Profit margin improvements in an inflationary environment
Sustained inflationary pressures
Online retailers and brands are under immense pressure due to the impact of inflation on consumers, with the British Retail Consortium showing like-for-like sales in May 2022 declining 1.5% year on year.
In our previous blog, we looked in some detail at the inflationary environment and key things retailers are already doing. One area most retailers are working with right now is effective margin management.
Deloitte has detailed eight actions that can be taken. Actions 1-4 will have a direct impact on your gross profit and 5-8 on your operating profit:
- Adapt pricing to market elasticity
- Update product mix and/or SKU rationalisation
- Product and package value engineering
- Renegotiate direct material supplier terms
- Reduce back-office spend – labour productivity increases, indirect spending reduction
- Service delivery model redesign
- Drive adoption of intelligent automation
- Identify legal entity restructuring opportunities
We’ve highlighted 3 of these areas that Upp can resolve within 48 hours of working with us.
Upp increases the impact of your margin management actions, right away
Our game-changing technology has already done this for our clients whether they are retailers, brands, or online marketplaces.
Have a look at what they have to say Charles Tyrwhitt, Nordgreen.
Updating your product mix and / or SKU rationalisation
Deloitte classifies this as an immediate time to respond and a medium level of impact. However, when done without full visibility and data insights, the results can mean more time spent on this action and the impact is lower than you would anticipate as our audit reveals that for a typical retailer or online marketplace:
- The top 15% of SKUs received negligible visibility
- 88% of products advertised received minimal visibility
- Over 40% of ad spend goes to products that generated zero revenue
Therefore retailers and brands can’t properly implement product mix updates and SKU rationalization. So the results of updating the product mix aren’t as effective as they should be, creating a cycle of performance below the actual possibility.
Using one of our audits of your Google Shopping performance, you will immediately see where your overspend and underspend are. You will have full transparency on which SKUs are selling well but receive minimal ad spend and visibility and where the revenue potential opportunity is across your entire product range.
And as soon as you’re on board, you can then test this by automatically creating and optimizing shopping campaigns based on your data sets to ensure the time to respond surpasses Deloitte’s analysis and becomes immediate, with the level of impact going from their assessment as average to high as our customers typical see:
- 62% increase in the rate of transactions
- 16% increase in new customer purchases
- 14% increase in conversion value for brands
Upp takes the necessary actions for you to benefit 24 hours a day 7 days a week. And because Upp continuously analyses your performance and data you will also be much better informed of your SKU rationalization activity. Upp will always give you an up-to-date view of what’s happening based on market conditions to allow you to better rationalise your SKUs and inventory. Whilst we are continually adjusting your performance to optimize it, we also provide you with a live dashboard with your top and bottom trending products so you can easily make product mix updates and SKU rationalization tweaks in a truly agile way.
Reduce Back Office Spend – labour productivity increases, indirect spending reduction
Deloitte classes this action as the medium time to respond and level of impact. Reducing back-office spending is one of the first areas CFOs and Finance Managers look at, however, in particular with productivity, they look to relevant departments to make their recommendations. Using Upp allows for a reduction in back office spending across departments. Upp’s retail intelligence technology is constantly optimizing, adjusting AND performing so that retailers can focus on their product and customers rather than wading through large volumes of data.
Typically we deliver a 27% increase in growth of revenues per client and an impressive average ROAS across our customer base, alleviating the pressure on marketing departments in terms of hitting revenue targets and gross profit.
At the same time, we automate manual processes effectively with AI and Automation, which allows marketers to focus more time on optimizing other sales channels e.g. email marketing, social media marketing, and enhancing website performance. On top of that, the live dashboard showing performance and top and bottom trending products also helps inform and enrich marketing activities for other sales channels.
Using Upp moves the impact of reducing back office spend to immediate response and high impact.
Drive adoption of intelligent automation
This is seen as a non-negotiable, long-term action by Deloitte with a medium level of impact. Automation projects are often time and resource-consuming, however, this is not the case when moving to Upp. Our intelligent automation begins to improve your business performance within 48 hours of onboarding. It involves minimal resources and works by enhancing and enriching existing automation technology you are already using e.g. Google Shopping (soon to be Google Performance Max ) with your data sets and our patented AI technology. After just 28 days our ML will have already recognized key opportunities previously unseen by your business. Customers typically onboard within a week of signing (as we do all of the data connection for the initial free audit) and our platform requires only a 14 to 28 days learning period to further optimize your Google Shopping performance.
We have already used our AI and Automation technology in 10 regions for Nordgreen and four regions for Charles Tyrwhitt.
Use Upp for an immediate impact on your margin management
It’s a bold statement, but we are sure that all of our clients have an immediate positive impact on margin. And this is led by your data, controlled by you, and transparent for all to see. This works with your technology, in tandem with your teams or agencies, and enhances your Google Shopping.
If you want to know more about how Upp can make an immediate impact on your margin management book a free data-led audit with us.
