The perfect storm for retailers
We know that buying is getting more important in terms of delivering profit. We also know that it’s getting harder to do so and requires greater procurement sophistication. With the majority of your hard earned sales turnover going to suppliers, the financial impact of maximising procurement is huge.
Growing top-line sales is hard. However, for a typical retailer, a one per cent saving in costs provides the equivalent EBIT impact of a 12 per cent increase in sales, so the way you buy is a good place to start to improve financial performance.
The buying function is a fundamental driver of retail competitiveness – to remain profitable, retailers must simply buy better;
- When the range is limited, for example with branded goods, buyers must become more sophisticated. An improved share of the margin is achievable with a pro-active, structured and disciplined approach to negotiation which optimises every aspect of the trading relationship.
- For own-label/B-brand product ranges, sourcing must be dynamic: retail buyers should be continually hunting out new sources of supply; more competitive supply markets and more competitive suppliers.
- Our research indicates that indirect spend, or goods-not-for-resale, can often account for up to 1/7th of a typical large retailer’s turnover and indirect buyers are often managing five times the number of categories as direct buyers. On average, retailers that have addressed their indirect spend – purchases like marketing, logistics, IT & telecoms, facilities management and utilities – have made savings on average of 12.4 per cent.
Procura can help retailers;
- Identify, quantify and prioritise savings opportunities
- Run programmes of structured terms negotiations with branded suppliers
- Source own-label and B-brand products and ranges
- Achieve significant profit improvement through indirect spend procurement cost reduction
- Focus on core direct procurement whilst we professionally manage indirect category procurement through our managed service
If you would like to discuss transforming your procurement function, please call: +44 (0)203 693 7275 or click here to email usClick here to read the full article