How will businesses adapt their traditional “Buy, move, sell” operating model, whilst developing alternative “Buy, sell, deliver” model for online? Online and store based retailing share complementary goals but their commercial operating models and skill requirements are very different. Do you ‘Bring in’ or ‘Bring Up’? And if you get that right, when do you ‘Bring together’? As a result, commercial teams are leaking talent to the online trading platforms (internally and to outside), with traditional retailers falling over themselves to attract ‘trained’ buyers, merchandisers and marketers with online experience.
With the online demand for talent creating a trading brain drain, commercial teams faced with the challenge of delivering ever more off less resource will need to become more effective; making quicker, better decisions in an operating model that is functionally efficient end to end through Customer, Commercial, Logistics & Operations.
As retailers wrestle with the challenges of delivering channel strategies that meet their customers’ needs – the right products at the right prices in the right place at the right time – the creation of their online capability brings new dilemmas. In an unguarded moment I once over-heard a CEO say, “this is great, but unless we can secure the ‘today’, we’ll have no tomorrow!” His challenge was ensuring the existing proposition continued to deliver the cash with nimble pure-play competitors eroding margins, whilst reducing the cost base to fund the new channels. I’m sure he is not alone.
Any new operating model needs to review and revise not only the systems, processes and business rules but also the accountabilities and responsibilities, the control and decision making governance, the business measures, organisation design, capability and reward framework.
This requires aligned objectives that cut across functional targets, with teams rewarded cross-functionally. It’s a delicate balancing act that needs to focus on customer and corporate needs and not solely functional objectives. The true test of how well this change is landed is if the retailer can handle the classic commercial challenges:
- Commercial Proposition – delivering the right range in store, complementary to the online offer, whilst delivering target margins and cash throughput. Getting the assortment right when customers have so many channel choices; duplicate everything?
- Merchandise planning – maximising range authority and stock availability whilst minimising total costs of inventory. How much stock, in what depth in which stores, whilst reducing logistics and staff handling costs?
- Store Optimisation – Maximising overall sales and margin density whilst minimising total costs of operating the selling space. In an Omni-channel world, how much space do stores really need, in what form and what to do with the rest?
These challenges require complex trade-offs to optimise, requires a set of operating principles underpinned by the business’ values and culture.
Now is the time to invest in existing capability and ways of working, where due to the scale of the current business many small improvements multiply and drive significant returns. Adapting to the competitive threat of a multi-channel world is only going to favour the efficient retailers who can empower their leaner workforces to deliver ever more from less.