Aggressively managing costs and, thus, liquidity is a matter of survival for many retailers this year.
Given current revenue and margin shortfalls, a typical retailer needs to reduce its cost base by at least 5% to 10% to stay cash flow positive. This requires a much more aggressive program than the classic trimming of overhead headcount and costs by a few percentage points. What should retailers do to manage costs?
Industry leaders are re-examining every aspect of their operations—and even rethinking the once "sacred cows" of cost reduction. KSA believes an effective approach to refinding profitability is built on four key principles:
- Culling the asset base
- Focusing on the "Big 4" of costs: sourcing, store operations, marketing, and supply chain
- Getting down to core costs
- Preserving key capabilities