What challenge(s) do our clients face?
Retail is a complex and fast-paced business undergoing a major transformation creating new opportunities and challenges.
The retail business environment is undergoing a major transformation – new consumer habits, e-commerce growth, and digital transformation are trends that are here to stay and should generate profound changes in this industry. The customer journey will be completely reshaped, channels will change, Stores will change their role completely.
While Retailers are being pushed to rethink their business, it’s important to bear in mind that the essence of Retail remains the same – the tools available and market competence are being completely reshaped, but companies should not lose sight of the basic principles that have always guided them:
- Provide the best experience for the customer: assortment, services, pricing, product availability, …
- Keep the cash conversion cycle and profitability under control: retail is a complex environment with typically narrow margins. Managing hundreds of thousands of SKU’s on hundreds of inventory points, buying from hundreds of suppliers and selling to hundreds of thousands of clients it definitely not an easy task
- React fast: This is a fast-paced business. Retailers are the last link to end consumers. This proximity, combined with its gigantic figures, creates an environment that requires pragmatism and speed of action to outlast.
How do we help?
In Retail’s fast-paced and results-driven environment, all solutions must provide short-terms impacts in order for any initiative to last, granting funding for the long-term transformation
We’ve had the great privilege of working alongside dozens of retailers striving to improve their company competitiveness and profitability. Our approach has been developed with hands-on, coping with the retailer of all types, sizes, and scales for more than 25 years.
Whether to improve on-shelf availability, optimize the assortment, or reduce expenses, our approach in Retail is geared towards business transformation. As solutions are thought out, they are tested in practice on pilots, on the company’s day-to-day activities, which feedback into the design, generating results, movement in the organization, and enabling the client’s team to learn on the job the new solutions and ensuring sustainable results. Transformation takes place in the daily life of the company!
Commonly applied services
- Entry Strategy and Value Proposition: How to establish a model for serving the market, leveraging revenue and profitability and improving efficiency, in line with both the company strategy and the needs of consumers
- Category Management: Translation of consumer behavior insights into business intelligence that drives assortment, display, promotion, and pricing models.
- Out-of-stock & Inventory Transformation: End-to-end optimization of retail replenishment back-bone, from merchandising to store operations and Supply Chain processes, systems and governance model
- Cost-Efficiency: Identifying levers for cost optimization through a broad and deep business diagnosis
- Footprint Expansion: Helping companies establish a solid foundation for consistent, sustainable organic growth – structuring processes, ensuring visibility, control, speed, and alignment among areas
Integration’s has a broad track-record in the Retail industry, having delivered the most distinct projects covering retailers of all types, sizes, and scales. This ensures a comprehensive understanding of each segment’s challenges and best practices, enabling each solution to be tailored to suit best the needs of each client. Find below some of the segments and clients that we have been working with:
One of the largest grocery chains in Brazil, with over 50,000 SKUs and 300+ stores had suffered from out-of-stock problems for nearly a decade. The company had been dealing with a stark contrast between either severe OOS inventory or excess inventory.
Through the completion of a comprehensive diagnosis of the causes of out-of-stock and overstock, it was clear the client required a complete turnaround of their Supply Chain, with a focus on inventory and breakdown for both FMCG and non-food goods.
With this in mind, we implemented a new organizational structure, a set of new inventory policies per channel (Direct store x Cross Docking and Stock), and re-designed supply routines/processes. With a strong focus on change management, we ensured the new methodology was tested in some pilot categories for 4 months, allowing for time to embed the new ways of working and to address any unforeseen problems.
We also introduced a new vendor relationship reward program that fostered better relationships between this retailer and industry suppliers, which today is highly known and recognized in the Brazilian market.
The work resulted in a -70% out-of-stock rate reduction, achieving the lowest historical rate ever, and reducing inventory levels at the same time (-5%), resulting in a significant increase in margin, and ultimately delivering the company’s annual target results. The team was also restructured reducing head-counts though a higher degree of automation.
Our client, a specialized appliance retailer with >100 stores (part of retail group with USD 1bn+ revenue) came to us facing problems of high stock and fulfilment issues.
Upon examining the context, we understood the root cause was a result of a blanket approach to the portfolio across stores and a simplistic approach to category management.
In this project, we started from scratch, building up a category management capability in the team from first principles. The essential elements of our success were:
- Building a collective and qualitative understanding – through a data-driven approach, we challenged our client’s pre-conception of who their target consumer was and what they wanted by analyzing purchase data across the market. With this we developed a clear picture of the market, consumer needs and category strategy which all teams could subscribe to
- Connecting SKU level detail with the big picture strategy – We brought clarity to the role of each category considering the business objectives, brand positioning and differentials and ensured high-level principles such as product hierarchy drove decision-making at the operational level.
- Total commitment to involve and align all stakeholders – guaranteed buy-in from areas beyond just commercial, ensuring all teams were pulling in the same direction
Through the project, we overcame the commercial team’s ‘space wars’ to agree on category resizing in just 4 months, aligning individual interests with the overall business goal. This led to a ~11% increase in gross margin and a ~10% increase in revenue (accounting for effects of Covid-19).
Our client, an oil & gas multinational, which owned a forecourt retail franchise with ~900 stores, carried out a consumer study and found ‘the convenience store’ was the 3rd most important factor in influencing gas station choice. They estimated, improving stores could raise gas sales by up to 20%.
However, gas station owners did not care about the ‘low margins’ of a convenience store, and the ‘headache’ of running its operation; meaning the stores often did not deliver a good customer experience and were in many cases unprofitable.
The client asked Integration for our support in developing a strategy to improve the relationship with franchisees, to deliver a better customer experience and increased profits, and ultimately drive further store expansion.
In order to deliver a solution, we focused on a variety of core aspects:
- Understanding the beliefs and motivations of both sides – we undertook extensive field visits to understand the perspective and needs of the gas stations owners across the country; creating a compelling value proposition, target customer, and mission aligned to the company objectives and attractive to the gas station owner.
- A simple but complete solution – we transitioned from ‘self-select’ model with 1,000 SKUs to an easy-to-implement model of ’4 base packages’ with 15 optional local add-ons; matching defined audience types/needs and sizes with pre-selected high-performing SKUs
- Continuous improvement adjusting to the local realities – we fine-tuned the assortment and also the pitch to reach target KPIs by carrying out pilots in multiple regions.
In terms of in-store results, the project delivered an estimated 7% growth in sales driven through assortment changes and a higher on-average store profitability driven through clear guidelines for franchisees.
Our client saw an uplift in franchisee adoption rate, expanding its geographic presence, alongside improved management and tracking tools delivering greater visibility.
The category management culture was reinforced in the company to provide it with the tools and methods it would need to continue improving and to tackle new contexts or regions. Concretely, these included governance rituals and decision-making moments embedded per team to deal with the tactical assortment, pricing, exposure, and promotion decisions in each region.
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Retail is a very dynamic and diverse environment. All solutions must be tailored to each Retail reality, aligned with its Value Proposition and Categories DNA.