Cost Efficiency In Merchandising

Killer graph. The cost of the Budget headwinds facing the sector from the beginning of April is staggering - £5.56bn over the next financial year. We conducted a comprehensive piece of research in partnership with YOOBIC, which not only measures the impact of the Budget, but also quantifies its effect across the industry through rising consumer prices, pressure on margins, and highlights the strategies retailers are adopting to mitigate these challenges. £5.56bn - it's an astonishing figure. Changes to employer NIC contributions have the largest impact, adding £2.48bn to retailers' costs - made up of £1.9bn from the reduction in the threshold and £0.6bn from an increase in the rate. The uplift in NLW and NMW adds a further £2.4bn, while a reduction in business rates relief and the overall uplift adds another £0.7bn. I’ve spoken to many retailers about the extent of these costs, and it’s clear that this represents a structural shock - a resetting of the cost base. Rising labour costs have sparked widespread discussions around the implementation of technological solutions, which are now more easily justified by the increased financial pressure. When retailers consider how to mitigate these costs, our research revealed the three main levers they plan to use: ➡️ 31% of the cost impact will be passed on in the form of higher prices - equating to around £1.7bn passed on to consumers. ➡️ 32% will be absorbed in the form of reduced profits. This £1.76bn hit equates to roughly 6% of total industry profits. ➡️ 37% said they would attempt to offset the impact through cost optimisation strategies. However, passing costs on only works if a retailer has pricing power. In this climate, it’s increasingly difficult to pass on the full burden to consumers without some knock-on effect on demand. Our research shows that small retailers and pure online retailers were the least confident about passing on costs to consumers. Larger businesses felt more confident that this strategy could be effective. Cost optimisation is likely to focus on five main areas: ➡️ Efficiency and productivity ➡️ Pricing strategies ➡️ Financial engineering ➡️ Business model restructuring ➡️ Margin management Retailers are re-evaluating how they operate, where they operate, and who they operate with. Download the research for free here ⬇️ https://lnkd.in/e4_v4KjQ There’s so much more data and insight based on the experiences of over 100 retail leaders, outlining the tactics and strategies businesses are adopting to combat these challenges. I hope this helps some in the industry navigate these choppy waters!

10 tactics to control costs A guide which provides you the tools for cost reduction When I was head of finance, we were facing a challenge: → How to reduce our hourly rate to stay competitive This became my number one priority to help the business And we succeeded to decrease our hourly rate by 3% while inflation was up! Today I am sharing the tactics to reduce costs: 1. Budgeting and Forecasting: • Importance: Plan and estimate costs, revenue, and expenses. This is where you can get your team to commit on cost reduction. • Focus: Use accurate data and update budgets regularly. 2. Variance Analysis: • Importance: Compare actual performance with budgets to identify deviations. If you found a variation, there is a big chance that you have a topic to explore to reduce costs. • Focus: Investigate significant variances for improved accuracy. 3. Cost Allocation: • Importance: Distribute indirect costs for accurate pricing and control. • Focus: Maintain fair and updated allocation methods. 4. Activity-Based Costing: • Importance: Assign costs to specific activities for better resource allocation. • Focus: Identify and measure cost-driving activities accurately. 5. Zero-Based Budgeting: • Importance: Justify every expense to optimize resource allocation. • Focus: Balance rigor with operational continuity. 6. Cost-Benefit Analysis: • Importance: Compare project costs with expected benefits. • Focus: Consider tangible and intangible factors. 7. Cost-Volume-Profit Analysis: • Importance: Understand how sales, costs, and pricing impact profitability. • Focus: Validate fixed and variable cost assumptions. 8. Inventory Management: • Importance: Optimize inventory levels to reduce costs. • Focus: Use EOQ and JIT techniques for efficiency. 9. Vendor Management: • Importance: Evaluate and maintain supplier relationships. • Focus: Assess performance and diversify suppliers. 10. Procurement Management: • Importance: Acquire goods at the best cost with quality. • Focus: Establish clear procurement processes and collaboration. 👉 What is your favorite method to find cost reductions?

