Retail surgery: Where can savings be made in my business?

With VAT increasing, supply chain costs rising, and low consumer confidence, the retail sector has faced a challenging few months in 2011. And with the top line under pressure, there is a renewed focus on the bottom line to support profitability.

However, says Tracy Follows, retail specialist at Expense Reduction Analysts, many retailers are missing significant opportunities to reduce non-core operational cost – which she says tend to go unchecked for many years.

She says it pays to shop around for cost savings in areas as diverse as printing, packaging, cash handling, stationery and merchant card fees, and points to four key areas to focus on to achieve the best value.

The first is about establishing your costs. “You may believe your costs are under control but your perceived ‘well-kept ship’ may not be as leak proof as you thought,” she says.

It’s important to be “marketwise”, adds Follows. “It’s critical you are aware of the changing supplier market for the costs you are examining and developments that you may be able to capitalise on.” One solution is to set up a supplier market intelligence system. Monitoring cost changes from suppliers is vital. “Ensure you obtain financial information relating to any cost increases, otherwise these could easily be overlooked.”

Lastly, creating a cost-conscious culture is crucial. Follows advises retailers to look at ways of developing a culture where cost-reductions are celebrated as much as sales success.