Retailers are making moves to innovate, compete and build shareholder confidence to drive growth in today’s integrated marketplace—with varying degrees of success. These moves include lowering prices to drive traffic and conversion rates, remodeling stores to remain relevant, upgrading digital and social to elevate customer experience, acquiring companies to keep up with competitors, rewarding employees to retain talent, and providing a return to shareholders.

But one approach cuts across the whole retail enterprise—and about 300 global companies are using it to fuel growth. Zero-based mindset—ZBx—brings a “smart spend” mentality to overall cost structure and operating models to reallocate costs, simplify complexity and improve profitability.1 ZBx is a “fresh set of eyes” that brings new focus, visibility and accountability by looking horizontally at all costs across all stores. To get started with ZBx, retailers must commit to some fundamentals:

Stop being rich on data and poor on insights

Consider the who, what and why questions for monies spent. It is imperative that retailers move away from traditional store, business unit or functional P&Ls toward a consistent and deeper level of detail throughout the organization to truly understand if investments are driving desired business outcomes (or not).

For example, retailers typically require corporate HQ-based employees to visit stores. To get the full benefit from these visits, retailers should use data insights to assess which types of stores which staff members should visit at what times. After all, context is everything and travel for travel’s sake makes little sense.

Embrace zero-based smart spending over cost cutting

Many retailers believe that cost cutting is in their DNA, and they already embark on frequent enterprise-wide cost transformation programs. But, according to Accenture Strategy research, only 51 percent sustain cost savings for one to two years. This suggests that traditional cost transformation programs just don’t stick.2

Retailers’ costs should be understood in terms of “working” versus “non-working” dollars. Working dollars fund customer experience and growth strategy. Non-working dollars fund necessary, but not differentiating, expenses like supplies, maintenance, utilities or security. Such expenses should be zero-based every year, keeping them as low as possible. Cost savings can be redirected toward working dollars that drive future growth.

This is exactly what ZBx does. It requires justification for every dollar spent (working and non-working). A closed loop process continuously monitors spend. Think of it as a virtuous cycle of self-reinforcing insight and action that constantly challenges costs and spurs innovation.

Source: Accenture Strategy, “Beyond the ZBB Buzz,” 2018

Drive culture and mindset change from the top

A ZBx program should never be launched without the support of C-suite leadership. The smart spend journey will unearth many decisions that may be counterintuitive to longstanding cultural habits. These decisions require leadership to engage in debate and set the tone for the organization to follow.

Surveyed companies report cultural buy-in (67 percent) and change management (41 percent) as the most challenging ZBx obstacles to overcome.3 Change is executed throughout the company, but it is the business leaders who instill the required mindset for smart spend to be effective within their cultures.

Get smart on all things ZBx for retail organizations

It is critical to become educated on the nuances and pitfalls of applying a ZBx approach in retail. Every retailer is at a different point in the journey, whether that’s cost restructuring, acquisition and integration of companies, or fatigue from countless transformation programs.

The time to embark on a ZBx journey must fit a retailer’s unique needs. This is why it is so critical to invest the upfront time and effort to truly understand what ZBx means, the appropriate scope (COGS and/or SG&A or front office and/or back office) and time phasing for long-term success.

Reinvest ZBx savings back into the retail business

With major retail market disruptors growing exponentially, it is imperative to define strong and clear initiatives to generate reinvestments and retain a healthy and stable market share. Retailers should ensure their employees and stakeholders have visibility into the difficult choices being made across the organization to remove and/or reallocate costs to innovate and grow.

Periodic communication celebrating outcomes and tying the ZBx initiatives to strategic objectives helps to ensure buy-in across all levels of the retail organization and builds internal momentum. Ultimately, ZBx becomes part of the lifeblood of the culture and discipline.

Companies of all sizes and geographic reach are adopting ZBx. If you are not innovating and growing, your retail brand will become extinct. To fund these non-negotiables, the ZBx journey must be part of your culture and DNA. With the retail landscape moving fast and furiously, there is no time to waste.

1 “Global Companies Extend Use of Zero-Based Budgeting to Slash Costs,” Wall Street Journal, February 2018

2 Accenture Strategy, “Getting Ahead by Cutting Back,” 2018

3 Accenture Strategy, “Beyond the Buzz: The Zero-Based Mindset,” 2018

Praveen Kishorepuria

Managing Director – Accenture Strategy, Retail


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