From small decisions, big profits grow: finding hidden margin in the retail value chain

Posted by Sarah Taylor on Wed, Jun 07, 2017

Retail has never been more data driven. Businesses now have the analytics and insight to explore aspects of their operation in granular detail, optimising tiny elements to drive incremental improvement.


In theory, this is a great approach; fine tuning each aspect of the customer and product journey, to optimise performance – and therefore profit. But in reality, it can sometimes create more challenges than it solves.

Why? Because the retail value chain is an integrated, end-to-end process. And it has become increasingly complex in recent years, because consumers have the power to interact and shop through more touchpoints, across a greater number of channels, than ever before.

But these consumers are still constructing a journey to purchase, and retailers therefore need the agility to ensure that self-created journey is a smooth one – with the right outcome.

Little changes, big results: the chain reaction

If retailers zone in on tiny aspects of the customer experience, and focus on how to innovate one particular area, there’s a distinct possibility that the changes they make can have a knock-on effect on other parts of the business. It’s something we discuss in our latest insight guide, Chain Reaction: maximising margins in the connected retail economy.

One example of this is delivery. Many retailers have introduced click-and-collect to create a cost-effective channel that provides a quick, convenient fulfilment point for the consumer. However, not all of them have fully analysed how click-and-collect impacts stock availability if they choose to leverage store inventory; or how it changes the in-store customer experience, if store associates have yet another responsibility to their already busy workload.

That’s not to say that innovation and fine tuning should not happen; quite the opposite. What retailers need to do is stand back and look at their operation holistically so that, when they do make adjustments, they initiate a positive reaction through the value chain.

Finding hidden margin in the value chain

The challenge many retail organisations face in making these informed changes is that it requires a complete view of business activity – in real-time – which they either do not have, or they do not trust its accuracy.

Finding the right technology platform to enable a 360 degree view of customers, orders and stock in all channels is the absolute cornerstone of retail innovation. To see what needs changing, first retailers need to benchmark what is happening in their business right now.

From here, they will have the up-to-date data insights needed to make effective decisions – whether they are operational changes, or shape how they serve the customer. Not only that, but making better quality decisions will result in an improved sales conversion rate, and each purchase being fulfilled in a more effective manner, to maximise profit margin.

And if retailers can increase the margin on every sale, they will discover that small gains per product sold soon add up to significantly greater profitability. This also demonstrates return on investment in any multi-channel retail software purchase they make to secure a single view of customer, product and order activity.

In this sense, from small decisions, big profits grow.

Download our latest insight guide – Chain Reaction: maximising margins in the connected retail economy – to uncover hidden value in your business.

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Topics: omni-channel retail, value chain