Retailer Strategies: How to Increase Consumer Value While Improving Net Profitability

As all retailers and wholesalers know, consumer goods can be very expensive to service when inventory turns slowly, buyers have to pick too many cases, and excessive handling is required. To provide more value to consumers and increase sales, purveyors must find ways to reduce supply chain inefficiencies and costs.

Wal-Mart, Costco and Target have led the industry in improving processes and redesigning the supply chain. Their efforts have driven exceptional supply chain efficiencies, which has delivered a 10-15% overall sales growth to them every year. In the case of Wal-Mart, same-store sales growth runs at a remarkable 6% annually – even in stores that are 20-25 years old. When comparing operating efficiencies, Wal-Mart’s operating expenses as a percentage of revenues sit at only 15% of sales versus a high-end competitor’s costs running at 26-27% of sales. That 12% difference is a direct result of supply chain efficiencies. While other retailers may boast a more “pleasant” shopping experience and broader product assortment, consumers have responded to lower prices by buying more from Wal-Mart every year.

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