Challenges Facing Retailers Today

Many retailers are looking at rationalising their stores - how do they best use the space they’ve got and do they need as much as they currently have if they’re a multi-chain retailer.

A Q&A with CROSSMARK CEO, Andy Kirk.

What are the main challenges facing retailers today?

It’s pretty tough for all retailers at the moment, given we’re in a cost-increasing environment.  Whether that’s rising energy prices or increasing award rates, there are a lot of cost pressures and it’s especially tough in grocery which has been experiencing a deflationary environment in terms of pricing.

While pricing may have flattened out a little recently, with minor inflation creeping back in, the grocery retailers’ margins continue to be squeezed from both ends. Their costs are going up but they must remain competitive which may mean dropping prices.  This is largely due to the impact of discounters such as Aldi have had on the market.

We’ve also seen a lot of retailers closing their doors over the last 12 months – especially in certain sectors such as apparel with brands like Metalicus, Esprit and GAP shutting their doors and even the likes of H&M finding it difficult to grow sales.  Some of the consumer electronic stores are really struggling too, especially the smaller more specialist retailers who, if they’ve not closed already, are under enormous pressures. Look at Godfreys, for example. It’s pretty tough to complete with large scale consumer electronic stores like Harvey Norman and JB Hi-Fi, whilst most products can also be purchased online as well.

With the pressures of operating store space, and rents and wages increasing, and of course the continued rise of online, retail is very hard at the moment.

What can retailers do to increase productivity and efficiency?

Many retailers are looking at rationalising their stores - how do they best use the space they’ve got and do they need as much as they currently have if they’re a multi-chain retailer. Myer are reportedly looking to cut their number of stores and in the US, a number of retailers are considering plans to share their floor space or selling it off. 

In grocery, retailers continue to strip their costs back with more effective supply chain management.  Many are doing whatever they can to pull resource labour out of stores and  push costs back on to suppliers.  Many also offer a self-service option at the checkout.  However, the downside is that the customer is not always benefitting from this.

Key to the future for many retailers is to improve their online offering. Fundamentally, every retailer needs a decent online presence.  There will be very few successful retailers that just have either a physical store presence or are just online. The secret will be in how they bring them together to ensure their online offering is represented in store, and vice versa.

How do you see field marketing playing out during these challenging times for retailers?

Retailers who share data with their suppliers will see the most effective benefits.  Retailers in the US and Europe are generally quite open about sharing data and we are starting to see this trend emerge more in Australia.

CROSSMARK recently conducted a trial with a major retailer where they provided data per store per item for one of our clients.  The data was then used to help predict when and where there would be inventory problems and with what product. This, in turn, allowed us to respond by sending staff to the right store at the precise right time to fix the problem ideally before it became an issue. 

If a customer can’t buy a product because either its not on shelf or sitting out the back of the warehouse it impacts a retailer’s bottom line. Providing more data is great for everybody - if suppliers have the data then they can fix problems more quickly, which drives sales for both the retailer and the supplier - everybody wins.

Andy KIrk

Andy Kirk

Andy has a deep understanding of the Australian retail environment and its shifting dynamics. Prior to CROSSMARK he has held a number of senior leadership roles in Australia and the UK, delivering retail strategy and field marketing initiatives for the blue chip brands. Andy is a firm believer in the power of data analytics to boost sales performance for brands and retailers.