In retail only April fools ignore indirect costs


By Daniel Ball, Wax Digital.
 
A late Easter, sunny bank holidays and Royal Wedding fever made April a rose amongst thorns in the retail sales figures of recent months. Most sectors saw a significant uplift in April on the previous year and on recent months, but experts have warned that the overall picture still leaves little room for celebration and retailers would be 'April fools' for thinking this was real recovery.



Retailers should "remain cautious about the outlook for the remainder of the year," said KPMG's head of retail Helen Dickinson, commenting on the BRC UK Retail Sales Monitor for April. The Monitor showed the three-month average heading downward with 1.8% total and 0.1% sales growth for February to April compared to 2.7% total and 0.8% for the 3 months to January.

But all retailers must already exercising caution, with the question "what else can we do other than sit it out and wait?" on their lips. There may be very little that they can control in terms of sales and growth, but in terms of survival and remaining profitable, could they be operationally sharper? Are there areas of indirect spending in retail businesses that still have room for efficiency?

According to Deloitte, the number of insolvencies in retail during the first quarter of 2011 increased by 30 per cent compared to last year. There were 60 retail insolvencies in the UK during Q1 compared to 46 for the same period in 2010, which is the highest quarterly number for two years.

Retailers want to grow the top line and by their very nature put a large focus on the wholesale to retail profit margins they can achieve on what they sell. Other industries, where operational costs are large and complex, manufacturing for example, put greater pressure on profit from efficient operations. But retailers have large indirect costs too facilities management, catering, uniforms, logistics, branding and packaging to name but a few.

For many, reviewing the efficiency of their goods not for resale contracts and purchasing practices could be just the focus they need in conservative times. It will also set them on a course to great profitability when consumer spending does improve too.

This comment article will cover the retailer's opportunity and need to refocus on Goods Not For Resale spending efficiency in order to secure the bottom line in light of continued uncertainty on the high street.
Wax Digital is a UK provider of eSourcing and ePurchasing systems to numerous retailers including Dixons, Play.com, Thorntons, Wickes and Primark. 

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