Investment in tech now critical to retail in 2024 as inflation continues to fall
Trade promotions driving down prices to compete for cash-strapped shoppers could cause retailer-supplier acrimony down the line without process automation, warns Retail Express.
“Fierce” competition for cash-strapped shoppers among retailers was cited by the British Retail Consortium (BRC) in February 2024 as one of the main reasons for the BRC-Nielsen Shop Price Index showing its lowest reading since March 2022[1]. However, Retail Express SVP warns of retailer-supplier acrimony ahead unless AI and automation are used to transform legacy practices. As most retailers operate on a very thin margin, trade promotion efficiency is an important driver of their financial sustainability.
Edward Betts, SVP General Manager – Retail Lead Europe, Retail Express explains, “Supermarkets are doing all they can to keep prices down and help people manage their budgets. We have started to see the main retailers launch price-match schemes with the discounters; this competition is accelerating promotions activity with consumer spending on offers increasing by 4% in February. But, we also know that 70 cents per every dollar invested in trade promotion are lost and that circa 60% of trade promotion investments do not break even[2]. Retail systems desperately need an upgrade.”
With a heavy reliance on legacy infrastructure, manual processes and siloed approaches, many retailers find that the trade promotions established with suppliers are often unprofitable. Successful promotional activity demands the ability to discover and act upon new category opportunities, the foresight to predict the position of the market when supplier deals come into effect, and the accuracy to ensure that all pieces are in place when promotions land – all while maintaining good relationships with suppliers.
Against the backdrop of a YouGov survey[3], which found that inflationary pressure has led to strained retailer-supplier relationships, retailers must go beyond the unreliable nature of spreadsheets, emails and phone calls and embrace the power of AI and process automation. Investing now, as liquidity improves, in enhancements to crucial communication and coordination between retailers and suppliers will strengthen this most important of relationships at a time when unlocking value, maximising ROI and gaining a significant advantage over competitors has never been more important.
Better supplier collaboration using AI will hold the key to retail success in 2024
In response, Retail Express has announced a whitepaper to help retailers operate smarter as they plan for 2024. While merchandising practices continue to grow in complexity, the paper reasons that greater investment is urgently needed in the technology platforms that underpin supplier negotiation and ultimately improve trade funds, reduce collection costs[4] and drive better promotional ROI.
The whitepaper explains how the drive towards digital transformation is ushering in a new dawn of algorithmic retailing – the use of AI to drive automation and deliver real-time insights that will free up staff time to focus on tasks that deliver improvement and innovation. This is particularly appropriate in a situation where internal practices have become a direct hindrance to growth and market responsiveness. Artificial intelligence (AI), capable of driving intelligent merchandising tools, can serve to vastly improve retailer and supplier collaboration while unlocking competitive advantage.
Ed Betts concludes: “The use of a digital solution facilitates real-time supplier proposals and deals, allowing retailers and suppliers to collaborate consistently and transparently using the analysis of data in real-time. This enables greater insight into promotions planning and a better understanding of the related supply chain dynamics. It also helps to ensure the better use of trade funds and improves the chances of retail businesses being more highly valued by their supplier partners. In addition, the automatic creation of digital contracts with full audit trails reflecting step-by-step negotiations with supplier partners can save valuable time and confirm agreements. Deals can be evaluated in real-time for compliance, with pro forma invoices and supplier trade-fund reports generated at the click of a button.”
Download the free Retail Express whitepaper to learn more:
The Digital Transformation of Supplier Collaboration
[1] https://news.sky.com/story/food-and-fashion-push-retail-inflation-towards-two-year-low-13081666
[2] More than 59% of trade promotion investments do not break even (Nielsen, 2015). Rapperport (2015) estimates that 70 cents per every dollar invested in trade promotion are lost.
[3] https://www.gov.uk/government/news/inflationary-pressures-strain-relationships-between-retailers-and-suppliers
[4] The post-audit industry estimates that for every $1b in sales, at least $1m in claims could be made (Parvatiyar et al., 2005).*
