Managing and reducing costs is the only way for retailers to survive against all of the competitive threats to the industry. There is only so much labor to be reduced; only so much to be gained from benefits and insurance, operating expenses can be tightened only so far. However, the average retailer could increase their gross profit by 1.3% by eliminating the waste in the supply chain.
Merchant retailers who have adopted these principles have had tremendous success in lowering the cost of product, while increasing their net profit, which ultimately benefits the consumer. They have better in stock, lower inventory costs and higher productivity. Therefore, I ask the question. Is Mega Stores really the problem?
Along with adopting the core strategy of meeting consumer need for basics at a lower price, Merchant early-on need to be committed to investing in their business at a higher rate than competitors. The example often cited is the supply chain, but the core underlying investment that made the difference is their investment in technology. The point is that others couldn't get better because they wouldn't spend the money to get smarter.
There is an underlying parallel here with the comments about independents and their willingness to invest personal and human capital in being in their stores, developing relationships with their employees and customers. That parallel is the willingness to INVEST in something other than quarterly earnings statements. Gaining a competitive edge requires differentiation to be sure, and differentiation requires ideas. But ideas are worthless without investment. Simply stated, we don't get better because we won't pay the upfront price.
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