Cut cost to ramp up retail revenue

Slashing prices, stocking more private labels and smarter packaging with freebies are some options that retailers are exploring to woo the customers.
Slashing costs

The retailers are gradually coming to terms with the not-so-inspiring market and re-considering the pricing strategy of their merchandise to send the ‘value-for-money’ message across its cost-sensitive customers. The exercise includes stocking of more affordable items that always allure a large number of customers in comparison to high end products that have demand in limited number of buyers.  

Private labels: Ensuring higher profit margin
The time has come for the grocery retailers to give more shelf space to the private labels that offer better profit margin. Generally the private labels introduced by the big corporate houses like Future Group, Reliance and that of Birla’s have many takers and quality-wise they are no inferiors. A decent packaging and competitive pricing can make these items have an edge over those from the leading manufacturers like HUL. 

Manufacturers are taking in stride
To keep intact their share of the retail spaces, manufacturers of the leading brands are coming up with revised product offerings enhancing brand propositions. This is mostly achieved through revamped packaging. 1 litre Amul ice cream, which costed Rs 70 earlier, is now replaced by 2 litre at Rs 99. Gujarat Co-operative Milk Marketing Federation (GCMMF) which is the brand owner is undergoing cost cutting task through rationalising the dealers’ margin, lowering logistics cost to sell double the volume for extra Rs 29. The smallest packet of Cadbury’s Gems at Rs 1 that used to contain four pieces will now have three pieces at the same price. As a cost cutting drive, the company did not feel convenient to raise the price to maintain its profit margin, rather preferred to take the other way round. The manufacturing companies, as well as retailers, are now eyeing for volume growth through price cutting and free offerings. 

Low-end items getting more shelf space
Apparel retailers too are strategising their merchandising plan to house more product categories at the low-end than pricey items. “We categorise our products as ‘Good’, ‘Better’ and ‘Best’, However in India, conforming to lower price points, the company is going to stock most of its SKU from ‘Good’ category. The company is also eyeing for local sourcing.” Says, Mark Ashman, Marks & Spencer. Presently, the company is sourcing 20 per cent of its SKU locally and has a plan to increase it to 70 per cent in the next five years thus enabling more price cut. The renowned ethnic wear brand Biba Apparels is also following the same track by widening its product range for the price point at Rs 599. The result was reflected as The Body Shop, the noted international beauty and wellness brand, also lowered price points of 200 best-selling items that comprise 40 per cent of its merchandise. By doing so, the product category would eventually contribute 50 per cent of the company’s total revenue.  

Cost-effective back-end operations
Future Group is planning to converge its all back-end operations across its multiple formats to cut down its operational cost and achieve higher profit margin. The company has already revised the average selling price of the brands like Sculler, Indigo Nation, Urbana and Jealous 21 under Indus League, a part of Future Group.

This is a positive sign to find that the market is resourceful enough to remodel and re-strategise in tune with customer sentiment ensuring better gain for the customers, but at the same time, permitting itself to grow.
 

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