📦 Understanding Re-Order Point (ROP) and Replenishment in Warehouse Management 📦 In supply chain and warehouse management, knowing when to reorder stock is crucial for maintaining the right balance between inventory availability and cost efficiency. One of the key concepts in inventory management is the Re-Order Point (ROP). But how do you calculate it accurately? And what are the most effective replenishment strategies? 🔹 What is the Re-Order Point (ROP)? ROP is the threshold at which stock must be replenished to prevent shortages before the next delivery arrives. In other words, it is the minimum inventory level at which a new purchase order should be placed. 🔢 Basic ROP Formula: Without Safety Stock: 📌 ROP = Lead Time (Days) × Average Daily Consumption With Safety Stock: 📌 ROP = (Lead Time × Average Daily Consumption) + Safety Stock 🛠 Example Case: A warehouse has a daily material consumption of 10 units, with a procurement lead time of 7 days. 📌 ROP = 7 × 10 = 70 So, when the stock reaches 70 units, the company should immediately reorder to avoid running out of stock while waiting for the next delivery. 🔹 Effective Replenishment Strategies Determining the ROP alone is not enough. Businesses must also adopt the right replenishment strategy to ensure a steady inventory flow without excessive overstocking. Here are three common strategies: 1️⃣ Just-In-Time (JIT) This approach ensures that stock is ordered only when it is needed. It is suitable for businesses with stable demand and reliable suppliers who can deliver quickly. ✅ Pros: Reduces storage costs and minimizes inventory obsolescence. ❌ Challenges: Highly dependent on a smooth supply chain—any disruption can cause stockouts. 2️⃣ Fixed Order Quantity With this method, orders are placed in fixed quantities whenever the stock reaches the ROP. The order quantity is often based on Minimum Order Quantity (MOQ) or Economic Order Quantity (EOQ). ✅ Pros: Helps maintain consistent stock levels. ❌ Challenges: Can lead to overstocking if demand drops unexpectedly. 3️⃣ Periodic Review System Stock levels are reviewed at fixed intervals (e.g., monthly), and orders are placed accordingly. ✅ Pros: Suitable for items with fluctuating demand. ❌ Challenges: If the review period is too long, stockouts may occur before the next replenishment cycle. 🎯 Conclusion Determining the optimal Re-Order Point (ROP) is essential to ensure stock availability without excessive inventory costs. By understanding consumption patterns, lead time, and choosing the right replenishment strategy, warehouse operations can run efficiently and seamlessly, avoiding both stockouts and overstock situations. 🔥 What ROP and replenishment strategy do you use in your warehouse? Let’s discuss in the comments! #Inventory #Warehouse #Supplychain #SCM #Logistic #Rop #Replenishment

Convenience retail: where every penny counts Convenience stores operate on some of the tightest margins in retail. Rising energy costs, wage increases, and theft make cost management a daily battle. Yet, across the UK, independent retailers are showing how smart technology, process optimisation, and discipline can unlock significant savings. Several approaches stand out: • Staff productivity: Automating stock checks and order forecasting with advanced EPoS systems can save up to 12 staff hours per week – hours that can be redirected to customer service and sales. • Promotion cycles: Moving away from rigid four-week cycles towards staggered promotions avoids costly staff surges. One Stop Stores Ltd achieved ~£600 weekly savings with this approach. • Apps for operations: Low-cost tools like Connecteam simplify compliance, shift management, and reporting – reducing admin costs and preventing the need for extra hires. • Security discipline & smart locking: With UK shoplifting at a 20-year high, retailers like Costcutter ’s Peter Patel limit evening facings of high-value products. But there’s another evolution: grab-and-go cabinets that act as a “high value shop in the shop”, released only after credit card tap (or app) and potentially age verification. —> A leading example is Reckon.ai, a Portuguese startup whose AI and computer vision modules transform existing cabinets, fridges, shelves into autonomous smart units. —> Customers unlock the cabinet (via payment or authorized app), pick what they need, and simply close the door — all tracked in real time, with inventory updates and automatic checkout. —> This combines the convenience of self-service with the protection of a controlled environment. • Energy management: Smart plugs, timers, and recovery systems optimise usage. For heavy users, suppliers like SmartNest Energy, British Gas and EDF offer tailored contracts – but the key is short-term flexibility. • Cash handling automation: Smart safes digitise deposits, reduce errors, and free up staff from manual counting. The UK convenience retail market exceeds £47 billion annually, with over 46,000 stores serving millions. Efficiency at the execution level is not optional — it is a survival imperative. #retail #convenienceretail #fmcg #grocery #storeoperations #epos #retailtechnology #efficiency #staffproductivity #promotionstrategy #retailsolutions #energymanagement #sustainableretail #smartretail #security #cashhandling #lossprevention #retailsavings #omnichannel #automation #retailapps #ukretail #europeanretail #retailsecurity #retailinnovation #smallbusiness #ukbusiness #europebusiness #retailtrends #retaitech #foodtech

