Innovation is happening faster than ever before
COVID-19 has changed the world of retail, perhaps forever. Retail margins are getting razor-thin, and the profits are predicted to pinch even more as consumers head online to research and buy products. Innovation is now vital for retailers who want to stay ahead of the game.
The current state of Australian retail.
According to a recent PwC report, Australia’s retail industry represents approximately $300 billion (2019) of consumer spending annually and provides 15-17% of Australian jobs. Overall, retail contributes around $75 billion in gross value added (GVA, 2019), with the consumer goods sector accounting for approximately $40 billion (2019).
It goes without saying that retail and consumer goods will be critical indicators for the health of the Australian economy as a whole.
However, few industry sectors were hit as hard by the change in household consumption during the pandemic. As lockdowns reduced consumer spending, discretionary spending plummeted worldwide. Bricks and mortar stores and supply chains were immediately impacted, and flaws in fulfilment became abundantly clear as retailers scrambled to shore up their online presence.
Change creates opportunity.
Yes, customers’ retail needs are shifting. But that doesn’t always have to be a bad thing—unless you’re resistant to change. The key to emerging from the pandemic and global recession stronger than ever is understanding your customer’s new imperatives and how your business can create value for them through new product lines.
In the immediate term, this means adopting a genuinely innovative mindset. Mirror the demands of today’s new normal by focusing on innovation, rapid iteration and discovering new revenue streams. And those retailers who aren’t transforming fast enough might never come back to pre-pandemic levels.
Innovation 101 for business survival.
The key ingredients of successful innovation are:
- Taking a fresh perspective. Get a big picture view of your current product lines. What can you do better? What can you do differently?
- Look at your customers differently. Find new opportunities for innovation by making every customer touchpoint more positive or asking them directly what they want to see in new products via community feedback and surveys.
- Seeking a diverse source of ideas. Innovation can come from anywhere inside or outside of your business. Your role as a business owner is to maintain an ‘open’ environment that encourages new products and ways to reach consumers as the market changes.
- Understanding global consumer trends. How are market needs changing, and how can you respond accordingly?
- Knowing your competition. Who are the emerging players in your sector? What can you learn from their new approach?
How to boost product profit margins.
With retail costs on the rise across the value chain, conventional cost-saving measures no longer ensure margins are protected. That’s where changing how you do business can give you more control over your profit margins.
Competing differently in the value chain means finding innovative opportunities to add more value for your customers and enhance product differentiations that increase prices and margins. Essentially you can:
- Deliver lower-priced products with a higher asset turnover.
- Deliver higher-priced products with higher profit margins.
- Change your cost structure by shifting your costs to another supplier. (Do we really know what this means?)
The lower labour, operating, and overhead costs that come with outsourcing your new innovative product manufacturing overseas can make all the difference to your profit margins. In fact, you could lower your prices, see improved product quality, and still increase your profit margins while taking market share from your competitors.
Outsourcing your procurement & supply chain functions to the experts allows you to reduce your expenses and ultimately frees up resources to focus on more product research, development, and savvy marketing to meet your customers’ rapidly changing demands.
But how do you find the right overseas manufacturer for you—the one who will maintain consistent product quality while boosting your bottom line?
Sourci knows how.
We’ve built our supply chain platform to help you innovate and grow in any market. We understand how difficult it can be to source the price benefits of manufacturing overseas without the headaches, and we’ve bundled in all of the advantages of working with someone local you can trust.
We’re focused on bridging the gap between Australian retailers and the best manufacturers worldwide, with great advice, step-by-step guidance and the supply chain knowledge you need to surge ahead.
Giovanni’s passion and interest in global sourcing and trade gives him insight and understanding that most would miss. His love of research mixed with his background in business makes for an interesting read.