Opinion article by Nuno Figueiredo, Board Member, Sales & Marketing Director of Abaco Consulting for Grande Consumo [PT Only]: https://grandeconsumo.com/atualmente-assistimos-a-uma-nova-era-do-retalho/
IDC’s forecasts point that in 2022, 65% of the global Gross Domestic Product will be digitized. As a result of the context experienced, 2020 ended up having the ability to have contributed to a greater technological impulse in the national business fabric, motivating companies to recognize the need to invest in their digitalization. Today, it is increasingly the technological tools that make it possible to gain instant, real-time and panoramic visibility of the businesses, generating a wealth of data and information that can represent the key to its success, as long as it is duly and timely interpreted. Nuno Figueiredo, Board Member of Abaco Consulting, discusses how retail companies can reduce their costs and choose the most suitable suppliers, through the use of technology and, at the same time, obtain a competitive advantage in business processes, through a quick price comparison against the selected quantities, volumes, discounts and quality scores from the supplier.
Grande Consumo – The last few months have seen profound changes to the retail business model. What were the main lessons to be drawn from 2020 for the management of this business and how can they be replicated in 2021, given the way in which the year is starting with a new confinement?
Nuno Figueiredo – 2020 was a different year at all levels, a year in which companies were forced to start their digital transformation if they wanted to survive, and the retail sector was no different. Digital came into force in this sector, in the sense that consumers started to resort, more and more, to online shopping and in categories that still did not show to have a very relevant demand. For example, the Portuguese mainly bought travel online, but when it came to grocery shopping, the preference was still for physical stores. With Covid-19, new buying habits were created.
In digital, online shopping will remain a trend, above all, because there is still a huge social and economic instability. And the fact that we are starting this new year confined will make buying online a priority for 2021.
Deste modo, as empresas precisam, imperativamente, de adaptar os seus negócios para o digital, pois é uma questão de sobrevivência no mercado. Os retalhistas devem prestar atenção, por exemplo, ao “social commerce”, adaptando o processo de compra do utilizador para as várias redes sociais (permitindo, assim, a compra sem muitos cliques).
Currently, we are witnessing a new era of retail, in which companies must be able to consolidate and integrate the online and physical retail experience as a whole, thus enabling customers to make purchases where, when and how they want, ensuring consistency concept, regardless of the point of contact.
Companies absolutely need to adapt their business to digital, as it is a matter of survival in the market. Retailers should pay attention, for example, to “social commerce”, adapting the user’s purchase process to the various social networks (thus allowing purchase without many clicks)
GC – Much has been said about the reinvention of the business. Something that not only does not happen in a short time, but has to go against the strategy / vision that each retailer seeks to implement in the market. In the light of your experience, how can you prepare a post-Covid-19 strategic scenario? Is this how you can “reinvent” the business? Anticipating possible scenarios?
NF – Currently, innovating and being able to do things differently are the watchwords for any sector of activity that wants to survive and develop in the market, which is, more and more, competitive. In this sense, overcoming daily challenges, without ever losing focus on business growth, as well as providing a service and experience of excellence to customers, remains the main objective of companies that want to differentiate themselves from their competition and that is increasingly urgent.
Consumer goods companies, like retailers, increasingly feel the need to reinvent their business in order to remain competitive and be able to keep up with current market trends and requirements. This growing concern is mainly due to changes in society’s behavior towards consumption, excess production capacity, as well as pressure on margins and a greater focus on the customer and their respective interests.
In this sense, it has become urgent for companies to analyze their strategies, in order to place digital as a priority, because the business models that existed until now, and were considered as a success, will no longer result in the new “normal” . Therefore, it became urgent to rethink all business models and even to reinvent the company and products.
In this way, companies must develop an analysis of the market, of their competitors, predicting possible scenarios, they must map all the resources they need and can use, develop a deep analysis of their internal processes, as well as their sales, in order to develop a strategy that takes into account the objectives of the company and the current demand in the market.
On the other hand, it is also important for these companies to analyze the possibility of establishing some partnerships that will allow them to innovate more quickly. In other words, in an emerging and constantly changing world, we must be very attentive to trends and new solutions that are launched by many companies, namely, startups. More and more “out-of-the-box solutions” are emerging, whether facial recognition, voice recognition, custom-made products, simulators, among others, that can, in fact, complement our services, in the status of partners and, at the same time, present themselves as an asset for the business.
In this way, transforming traditional businesses into experiences for the consumer, where he feels connected and has the perception that we are delivering value to him, is the challenge of all companies and, in the end, it will be what will dictate his survival in the market.
It has become urgent for companies to analyze their strategies, in order to make digital a priority, because the business models that existed until now, and were considered a success, will no longer result in the new “normal”. Therefore, it became urgent to rethink all business models and even to reinvent the company and products.
GC – What kind of technological solutions are available to retailers today to make more and more correct decisions?
NF – With the growing competitiveness and demand of the sector, data has become the best friends, since taking advantage of them as a decision-making tool is essential to find solutions to more complex issues and, at the same time, increase the organization’s efficiency.
In this sense, there are several technological solutions that retailers can and should use to be able to make better decisions, namely, management software (ERP), which, more and more, are becoming a powerful information aggregating tool and which have evolving to meet the needs of organizations. Currently, they are more modern, more versatile, multifaceted and allow collaboration and ease of use through the mobility of social media tools and even more traditional platforms. On the other hand, they increasingly provide intuitive reporting tools, given the advances in compression, storage and use of the amount of available memory, while the computational distribution allows for real-time processing, as well as further analysis of data sources, both internal and external.
