How Retailers Can Achieve High Performance in a Downturn -- Summary

Accenture’s most recent global survey of cross-industry consumer sentiment shows that though a clear majority (55 percent) expect their financial situation to improve within the next year, 67 percent also believe it could take up to three years before they are confident enough to spend freely again. Until then, most plan to shop economy stores, avoid premium-priced products, postpone the purchase of big-ticket items, eat out less and wait for a sale rather than buy at the full retail price. 

For the industry’s high performers, however, uncertain times are also exciting times. That’s because they know that downturns offer an opportunity to seize market share from weaker competitors and strengthen their competitive position. What’s more, because they actually anticipate downturns, high performers are positioned for improved performance post-recession.

In the last recession, high-performance retail businesses cut costs to fund growth and advanced their strategic position by building differentiating capabilities. As a result, these leading companies pulled away from the competition dramatically—and performed even better in the up cycle.

According to Accenture’s High Performance Business research, leading retailers really know and understand their customers—especially the most profitable. That insight drives all their marketing, merchandising and operational functions. It also explains how they have managed to boost sales through up cycles and down.

Yet leading companies are just as consistently relentless about cutting costs. In fact, they pursue both strategies in a downturn—customer-focused sales growth and cost reduction—simultaneously and with often dramatic results.

Cost Reduction

• Reduce indirect procurement and redundant headcount.
  
  
• Improve inventory forecast and replenishment capabilities and take full advantage of vendor payment terms to lower working capital requirements.
  
  
• Adjust store labor and field operations to reduce operating costs.
  
  
• Rationalize the lowest performing stores.
  
  
• Renegotiate lease terms.
  
  

Sales Growth—Discretionary vs. Non-Discretionary
The success of specific sales growth strategies very much depends on both the type of product sold and on whether a retailer is pricing for value or fully.

Discretionary Value-Price retailers like off-price apparel vendors or quick service restaurants should:

• Turn trade-down customers into loyal customers with store cleanliness, in-stocks and friendly service.
  
  
• Be opportunistic with store growth.
  
  
• Poach newly available talent from other retailers.
  
  

Discretionary Full-Price retailers like up-market apparel vendors and specialty restaurants should:

• Value price or bundle on selective products.
• “Right size” space and assortment.
• Ensure that marketing and promotion spend is ROI-driven.
  
  

Non-Discretionary Value-Price retailers, including warehouse clubs, mass merchants and chain drug stores, should:

• Price appropriately since all customers now seek additional value.
  
  
• Ensure disciplined execution in store operations.
  
  
• Pursue opportunistic but cautious M&A, waiting for struggling competitors to fail before buying discounted assets.
  
  

Non-Discretionary Full-Price retailers like gourmet grocery and specialty home furnishings companies should:

• Stabilize the top line by deepening core customer insight and service.
  
  
• Step up value advertising to maintain customer relevance.
  
  
• Divest and invest in assortment at the same time, pruning redundancies and slow movers and offsetting with private label expansion.
  
  

Accenture has a wide range of offerings that can help both types of retailer drive value for customers and achieve high performance in uncertain times. They range from space and assortment optimization and promotions and markdown management solutions and strategies to customized workshops at our Accenture Customer Innovation Network.

Contact us to discuss how Accenture can help you make the most of the opportunities in today’s global economy.