Retail Management – The Challenges and Opportunities.

The retail sector is one of the oldest industries in the world; evolving from a time when families decided to exchange their surplus crops and produce for other things they required (animals, tools, labour etc), growing into centralised markets where metal coins and paper notes were exchanged for goods and eventually developing into high street retail stores, and, finally, the online stores where an ever increasing number of sales are made today. Globally, the retail sector is one of the biggest employers (in the UK alone 2.9 million people – 11% of the total UK workforce are employed within the retail sector). Source (British Retail Consortium: Retail Stats & Info, 2009).

The Retail Management sector has always brought with it some interesting challenges throughout history, and these challenges are resulting in ever more innovative solutions. Consider these challenges which have spanned centuries;

A merchant sells his fresh fruit and vegetable produce in the street markets of the 1700s. A man wants to buy the majority of his produce because he owns a guest house and needs to serve meals to his paying customers. But the guests haven’t paid for their stay yet so the guest house owner cannot pay the merchant for the produce he needs. If the merchant turns this business away, he may be left with overripe stock at the end of the day (and little income), but if he allows the guest house owner to take the produce now and pay later, he will have no way of buying new seeds and tools needed to make more produce. What if the guests do not pay the guest house owner? What if the guest house owner is dishonest and never returns with the money?

In today’s retail management industry, technology has allowed processes to become more efficient and sophisticated. But, still, similar problems arise, particularly following financial crises.


Retail Management Online Statistics

  • Online retail generated $121 billion in sales in China last year, up 66% from 2010, according to Barclays Capital.

  • China’s ecommerce market is expected to increase three-fold over the next three years, with sales reaching $420 billion by 2015 (20% more than the expected figures for the US ecommerce market for the same year).

  • Approximately 54% of the U.S population make regular purchases online.



[Image courtesy SAP AG]


Why Retail Management Reporting is Important for Your Business, Right Now

Anyone in the retail management sector will be caught up in reporting on a daily basis; whether you’re the CFO evaluating profit for the quarter, the warehouse manager ensuring optimal stock levels, or the logistics manager distributing stock around the country to meet consumer needs.

Just like the simplistic example in the story above of the merchant with the fresh produce, stock is either your biggest asset or your biggest liability. Unlike the market traders of history, today’s retail managers can accurately and expertly order and distribute stock to keep profits high and waste to a minimum – they know how much of each item to buy according to previous sales figures and they know where to distribute items across their stores by accessing consumer trend data.


Don’t have your reports in order?

The earlier you start to understand the type of reporting your company needs, the more organised and efficient you will be. Establishing a product tree made up of major categories and sub-categories is an easy way to start this process. Starting small when you only have a few products to sell helps you when the company grows and expands its product ranges.

Think about what information you might want to see in a report, e.g.

  • Sales figures for each category and sub-category
  • Profit per category
  • $ and % values for gross profit
  • Operating costs and cost of good sold (COGS)

Taking this a step further, each product category in the product reporting tree can then be assigned bar codes which can include information such as the supplier, cost price, retail price, delivery info, gross profit, margin, as well as which category/sub-category within your product tree it belongs to. Imagine the types of insightful reporting your company could generate!

With an ERP system in place, these reports can easily be automated. See below sample of an SAP Business One Monthly Sales report.

[Learn more about SAP reporting]


What does tomorrow look like for Retail Management?

A recent SAP Whitepaper looked at a combination of factors which may lead to significant developments in the future of the retail industry. These ‘megatrends’ are set to combine to drastically influence the way consumers buy products and services.


Price wars and fierce competition enables buyers to have access to multiple sellers and can demand more for their money. Retailers then either need to continuously drop their prices (unsustainable in the long term) or be smart and do something innovative.

Supply chain management.

The reduction in trade barriers due to globalisation means retail firms must react quickly and effectively to trends and demands to stay on top.

Social responsibility.

Consumers are willing to pay higher prices for more socially responsible products, items and manufacturing methods. More transparency into the ecological elements of an organisation will become a driving factor in success and some companies are already making steps towards this.

Asia as the next hub.

India and China are already taking the retail management world by storm (see statistics above) but other countries in the region will begin to gather pace too. Growing numbers of the affluent middle class with significant disposable income in these emerging economies will become the target for luxury brands and trends.

Long-tail retailing.

By avoiding the mass market and refocusing on niche or specialty markets, retailers will be able to turn their attention to improved service levels instead of price wars and profit margins.

The customer experience.

An area we are already witnessing, and which is set to grow, is the focus on customer experience and providing individualised services. By looking at customer interactions, social media, trends and preferences, we will see targeted sales campaigns based on more than just age, gender and location (instead it will be your favourite brand of cheese or how much wine you have left in the fridge!)

[Learn more about customer service]

Integrated view of the customer.

Providing an holistic view of the consumer and their online/offline/mobile habits and trends will enable retailers to prosper by providing buyers with consistent and focused services and experiences.

[Learn more about customer innovation]

Investment in services.

Leveraging brand names to sell additional services has already seen success for the big players (e.g. Tesco UK offers car, health and home insurance as well as mobile and broadband services). This ‘locks in’ the consumer with a brand for the long-term.

So, are you ready for tomorrow or still trying to catch up with today’s trends?

If you would like to speak to a Blue Ocean Systems consultant about preparing your retail management business for tomorrow’s growth, contact us today.

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