Industry Insights

Retailing encompasses the business activities involved in selling goods and services to consumers for their personal, family, or household use. Retailers are the final link in a distribution channel that links manufacturers to consumers, without changing the nature of the product in any significant manner

The different risks that the retail industry faces are:

Product Complexity: The retail sector has a high degree of product complexity, with the number of SKUs in stores running anywhere from the tens of thousands to more than two hundred thousand, a high degree of seasonal and fashionable items, and a lack of standardization of product hierarchies.

Supply chain challenges: With so many different outlets and channels, multiple hands-offs, and high frequency of replenishment, developing and managing an efficient supply chain remains one of the primary challenges in the retail sector.

Scale complexity: Retail operations are executed on an extremely complex scale. The U.S. retail sector alone deals with millions of transactions per day, driven by millions of customers who shop through thousands of outlets.

Process complexity: The business processes that support this environment are also inherently complex due to the multiple touch points across players in the value chain (manufacturer, distributor, retailer, consumer), the coordination required between the different planning cycles of each of these players, and geographic dispersion.

Apart from the business challenges the IT cost and performance under pressure also owes to the high growth in annual IT spends as compared to the growth of revenues. Also, the lack of standards in a complex, highly customized IT environment leads to integration challenges, making changes and new functionality development cumbersome and expensive.

Longer Lead Times

Offshore manufacturing leads to longer lead times, thereby causing huge transit costs, less reactivity to demand changes, greater cycle times and piling inventories.

Demand Volatility

Higher degree of demand/pricing volatility coupled with poor visibility of network stock transfers and inventory leading to longer cash conversion cycles and opportunity losses.

Intense Pricing Competition

With big box retailers competing heavily on prices, the need to retain customers and maintain margins requires having an efficient supply chain network.

Private Labels

Competition from private labels continues to grow with manufacturers losing business to retailers.

Right Mix, Right Quantity

Retailers need to contend with twin challenges of ensuring fewer stockouts and right assortment mix.

Multi Channel Retailing

Multi Channeling has brought new challenges like capturing Accurate Sales & Customer Info, Maintain customer loyalty. Manage Promotions/Markdowns across all channels, Build & maintain elaborate infrastructure to support multi-channel sales.