Retailers balance the products and business practices that contribute to profitability with those that don’t.
For example, you may accept losses in the off-season if you know you can make them up during times of peak demand. Or, in achieving sales goals you may accept products that don’t contribute to your profitability. But as the Deloitte white paper “Preparing for an Economic Storm” points out, businesses must be able to challenge these practices and assumptions. That doesn’t mean you need to completely drop them. Instead, you should look for ways to restructure, renegotiate or re-price them to become contributors.
Deloitte advises retailers to:
- Indentify different business cross-sections for looking at profitability such as products, product categories, vendors and locations
- Determine what’s contributing and what isn’t
- Challenge your reasons for supporting non-performing elements of your business model
- Look for game-changers that can turn the non-contributors into winners
- Make challenging decisions and rationalize negative contributors if they can’t be rehabilitated
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