Resource allocation and optimization is a topic that many retailers do not look at often enough. Budget allocation decisions are generally taken once or twice a year. This is usually done when it is time to purchasing the goods for the next season.
In our opinion, one of the core capabilities of an omnichannel organization is being able to perform analytical optimization. Analytical optimization might sound very technical, but by that we mean that you should look at each part of your business through the eyes of a business intelligence expert. Of course not every organization has these resources and capabilities in-house. However, if you go about these processes pragmatically, there is a lot to be gained.
We believe that it is important to plan more regularly and in shorter cycles.
For retail businesses this means using the off-season dips to plan and optimize your business. The summer months are great for that. Especially in fashion retail, businesses focus too much on top level revenue and inventory levels. The Winter months are the ones in which the money is made. Therefore you need to plan ahead, build up cash reserves and give yourself time to breath in the summer months.
Don’t only focus on Marketing spending
The summer months are great for resource planning. What we generally see though is that retailers strongly tend to focus on short term gains and losses. If sales do not come in as expected in summer, marketing spending is cut. Whereas cutting marketing spending is generally not the best thing to do in these months.
Of course we understand that the product margins are smaller in summer due to lower basket sizes. Yet, this does not mean that the marketing efficiency is necessarily negative. It is key to define the right business goals and realistic targets for each and every month.
These Key Performance Indicators (KPI-goals) could be monetary, as well as qualitative. Maybe it would be best to think about the number of new customers, instead of turnover. Customer acquisition can be costly, but every business needs at least as many new customers as old customers it has lost. This is caused by natural customer churn rates.
What should you optimize
So how do you spend your resources best? Resource allocation depends almost entirely on your goals and targets. These targets should go far beyond pure revenue plans. We advise you to set targets for any part of your business that can impact your overall performance positively.
That means that we would use the summer months to set goals for: Payment collections, inventory risk minimization, customer service level performance as well as marketing efficiency.
Of course this holds true for any type of organization. But especially omnichannel retailers should use their time wisely to plan ahead. The seasonality the businesses, allows exactly for these optimization rounds. It is something that is unique to fashion and retail and we advise you strongly to use this time as effectively as possible. That also means allocating the required resources needed for the analysis and planning in the summer months.
Keep your targets simple
The key is to be pragmatic about your goals and keep them simple. You and your organization cannot do everything in one go. So focus on key topics as you go along the way. But what does help, is to keep a strategy list of topics that you want to tackle. Set yourself quarterly goals that you and your team are able to reach.
Find out more about our approach to setting targets and goals and contact us today. Omnichannel resource planning can be quite complex. Our frameworks and pragmatic approach to planning might just do the trick. Of course it cannot hurt to have a chat right?