Improving Profit Margins After COVID-19
Retailers have faced tremendous pressure throughout the COVID-19 crisis, as top-line revenue and profits plummeted in many product verticals. Meanwhile, other segments, like essential retail and grocery, experienced overwhelming demand that surpassed operational capacity. At the height of the pandemic, grocery sales hit a record high of $9.3 billion. These retailers had to invest heavily in new technology and customer service options, such as curbside pickup, to keep customer journeys safe and efficient. As advances were made, competition intensified across all sectors as retailers vied for digital shoppers in an era of easy comparative shopping and growing pressure from the likes of Amazon.com, Walmart, and other industry goliaths.
Now, as the world re-opens and customers prioritize experiences once again, retailers will struggle to maintain top-line revenue and profits as essential retail sales slow down and the competitive digital environment remains strong. For grocers and consumer goods retail, this will challenge them to maintain profitability and invest in the right technology moving forward. For other sectors of retail, companies will be pushed to center their business around an experience to regain profits as consumers resume traveling and social interactions.
Yet at the end of the day, retailers of every variety are striving to be profitable, just as they were before COVID-19 and as they will continue to be. Profitability begins with negotiations between retailers and suppliers. The cost-saving precautions taken during the negotiation stage cannot be understated as they have the potential to protect critical margins and form long-term relationships for continued success.
The Trouble With Traditional Negotiations
Conducting smooth and efficient negotiations and agreements is critical to improving margins, fostering customer loyalty, and offering competitive sales prices. Yet, traditional negotiation is extremely time consuming and expensive. For many companies, negotiations take the form of numerous reports and spreadsheets across every existing agreement and supplier, leading to inefficiencies and missed opportunities.
Challenges for manual negotiations also include poor transparency and visibility across the process, which lead to eroding margins, weak negotiating positions, repetition, and disruption whenever documents are lost, mistranslated or forgotten — just to name a few. Ultimately, a crucial amount of money gets lost (or left) on the table.
To avoid these common pitfalls, retailers must look to technology automation that systemically streamlines negotiations between all partners, suppliers and customers.
Lean Into Data and Analytics
With a streamlined negotiation process, retailers can improve profitability at the beginning of the product sales cycle: when they negotiate with suppliers. Relevant data is the basis of a successful negotiation. Real-time data regarding sales, orders and forecasts significantly influence the agreement and must be available to the negotiator at a moment’s notice. Renowned software to secure agreement negotiations and facilitate collaboration maintains this high level of transparency and professionalism between retailers and suppliers by organizing contracts, claims and settlements in order to ensure that nothing slips through the cracks.
Try, Try, Try Again
Additionally, real-time data gives both negotiators the ability to focus on margins. With data-driven innovations, operators can analyze previous negotiations to see how well the company performed and conduct what-if scenarios to prepare for future discussions. Testing simulations allow buyers to visualize the impact of any deal and future profitability before creating an agreement. The increased visibility of margins and profitability allows retailers to reduce the cost of goods sold through a streamlined, closed-loop process.
Offer a Single Source of Truth
Once the process is complete, software for agreement management can digitally store all data related to the deal as well as all terms, conditions and documents. This single source of truth reduces errors and miscommunication, ensuring that all parties have access to the information. After negotiations, the automated settlement process ensures all agreements are met and all monies are claimed. Then, when it comes time to strike up a new deal at the end of a contract, all previous information is a touch away, encouraging seamless, long-term relationships.
Stand Out in a Crowd With Smart Negotiations
In today’s retail environment, margins are critically important. If retailers want to stay afloat as customer priorities shift and the focus on essential retail is diluted, they’ll need to optimize negotiations as soon as possible. A strategically streamlined agreement management process holds the power to increase margins, enhance transparency and, ultimately, build relationships with every stakeholder.
Stefan Hilger is a member of the executive board at gicom, a leading negotiation and terms and conditions partner.
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