Product is a key part of your competitive advantage, yet it’s often one of the most under-managed aspects of your business. Do you measure inventory health as frequently as you measure marketing performance? 🧠 Most brands we speak to say no, yet they want to be profitable. When we assess inventory health the pathway to generate revenue, free cash flow, and profits starts with how well you manage your product assortment. Here is a real life example of a $20m+ brand in Australia and when we onboarded them I immediately understood why the founder seemed stress. What is the data telling us: Revenue is around $20m and they are carrying close to $39m in inventory 3075/8246 are selling, that's only 37% 613/8246 are driving 70% of gross profit, that's under 8% The majority of stock are contenders, underperformers or dead! Insights are great, but what next? Segment your product feeds into A/B/C/D classes Make sure you convert C/D classes to cash ASAP Slim down holdings in your B class Boost holdings in your A class and make sure they never go out of stock That's what it takes to build a lean, efficient commerce machine!

10Rs in the Product Life Cycle 🌎 The transition to a circular economy requires a structured approach to rethinking how products are designed, used, and managed at end-of-life. The 10R framework offers a comprehensive set of strategies to guide this transformation across all phases of the product life cycle. Each of the 10Rs represents a specific action aimed at reducing resource use, extending product longevity, or recovering value. When applied systematically, these strategies support both environmental goals and operational efficiency. In the design and production phase, the focus is on preventing unnecessary resource consumption. This includes refusing materials or products that are not essential, redesigning systems to minimize waste, and reducing inputs through improved efficiency. The use phase is centered on maximizing the lifespan and performance of products and components. This involves strategies such as reusing existing products, repurposing them for different functions, repairing damage, refurbishing outdated models, and remanufacturing to restore functionality. In the after-use phase, the goal shifts toward recovering value from materials that can no longer be used as-is. Recycling enables the reprocessing of materials into new inputs, while regeneration supports the renewal of natural systems and resources. By aligning the 10Rs with the stages of the product life cycle, organizations can identify targeted opportunities to reduce environmental impact and strengthen supply chain resilience. This approach also enables more informed decisions at every stage—from product development to disposal—helping businesses align sustainability with performance and long-term value creation. Source: Ellen MacArthur Foundation #sustainability #sustainable #business #esg #climatechange #circulareconomy #circular

Pricing team's work should never end. In an ideal world where pricing is upfront the cycle goes: Price--> Design--> Build (can someone point out who built this framework) While this is correct, it's not necessarily complete because it assumes your price in pre build phase is correct and needs no change all the way to launch. We know that is farthest from the truth. In the real world we need a lot more iteration in price: Step 1: Price: Goes without saying this stage you quantify value and price. This is where you figure out the WTP as well. Step 2: Design: With that price info, the product team builds a product that hits product and profitability targets. Step 3: Reprice 1: Now that we know the design constraints that impact the profitability, this stage gives you the opportunity to reprice the product based on the design. Step 4: Build: Now with that new price info and product roadmap the product goes through the build stage. Step 5: Reprice 2: Now significant time may have passed between initial price and build stage. The market for the product, the economy etc may have changed. This stage can assist in making last changes before product goes out. Good time to also establish guardrails for price performance. Step 6: Launch: Goes without saying the product is out in the real world. Great way to capture feedback. Also a stage where performance is measured against the price guardrails. Step 7: Reprice 3: Based on sales feedback, you start charting next steps. Selling too slow, you may need discount or reprice. Selling too fast, it may be overdelivering on price vs value. Pricing metric may need change. Fx may have changed. This is the price adjustment stage, should be annual or semi annual. You can incorporate these steps into new product introduction framework or annual or semi annual pricing strategy process, either ways it will help establish good pricing principles in the org. Some may say its overkill to think about pricing at each step, but pricing's role is to keep iterating the price, he model, and the metric.... I know of many products that once designed were never repriced years into its life.. Surely things must have changed all those years... Do you think its overkill and a waste of time ? -------------------------- I write about pricing, discounting, revenue management and careers.

