- Across Africa, mega-stores and wholesalers are increasingly selling directly to consumers.
- As a result, last-mile retailers find it difficult to remain relevant and competitive.
- However, digital tech systems such as the End-to-End (E2E) approach offer sales and growth solutions to these retailers caught between a rock and a hard place.
End-to-End (e2e) approach to doing business may be the only lifeline to save African retailers in this digital, mega-business age, as an increasing number of wholesalers deploy systems to reach out to customers directly. With a spirited push from wholesalers, many retailers have found themselves pushed to the margins of the production and consumption equation.
Across economies in the continent, big supermarkets are opening stores in towns and even neighborhoods, bringing closer to the final consumer a wide range of product options at much lower prices than the retailer next door.
Research shows that while in the beginning it was argued that the retailer next door offered personalized service, that title is fast slipping away from the grip of retailers into that hands of “big businesses”.
Colleen Baum, a senior partner at the McKinsey’s research institute points out that; “We are enjoying more welcomes at the supermarket entrance and seeing more smiles at the checkout points of supermarkets.”
As big business comes closer to the consumer, it is only retailers that think and work outside the box that can hope to stay in the equation and may be even expand. “Retailers’ profits is tighter than ever. If they want to protect their margins and gain a competitive edge, they’ll need to take a more radical and transformative approach, end to end excellence,” Baum warns in the 2024 paper titled “The end-to-end excellence playbook for retailers.”
Competitive retailers adopt end-to-end (e2e) approach
To stay competitive, Baum argues that retailers will have to tackle their toughest operations problems with a “whole business” approach.
So, what does end-to-end (e2e) excellence mean? As the name suggests, end-to-end (e2e) excellence refers to a business approach that ensures excellence in service delivery on either end of the service chain, that is, end-to-end.
e2e excellence is a critical strategic imperative for retailers. It is the necessary operations guideline to winning and retaining clientele and growing business. “This way of operating can transform retailers’ operations and retain margins in a challenging economic environment,” Sarah Touse, a co-author of the report reassures retailers.
And how does it work? “Applying the principles of e2e excellence in retail operations requires breaking down stubborn silos in operations, both functionally and metaphorically,” she explains. He adds, “To achieve e2e excellence, retailers must convene cross-functional teams, arm these teams with timely data, tools, and technology that translate across functions, and communicate a shared mission.”
Arguably, most companies operate in a ‘Top-Down’ or very ‘Centered’ so much that if you walked into a commercial bank, for instance, and asked any of the staff what the bank’s philosophy is, you probably wouldn’t get an answer until you reach the floor manager, and maybe not even then.
What this says is, only top management knows what the company is all about, the rest are simply reporting to work for their end month salaries, a noble goal no doubt, but it if that is the end goal of business, you will convey this to your clients through how you greet them, how you respond to queries, how you follow up and you may be shocked but, the customer conveys this disunion by leaving your business.
This “Top-Down” approach is what the experts are referring to as a “Silo Approach” and this way of doing business does not emphasis a shared mission across the work force. “When implementing individual solutions, retailers typically achieve five to 10 percent cost savings. An e2e transformation, meanwhile, yields 10 to 15 percent cost savings and also improves the customer experience, thanks to streamlined operations,” the research adds.
Three problems, three e2e transformations
First, retailers are advised to improve in and out of stock rates, that is, to put more emphasis on controlling their stocks. “During the height of global supply disruptions fueled by the COVID-19 pandemic, out-of-stock products became a perpetual headache for customers, retailers, and suppliers alike,” Baum explains.
While fluctuations in global supply led to sharp dip in inventory, in other words, there was huge up-and-down shift in available (in-stock) verses not available (out of-stock) goods, “retailers cannot solely blame the global supply chain nor can they expect store teams alone to solve out-of-stock issues,” he cautions.
Consider this, a one-percent improvement in pre-substitution options for in-stock goods can boost sales by 20 to 35 basis points, points out the researcher.
“Improving in-stock rates (availability of goods) has also been shown to increase customer satisfaction and loyalty, since it frees up employees to focus their time on customer-facing tasks rather than hunting down products in a stock room,” explains Baum, adding “when you are well stocked, you also improve employee morale.”
Secondly, while retailers typically evaluate their performance on a quarterly or annual basis to decide where to improve and where to invest, research shows action needs to be taken a lot sooner. Should a retailer apply the e2e principles by say, putting together a cross-functional team that is comprised of its supply chain, merchandising, and finance leaders.
Then they will be able to gather inputs from the relevant functions i.e. product segmentation from the merchandising team that can shed light on the optimal mix of products that achieve highest sells at each distribution center.
The finance department can provide a rough growth forecasts to help identify where more staff may be needed should there be potential for setting up a new store or a distribution center.
With input from all these ‘functions’ of the business, the retailer is able to customize an informed action plan. The retailer is able to consider several ‘what if’ scenarios before they occur and that way prepare for the worst, or for the best for that matter.
“What if shoes and clothing orders were both fulfilled in this distribution center, what would happen to the sales?” or “What if we added a distribution center to this new region?” etc, these ‘what if’ scenarios allow the retailer to plan ahead.
Read also: Blockchain’s potential in unlocking Africa’s supply chains
African retailers need to adopt modern tech solutions
Most African retailers operate in the past. They are often stuck in the traditional way of doing things and only operate in their comfort zones. Most assume new tech is complicated and expensive and so they do not bother to explore it. However, in this digital age, new technology is the way forward, only retailers who adopt will stay afloat and even grow.
For example, there are “sales scenario modeling software” that can perform the above mentioned tasks i.e. calculate and present ‘what if scenarios’ using little input e.g. increasing investment in shoes stocks by X amount will yield Y returns etc.
As mentioned also, such ‘what if’ predictions help the retailer to make informed decisions and these software are available even on your mobile devices. Granted there are sophisticated and expensive kinds but there are also market friendly easy to use mobile phone based software available. These software can be as simple as software to create invoices or software to plot out expansion options.
