Retail cost reduction for sustainable growthCutting costs while remaining competitive, and setting up for growth

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B Retail cost reduction

In the current retail environment, customers expect best prices, great service and a seamless experience between digital and physical channels.

However, while retailers are rushing to meet these challenges, they are also facing bottom line pressures.

Businesses need to find a way to streamline their operations and achieve optimal efficiency in order to manage margin pressures and rising costs. At the same time, they need to find ways to fund new investments, improve the customer experience, and expand omni-channel capabilities.

At KPMG, we focus on helping retailers make sustainable reduction in expenditure, while still setting them up for future growth.

© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

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Bottom line stressWith competition, technological advances and customer demands increasing, retailers are facing a period of financial strain. Many large retailers that have previously shown no signs of distress have, within months, found themselves in financial difficulty.

The impact on trustRetaining the trust and confidence of customers is paramount to the continuing success of any retailer. Cuts to in-store staffing and other forms of customer service can lead to scenarios in which the relationship with customers can be irreparably damaged. A sustainable approach to cuts can not only safeguard the most important aspects of the relationship, but maintain high product quality and safety standards.

© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

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5 steps to sustainable cost reduction

Thinking about the futureMany retailers cut costs, such as the wage bill, without considering the impact it will have on their business. They may find out a year later that parts of their business won’t function adequately due to staff shortages. Rather than looking at moving costs out as quickly as possible, we help retailers start with their future growth strategy, and focus on an operating model that is in line with the growth trajectory.

Finding new opportunitiesWith the market moving so fast, we can help you find opportunities for your business to take advantage of. For example, consolidation in the property and logistics industry and a surplus of warehouse space is creating an opportunity around renegotiating contracts.

Keeping up with regulationIn an increasingly complex regulatory and compliance environment, cutting costs in ways that impact your compliance could lead to reputational damage. For example, a large convenience chain found that, as a result of cutting agency costs, they weren’t paying staff correctly. The result has been lasting damage to their market position. We’ll firstly help ensure your operations are compliant, and then that this isn’t impacted by cost reduction.

Hunting down the hidden costs Familiarity and legacy processes can often lead to overlooking easy opportunities to increase efficiency. We’ll help you look at streamlining processes that you may have been doing for years, or to find value in existing contract management, for example.

Continuing delivering to customers We’ll look at the end-to-end value of your processes and operations, to make sure there is no negative impact on the end customer, and your ability to deliver your products or services.

Instead of just thinking about the short- or medium-term benefits, KPMG looks at how sustainable cuts fit into the business strategy holistically, while planning for the future. Here’s how we help:

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© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

A future ready approach An Australian pharmaceutical retail business had aspirations to grow from almost 100 stores to approximately 400 across a 5-year period. Constraints to the growth plans included the organisational structure, operating model and technology. Other hurdles included the availability of working capital and ability to attain the best deals from suppliers.

A team of KPMG professionals delivered a tailored solution to support the client to design its future retail supply chain and target operating model. A transition roadmap enabled the business to realise benefits within the required timeframe.

We worked closely with the client to design a future organisational structure with complementing job descriptions, to investigate new technology options, and supply chain enhances. Aligned to this, we created a financial model to help the business understand the cash flow scenarios if it undertook a series of financial changes. In short, we helped set it up to make informed decisions and sustainable cost reductions that still enable customer satisfaction and growth.

© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

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The information contained in this document is of a general nature and is not intended to address the objectives, financial situation or needs of any particular individual or entity. It is provided for information purposes only and does not constitute, nor should it be regarded in any manner whatsoever, as advice and is not intended to influence a person in making a decision, including, if applicable, in relation to any financial product or an interest in a financial product. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

To the extent permissible by law, KPMG and its associated entities shall not be liable for any errors, omissions, defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence, negligent misstatement or otherwise).

© 2019 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo and are registered trademarks or trademarks of KPMG International.

Liability limited by a scheme approved under Professional Standards Legislation.

June 2019. 297465262LOBS.

KPMG.com.au

Contact usAndy BuckleDirector, Operations and Technology – RetailT: +61 3 9288 5734 E: abuckle3@kpmg.com.au

Carly RichardsDirector, Risk Consulting – RetailT: +61 3 9838 4684 E: crichards7@kpmg.com.au