At the same time, machine learning and artificial intelligence mechanisms are also complementary to this technology to create user profiles and make extremely accurate predictions about the behavior of its customers, using casual data resulting from web browsing, for example. In this way, the correct analysis and interpretation of data provides organizations with a set of valuable insights for the development of their business, with the ability to reduce risks and define their strategy more rigorously. The deeper the understanding of an organization’s data, the greater and more accurate its impact on decisions, which benefits the relationship with the final consumer and internal processes.
GC – Although important, the “algorithm” cannot justify all management decisions. How are we able to make rigorous, correct decisions, based on technological support today at the disposal of modern management, but without neglecting the human factor? How do you manage to balance these two important dimensions in conducting operations?
NF – It is not an easy task, but it is possible with the right technology and using the data. In other words, to know the customer’s habits and tastes, to understand what he thinks and what he wants, to know his buying and consumption process, when, where, what, are key indicators nowadays and are essential for us to focus on. our offer and meet what the consumer is looking for. In fact, these valuable data are, more and more, a key tool that, well crafted, brings us to fundamental information regarding the direction we must follow.
This objective is only possible through the adoption of Big Data & Analytics tools, which allow analyzing large volumes of data at a speed never before imagined, which allows organizations to obtain relevant information for management in a timely manner, improving and making it more reliable. decision-making processes. This information is, therefore, essential for creating personalized offers for customers, or even foreseeing market trends and working on the value proposal to respond to those same needs.
In this way, retail companies, having knowledge about the real needs of their customers, are able to create a personalized offer, creating a closer relationship with them. Predicting consumer trends in advance also improves an organization’s entire supply chain, maximizing all aspects of the business on its own, such as reducing stock levels, eliminating unnecessary stock, and analyzing and executing various production scenarios. prices in millions or billions of products in various dimensions, to support “markdowns”, promotions and regular pricing strategies.
GC – Is procurement one of the most sensitive areas for retail management? How can technology help to reduce costs in this area?
NF – With the right technology, this area can become much easier to manage, managing to optimize the procurement and procurement negotiation processes, making them more efficient, fast, rigorous and transparent, since there are technologies that allow the automation of purchasing and supplier management, enabling cost reduction on several fronts.
With regard to the choice of suppliers, these technologies calculate the ideal solution based on the best prices, quantity, volume, discounts and quality scores from the supplier. In addition to simplifying processes and allowing consulting, selecting and contracting an unlimited number of suppliers, it minimizes direct and indirect costs not only in operational terms, but also in the actual acquisitions. In this way, the efficiency and automation of procurement processes can save organizations a lot of money, avoiding late purchases, lost discounts and transaction disputes.
On the other hand, it also allows greater negotiating power, since, in addition to providing the buyer with detailed information for each of the different purchase scenarios, it invites suppliers to improve their initial proposals in terms of unit prices, commercial discounts ( quantity or volume of purchase) and cash discounts. It also allows the optimization of processes and human resources, that is, when making the decision to automate the management of purchases and suppliers, organizations will have better control over all stages of the life cycle of these acquisitions (procurement lifecycle ), optimizing not only operational processes, but also human resources, since it optimizes the workload of all stakeholders.
Finally, through these technologies, companies will start to make much more informed and sustained financial decisions, since they will be able to centralize all procurement processes on a single platform, which allows management, monitoring and access to detailed reports (and understandable) of the purchasing process, contributing to more informed financial decisions.
GC – Is it the only critical area of the business where technological tools can be a privileged partner for decision making?
NF –No, we all realize that technology is an asset for any organization and that it has global advantages. It is a fact that intelligent management models are transforming businesses and increasing the competitiveness of organizations in the global market. Optimizing processes and resources, using, for example, machine learning or big data processing, can be a decisive step for the survival of certain organizations in the context of industry 4.0. The advantages of these technologies are not limited to economic and organizational issues. In strategic terms, they can have a significant impact on the competitiveness of organizations and, consequently, on their overall growth.
Retailers that today have the ability to grow and innovate from customer data are, for sure, those who, in the future, will be able to launch and test new concepts and ideas more quickly. They will be the ones who will be most able to satisfy the needs of customer X or deliver the goods to customer Y efficiently and without fault.
GC – Doesn’t the progressive adoption of these tools make the business process more unbalanced between retailers and suppliers? Or does the industry also stand to gain from this greater analytical capacity of the business on the part of retailers?
NF – I think that the whole industry will have to win. Retailers that today have the ability to grow and innovate from customer data are, for sure, those who, in the future, will be able to launch and test new concepts and ideas more quickly. They will be the ones who will be most able to satisfy the needs of customer X or deliver, in an efficient and irreproachable manner, the goods to customer Y. And, as such, they will be the most successful. Which turns out to be beneficial for the suppliers themselves, who are also able to channel their sales according to their customers.
Obviously, the fact that retailers now have greater analytical capacity means that suppliers are unable to set the prices they want. Or rather, they can, but, if they want to be successful, they will have to be attentive to their competitors and seek to improve their initial proposals in terms of unit prices, commercial discounts (by quantity or volume of purchase) and cash discounts.