You will be redirected back to your article in seconds
Skip to main content

Retailers Hoping to Thrive Need to React More Quickly on the Supply Chain Management Side

The new retail hierarchy is comprised of thrivers, survivors and strugglers, but keep in mind that those in survival mode–while stable–are just breaking even and therefore only treading water.

Natalie Kotlyar, partner and retail and consumer practice leader at BDO, said many retailers are stuck in survival mode. And if they can’t become quicker on their feet when it comes to supply chain management, they’ll be hard pressed to advance.

“Playing catch-up in perpetuity is preventing retailers from seizing new opportunities and leapfrogging the competition,” she said.

The key centers on what retailers should be doing to get themselves out of survival mode.

In a recent study from BDO on “Moving Beyond Retail Survival Mode: Get Rational,” Kotlyar concluded that there are three key steps connected to retail rationalization: Scale with stability, focus on foresight, and invest with intention.

The study surveyed 300 retail C-suite executives on overall health and strategic planning, noting that it’s critical that retailers take a “hard look at their businesses now” because of the concern that the economy might be teetering on the next downturn—or at least market correction—following what has been deemed the longest bull market on record.

What might have kept businesses afloat in 2018, BDO said, may not be what’s needed once a correction–whenever it happens–arrives. That means retailers that are surviving now could find themselves in trouble later on.

An overwhelming majority of pure play e-commerce businesses are classified as thrivers. They have less overhead and no dead store weight, according to the study. In addition to being e-commerce-centric, many were early adopters of technology. The count exclusive products as a competitive advantage, but less convenience has proven a weakness.

Related Stories

More than half of the traditional brick-and-mortar retailers, including big boxes, department stores, discounters and specialty chains, are deemed survivors. This group tends to be risk-averse, and were not early adopters of technology. While customer service is their competitive advantage, higher prices is also this group’s greatest weakness.

The rest, including one in five department stores, are considered strugglers as they try to optimize their stores and compete online.

In order for retailers to get out of survival mode, BDO said they need to know where to focus and how to anticipate consumer demands before they are realized. One problem, however, is that many don’t have the solid financial position needed to invest and make those really big leapfrogging bets for the long term.

The financial services and consulting firm said survivors need to make some hard choices regarding exiting unprofitable stores or turning them into distribution centers, upskill employees, replace legacy systems with next-generation technology throughout the supply chain. And it may mean partnering with a competitor, like start-up.

One example is Walmart’s acquisition of online intimates retailer, Bare Necessities. Such moves can help retailers build out their technology, BDO concluded.

A high percentage of the respondents believe that Amazon may not be a direct competitor today, but 70 percent did indicate the cons of partnering with the marketplace platform provider outweigh the pros. Companies, according to BDO, would be wise to Amazon-proof their businesses as the marketplace giant extends its roots.

Thrivers, like The TJX Cos. Inc. in the off-price channel do well for several reasons.

“TJX understands their customer, Kotlyar said. “They bring in the right product mix to the right customer. Customer service is not high on their list, but discounting and the right product mix are, and they rely on the hunt factor” to grab the attention of shoppers in the store, she said.

In contrast, she added, survivors, like Macy’s and Dillard’s, are using their funding to survive every day, manage their inventory and supply chain. But foot traffic is down and that’s a big challenge for these retailers. Exclusivity could mean not just specific items or brands, but a spokesperson as well, she said.

As for challenges the survivors face this year, Kotlyer said, “It’s foot traffic and lower tax refunds, which will hurt retailers in the second quarter….We are also [moving] closer to the [presidential] election, which will create uncertainty. I think 2019 will be the year of uncertainty.”

As for other components of the business, such as the supply chain, Kotlyer said survivors need to understand “what their client is going to buy—they need to almost project that and then react quickly on the supply chain management side.”