Retail & Consumer Products
Consumer products organizations have lately desired to attain profitable increase by extending business scale and scope while concurrently rationalizing mode of operations. Although each sector—durables, consumables, apparel, specialty goods, etc.—has faced its own unique problems, there are some common challenges for consumer business leaders.
Transverse consumer markets, growth has become a bigger challenge; increases in wealth, growth in population and creation of new markets has already played out for many. Competition among organizations, brands, products, and marketing advertising has become even more intense, limiting pricing power, raising promotion budgets, and decreasing the time before new products launch. Customer’s attitudes, requirements, and shopping Characteristics are increasingly diverse, forcing a fundamental reconsideration of product management, communications, and marketing investments. Retail consolidation, along with the rise of such new channels as mass merchants, discounters, and warehouse clubs, has complicated supplier partnerships and the role of the sales force.
Accordingly, several capabilities are increasing in importance. Channel management, from the context of both product supply and sales, has evolved into a more critical part of the strategic incentive. Innovation continues to be the top management prerogative as organizations compete to create new products and brands, or at least news. Deal making and integration skills remain substantial as organizations push consolidation and globalization to higher plain. Most organizations have contended with a amalgamating customer base by rationalizing brand portfolios and influencing marketing investments better. Advanced technology and systems investments are being rolled out to deliver step-change improvements in productivity. In addition, the Internet is firmly entrenched as part of the shopping cycle, if not for purchase, then for information gathering and price research. Finally, new questions are being raised about the right operating model and supply foothold as organizations investigate ways to increase profitability.
The only constant is change and that applies to the retail Industries as well. The only certainty in today’s global economy is that nothing is the way it was. Commodity prices shot up, and then relaxed as the economic plunge took hold. The formerly safe bets of low costs for energy and transportation, cheap labor and little environmental regulation in China and Asia, and advantageous currency exchange rates now require reexamination.
What is obvious is that we are glaring into the chops of a global economic recession, and the 2009 predications base on soaring oil, packaging, and commodity prices need to be calibrated to reflect greater volatility and potential deflationary pressures. Consumer spending fueled by easy credit drove the economic boom. Now, a credit crunch has hampered consumer spending to a degree that has perplexed retailers. Greater inventory levels, shoppers’ increasing thirst for discounts, and fundamental changes in consumer spending behavior have made retail a ambitious environment in which to operate. But as with all obstacles, this one is accompanied by opportunity. Leading retailers will simultaneously sustain themselves during the downturn and build capabilities for the next wave of success.
As recessionary pressures negate consumer spending, retailers are taking various options to handle the crisis, frequently in cost cutting. The danger in a downturn, however, is that a focus on costs will avert positive action in other areas.
Our engagement with retailers of all varieties tells us that leaders in the field that intend to survive in the short term and thrive in the long term will intensively focus on four areas:
Price adjustments and promote creation to maximize consumer spending and switching trends
Implement “smart allotment” to increase profit and improve the shopping experience
Increase efficiency to invigorate profitability
Invest in capabilities for the long run.
Retailers find themselves facing commotion of uncertainty as they wait to see how alteration in credit availability, commodity prices, and consumer demand will play out. The obvious, however, is that waiting is the last thing they should do. By taking decisive action now organizations will offset pressures on their top line, boost profitability, and emerge in a stronger financial position to make the investments required for long-term value creation as the economy reboots