By Matt Hopkins, Global Retail Director at Board International
2023 could be the year of opportunity for many retail businesses despite the economic challenges ahead. Oxymoronic perhaps, but the Office for National Statistics research reveals that retail sales volumes were up by 0.5% in January 2023. Against this tentatively optimistic backdrop, profitability doesn’t have to be a buzzword but a reality.
Retail businesses need a renewed focus, not a revolutionary reset
Now, whilst retailers have little control over external, economic factors, they do have control over internal business processes. Effective retail planning will hold the key to setting retailers ahead of a competitive market, or being left in its wake. Businesses don’t necessarily need a revolutionary reset when it comes to proactive retail planning. Just a renewed focus. Here are three ways retailers can join the path to profitability in 2023.
- Leverage the AI advantage to drive planning profitability
Businesses can utilise AI to unlock new optimisation opportunities for sell-through, such as stock balancing, dynamic pricing and promotions. But how? And how does the AI factor come into play when it comes to increasing business profitability through planning?
The retail industry is constantly evolving to meet changing consumer demands. In the UK, we can see the rise of “influencers” from popular reality TV shows such as Love Island directly impacting demand, as younger generations have aspirations to mirror the celebrities they follow. Manual product selection and assortment is an uphill struggle given the high volume of inventory demand and volatile nature of the fashion industry. As a result, those retailers without quality automation tools could get left behind in the market.
Planning ahead is vital in order to keep ahead of such trends. Leveraging AI to execute a robust planning strategy in the context of fast fashion means to accurately predict insights into consumer behaviour and predict demand trends. Once retailers are able to achieve this, they’re able to use data-driven insights to forecast stock levels needed in upcoming spring and summer seasons for example – and to meet changing and rapid consumer demands. Given that the major stumbling block for many retail businesses is too much or too little inventory, automation is a game-changer when it comes to managing this. Through automation, retailers can reduce stockouts and avoid overstocking, thus eliminating unnecessary wastage and boosting profitability.
- Incorporate true cost-to-serve in replenishment planning
Resilience is key here when it comes to replenishment planning. Staying on track with the retail market, competitors and profit goals can be a challenge.
However, it can be achieved through incorporating true cost-to-serve at Stock Keeping Unit (SKU) in replenishment planning. Essentially, this means that those retailers create visibility of the full value of end-to-end decisions – whether it’s providing insight into inventory levels and type, or reviewing purchase orders. Regular checks and assessing inventory levels and consumer demands is the key to competitive replenishment planning, as retailers are able to rebalance their inventory and proactively provide a healthy supply to burgeoning consumer demands – as opposed to reactively scrambling for stock.
- Adapt to real-time demand and supply trends through financial planning
If the last three years has taught businesses anything at all, it’s that financial loss could be around the corner at any time. Yet, though retailers can’t prevent demand and supply chain disruptions, they can avoid, or at the very least, mitigate the financial losses incurred. How? By using AI to simulate potential scenarios; whether it’s a pandemic or neighbouring conflict with international consequences, it allows decision makers to carry out de-risk measures.
Retailers who analyse their data dashboards and apply lesson learnings to plan for potential seasons of disruption, are far more likely to get ahead to mitigate financial loss. Retail businesses can use AI in supply chain management to shine a spotlight on the end-to-end process, from managing logistics, assessing delivery of products to customers. These businesses are quickly able to identify weaker points or disruption-prone points in their supply network, and proactively work on shoring them up, or seeking more sustainable processes, well ahead of the next threat to business profitability.
As the demand for retail goods hopefully begins to pick up pace in 2023, the use and application of data and technology tools such as AI and automation will prove massively important to staying competitive. Proactive planning holds the solution for many retailers seeking not only to repair losses incurred after years of disruption to business as usual, but to put themselves onto the path to profitability within the international retail market.