UK retailers could increase their profits by 4.8 per cent by better procurement – that amounts to £1.3 billion across the industry.
The figures come from retailers themselves. Management consultancy Inverto surveyed 150 directors of UK retailers and found that a “perfect” buying team could improve margins by almost five per cent.
Inverto points out that for a typical retailer a one per cent saving in costs has the same effect on EBIT as a 12 per cent increase in sales.
Inverto managing director Richard McIntosh points out that 90 per cent rate their buying team as better than average. “They can’t all be. Seventy per cent believe they’re getting better terms than their competitors – this also cannot be true. Retailers are deluding themselves.”
Harsh words. And you might feel moved to question the possibility of putting together a “perfect” buying team – or maintaining that level of performance for a significant length of time.
But there are some pointers to improved performance. The survey found that supply chain issues were dominating concerns for retailers. Almost a quarter said increasing the range of suppliers would improve the performance of procurement.
The four main trends affecting procurement over the next ten years include inflation/currency fluctuation, traceability of sourcing through the supply chain, environmental issues and the identification of new suppliers.
And it also highlighted the importance of indirect spend, items such as marketing, facility management or shop fitting, which can account for up to ten per cent of a retailer’s turnover.
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