festive frustrations

Promotions have become like methadone: is it time retailers kicked the habit?

For many managers in retail, promotions are like a heavy drug addiction: they know they are bad for them, but it was simply too difficult to stop. While some retailers have moved away from the old days of flash promotions in favour of an Every Day Low Prices Strategy, it seems the vast majority just cannot seem to kick the habit. Ultimately, when the pressure is on, retailers still return to their old ways.

Given that the average consumer is unlikely to fork out for an item unless there is at least a 25 per cent discount on offer, it’s virtually impossible for retailers to not have some form of promotional activity in place. After all, how do you feel when you have to pay full price for toilet paper?

It seems then that promotions are a necessary evil for retailers. However, in order to help combat the pressure placed on the supply chain teams during these volatile times, here are 3 top tips to help better manage promotions and rehabilitate the value such activity can offer retailers.

Stub out decentralised planning

Firstly, avoid decentralised models where individual stores launch promotions without any real insight. Rely instead on robust algorithms that are based on real numbers. Historic sales figures of the same or similar items can provide a lot of guidance when it comes to estimating initial allocation volumes. From this point on, replenishment can be based upon actual sales.

Synchronise the business

Secondly, it is vital that the supply chain team is well synced with the commercial teams. Through bringing together the right people, the supply chain and commercial teams can develop far sharper analysis and allow the facts to speak for themselves. For example, the commercial team may be able to provide some form of “gut” feeling insights such as marketing insights which would otherwise not be available to the supply chain team. Such inputs can be added into the mix through means of an effective S&OP process. Thus ensuring the relationship is both statistics and pragmatic.

Learn from your mistakes

Finally, there is more to be learnt from failures and successes. Through jointly evaluating any actions taken with the supply chain and commercial teams, you will be able to ensure that the next action is just that little bit more successful that the last. After all every little count. So with this in mind: Plan, Do, Check, Act…

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Jan - Author

Jan Kraaijeveld

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