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Four Strategies to Protect Retail Margins in a Tough Economy
From the global credit crisis to the rising price of commodities, retailers find themselves in uncharted waters. But the news is not necessarily all bleak.
In fact, the crisis offers opportunities for retailers that provide customers value in the context of economic challenges. How is this possible?
The four strategies to protect retail margins in a tough economy:
1. Utilize the hidden power of lifecycle pricing tools.
Retailers are facing a classic squeeze play as commodity costs rise while consumers are being forced to cut back on spending. To survive, retailers must offer more value for customer dollars, but they can no longer rely on simply marking down prices across the board.
The solution lies in a new generation of lifecycle pricing tools, which can set optimized prices for local geographies while also taking into account the risk of "cannibalizing" sales across product assortments.
"In a time of great uncertainty, these tools allow retailers to respond to unforeseen fluctuations in demand both quickly and intelligently," says Boyce.
2. Respond immediately to changes in customer behavior.
In an economy where customer behavior is changing quickly, customer data is more important than ever. Retailers must find ways to gather customer information and turn the data into insight as quickly as possible to take immediate action in response to demand.
"Oracle supports the integration of data, applications, and channels that enables exactly this kind of rapid, intelligent response to changing behaviors," says Boyce.
3. Deploy advanced inventory management.
"Cash generation is essential in this environment," says Boyce. "The last thing a retailer wants is too much inventory."
At the same time, retailers cannot afford to not exploit real opportunities. That means getting inventory levels just right—especially since customers have even less patience than usual for stock-outs in a tough economic climate.
To achieve the right balance, retailers need tools that integrate and analyze data from multiple sources, with the ability to manage hundreds or thousands of stores while also optimizing local assortments.
4. Think big, but use modular systems to ensure fast payback.
Retailers that take a broad, comprehensive approach to IT architecture are best positioned to make good on the strategies listed above. They are able to link formerly disparate systems to make clean, actionable data available to many more people throughout the enterprise.
"At the same time, such an approach enables modular growth as well," adds Boyce. "Retailers can target specific business problems that achieve fast payback—a critical factor in this environment."
Learn more about strategies for transforming the economics of retail.
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