You can't expect to fix your #Amazon 1P margins in one AVN after years of mismanagement. ❌💸 To improve your profit margins, you'll need to do more than ask for lower trade terms and cost price increases. So what can you do if your 1P margins have become unsustainable? 𝟭- 𝗥𝗲𝘃𝗶𝗲𝘄 𝗬𝗼𝘂𝗿 𝗣𝗿𝗶𝗰𝗲-𝗣𝗮𝗰𝗸 𝗔𝗿𝗰𝗵𝗶𝘁𝗲𝗰𝘁𝘂𝗿𝗲 Ask yourself: Are you selling the right products at the right price? If most of your assortment is sold at <$15, you must improve your price-pack architecture. Focus on the launch of larger pack sizes that can help lower handling and shipping costs while increasing your Average Selling Price. 𝟮- 𝗢𝗽𝘁𝗶𝗺𝗶𝘀𝗲 𝗬𝗼𝘂𝗿 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗔𝗰𝘁𝗶𝘃𝗮𝘁𝗶𝗼𝗻 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆 Listing the right products isn't enough. You also need to activate the right ones. Just because a product is profitable for Amazon doesn't mean it's profitable for you. Make sure you overlay your marketing and advertising strategies with a commercial decision layer. In other words, only activate products that return healthy margins for you and Amazon. Define net margin thresholds and reduce marketing and promotions on low-margin items. 𝟯- 𝗣𝗮𝗿𝘁𝗻𝗲𝗿 𝗪𝗶𝘁𝗵 𝗬𝗼𝘂𝗿 𝗩𝗲𝗻𝗱𝗼𝗿 𝗠𝗮𝗻𝗮𝗴𝗲𝗿 Your Vendor Manager's job is to protect their P&L. Instead of seeing Amazon as the enemy, work with them to understand their category objectives. Amazon buyers often look for brands that help elevate their category ASPs, especially in Beauty, Grocery, and HPC. So ask about their ASP targets, share your NPD concepts, and align on initial buys early. The more you involve them, the more likely they'll support you and not just see your approach as a negotiation tactic. Remember: While Amazon is focused on automation, use your time with Vendor Managers to build a profitable business. --- What else would you add? Let me know in the comments. #amazonvendor #amazonstrategy

An idea I've become obsessed with: Pricing is a living thing. It needs constant attention and tweaking to thrive. Here are 3 ways you can keep your pricing strategy alive and kicking: 1. Experiment with Pricing Tiers: Don't shy away from trying different pricing tiers. Test various options to find what clicks with different markets. Your perfect price isn't set in stone; it's written in pencil. 2. Regional Pricing: Consider regional pricing to match local purchasing power. What works in one market might not work in another. Adapt and adjust to resonate globally. 3. Usage-Based Models: Explore usage-based pricing models. This can align better with how customers use your product. It keeps your pricing flexible and fair. Remember, pricing isn't a one-time decision. It's an ongoing experiment. Set it, test it, and reset it again. And again. This approach can improve conversion rates and boost revenue. How you thinking about pricing?

Excess inventory might seem harmless, but the truth is it can severely damage your bottom line. Storing unsold stock ties up cash flow that could be better spent on growth initiatives or expanding product lines. On top of that, overstocking leads to higher warehousing costs, increased risk of obsolescence, and potentially wasted resources—especially in industries dealing with perishable goods or rapidly changing technology. Many businesses fall into the trap of over-ordering due to inaccurate demand forecasts or fear of stockouts. But balancing stock levels can be achieved through an intelligent inventory management system that provides real-time insights into customer buying behavior and accurate demand forecasting. By optimizing inventory and reducing excess stock, you can free up cash flow, improve storage efficiency, and significantly boost profitability. Do you know how much of your working capital is tied up in excess stock? Let’s talk about reducing overstock and making your inventory work for you, not against you. #InventoryControl #Overstocking #CashFlow #BusinessGrowth