Uncertain times are testing times for the retail industry.
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. In fact, these leading companies almost relish the prospect of recession. 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 businesses in retail 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.
A Simultaneous Approach
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 (see “dramatic results” sidebar).
Accenture’s unmatched retail experience and research-based knowledge show that every retailer should be able to achieve similar competitive advantage in a downturn by simultaneously taking certain critical actions in regard to both cost reduction and sales growth.
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