5 rules for retailers on the core/non-core business functions

In the last 5 years Indian Retail is on the move, the demand is growing in population and desire; the Online E Commerce is booming with large scale investments; International players are bypassing FDI, enriching the opportunities and offerings; there is a hike for more Retail in the biggest populated country in the world.

Positive for all participants: The end consumer, the retailer, the supplier, the national hero’s, the international challengers; the market is in a radical change process, booming towards new unseen peaks and opportunities.

Key Questions for Retailers to be answered:

Where and how do I grow?
When do I do the needful and where do I challenge the competition?
What is my CORE strength and CORE competence to survive better than the market?
When do I leave the CORE competencies to specialist, as it is NON Core for my business and slows down my growth and efficiency?

FIVE RULES for the RETAILER on CORE/NON Core business functions:

Rule 1: CORE Retail Forecast based Market knowledge

Be a specialist in market knowledge and demand creation and planning.
India is in markets and demands full of unknown potentials. International players boom in supplies of packaged dry food supplies, are at the beginning of coffee shops and big box market solutions. Only those who specialize will avoid a price war and grow in gross margins and in Top line.

Groceries have to be specialists in fresh food, electronic (e-) retailers in fast moving mobile product and technology changes, fashion brand stores in monthly changing market dynamics.

Global retailers invest heavily in forecasting and demand management, adidas for example has a rolling monthly forecasting tool in place, in a mix between forecast- and history based planning methodologies, reaching market leaderships my forecast accuracies above 95% on sales.

Indian retailers heavily have to catch up. Often you hear in discussions the demand in India is unpredictable, we always can sell what we buy. The risk in this me too approach are substantial gaps in demand planning, where newcomers can pitch the market very fast, low stock turns (everything under 6 has to be investigated) and heavily competing sales programs, creating massive write offs.

Market analytics and Demand planning need to get CORE competencies for Indian Retailers.

Rule 2: CORE Assortment Management

Be the best in Assortment in your field of Retail; do not try to have everything, where you can make money with a complete range in your retail specialization. But be 100% complete in your class of retail.

Some visuals of assortment potential in India:

E-Retail multi brand footwear stores in India all have the same assortment. There is little or no differentiation with technology changers like Geox or luxury stiles like Fratelli Rosetti.

The mass production in fashion liquidation sales has little ambition to proof a complete assortment on latest styles, fashion crazy designs and real sales worthy ASPs. There is a true order volume “Mania” which is short lived and without any leading category specialist ambition.

Rule 3: Excellence in Cat Walk Store Logistics

Doing market leading retail requires excellence customer attraction, customer acquisition planning, excellence in display logistics, excellence in online store cat walking. Buying customers by discounts of 60, 70 or 80% will create not loyal customers and a complete depletion of market potentials.

There is a very high demand in change in mindsets of current Indian (e) retailers required. Some Basics:

1. Customer attraction you achieve by excellent positioning of your products, brands and nearness to the customer behavior. There are reasons why every Ikea offers food and beverages, playgrounds for children and a detailed cat walk from the beginning to the end. 95% of all e-retail web pages are not fulfilling basic customer attraction requirement planning: Which targets groups? who to uniquely attract? and how to guide the customer to a new unique and innovative shopping experiences?

2. Customer acquisition you achieve by building reliable assortment offerings, repetitive core product assortments and add on for the target group identified. You do not buy but win a customer by providing your understanding of his requirements.

3. Display Logistics in virtual or bricks and mortar retailing is key for success of customer attraction and acquisition. Display logistics is based on innovative, creative design solutions, daily developed into a new content experience for customers. Display logistics requires display labs where the creativity and understanding of customer expectations is planned and understood. Display logistics is core of retail logistics success factors. Winners have the most attractive and efficient display designs.

4. Putting the crown to store logistics you have to optimize the cat walk for your customers. Where does he come into the store, how is he immediately attracted, who is he lead through the store, where do you give him rest and support, where shall he stop to buy high margin products, where should he close before POS?

Unanswered, boring in many Indian setups Off or Online, normally packed full of discounted products with little ambitions to humbly serve and learn, understand the customers.

Rule 4: Exploit Retail Supply Chain Enablers by OUTSOURCING Non-Core

In order to concentrate on Rule 1 to 3 there is a clear international trend to:

A) OUTSOURCE all supply chain and back end execution or

B) RUN it if profitable for large MEGA retailers in separate business unit or company set up.

The majority of all Indian (e) retailers fall under A.

Outsourcing means to have a small and excellent Supply Chain Brain team, operationally managing 4 or 3 PL’s in achieving services and value creation for their clients.

A – Key advantages:
Cut your Growth investment costs by 50%, variable
Utilize Multi User Synergies
Operate supplier efficiencies integrated with GM requirements
Get service competitively efficiently operated

FOCUS on Retail CORE rules (1-3)

B – Falls in place at sizes of 100.000+ orders in e-retail or constant stable supply chain demand, where you finally cut the Outsourcer Margin. Currently all e-retailers in India apply for the A category. If you try to be doing everything yourself you will heavily lose focus and will never reach a B-Scenario. You will lose focus on CORE and efficiency on Non-Core.

Rule 5: Implement Continuous Change Management

Given a true value analysis of a (e)-retailer there is a strong CXO leadership requirement to initiate change. Key steps for change management are:

1. Redefine your (e) retail company strategy, understanding your core assets and targets
2. Run strategic change initiatives to foster quick wins and deliver long term company core requirements
3. Get support by neutral and consequential project management, building the truth and necessary change
4. Drive the change and make mistakes during change, your learning’s will enable faster and more profitable growth

About the Author: Dietmer Jobst is the CEO of DSCE Global. The company is specialized on comparable change projects to increase core capabilities of (e)retail companies and enable the outsourcing specialist to serve and develop his customer. 

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