Retailers and Contract Management. Retail has got to change to survive, but how can contract data help? We explore how contract management could transform organizations today to survive and be ready for tomorrow.
Get to know your business better, optimize, streamline and use data to do everything.
All wise words that retailers (and others) have been hearing for the past several years – although even more so post-pandemic.
Retail, like many other sectors, has felt the cold wind of change as shoppers desert the high street and buying patterns morph to focus on online purchasing – a move that was already occurring and has accelerated post-pandemic. According to the Office for National Statistics in the UK, the proportion spent online soared to 35.2% in January 2021, the highest on record; this compares with 29.6% in December 2020 and 19.5% reported in January 2020.
Retailers know that to survive something needs to change. As we discussed in our previous blog, there’s more than one pressure point for retailers. Margins are tight, sales need to be maximized and supply chains improved. But if using data is the answer to making change happen, where to start?
Retailers, more than most, are already using data across their organizations – from sales to stock, supply chain to inventory management. So the concept of using numbers, reports and information to make business decisions and trusting the data is a familiar one. However, this almost compounds the problem in many ways – too much data is almost as ineffective as not enough data.
Retailers and Contract Management: Getting cozy with contracts
One place that can provide answers and insight to drive change is contracts.
Poor contract management can cost businesses up to 9% of revenue, according to World Commerce and Contracting. Alongside this, improved contract management can save up to 25-30% on admin costs to this, according to Aberdeen Group. There’s plenty of evidence of the cost savings and insight that good contact management can offer, and given the heavily contractual nature of retail, these savings could be even higher.
Real estate is often a huge part of expenditure for retailers – and with many struggling to support bricks and mortar stores, or looking to change the use of their premises to be more experiential, examining contracts around leases and flexibility, as we’ve previously mentioned would be a great place to start.
Retailers and Contract Management: Super-charge the supply chain
Another area that’s been under scrutiny since the pandemic is the supply chain. Food retailers especially felt the hit over the past 12 months. Many non-essential stores simply closed their doors, but food retailers and supermarkets saw a huge increase in demand for their products, and due to manual processes, slow supply chains and not enough staff, were unable to fulfill this expectation.
The challenge is that supplier contracts and reports are static and inflexible, signed and then forgotten, and when supply chains faulted due to sourcing or logistics issues during the pandemic, even locating these contracts was difficult.
Digitalized and centralized, these supplier contracts are vital to improving cost savings and preventing revenue leakage. Searching and then extracting information quickly will give insight into everything from the number of contracts with force majeure clauses, to those with incentive agreements that require enforcing.
Be innovative with inventory
Retailers live and die on their inventory – money can’t be made on empty shelves – and a better understanding of the contracts in place can help manage this process. More importantly, contract data can deliver insight into not just what’s on shelves today, but what’s available and required tomorrow and beyond.
Managing promotions for FMCG products for example can be hazardous; running discounts on products that are not available is reputation-ally damaging and contractually risky. Agile and smart contact management can alleviate the risk in this process – at scale. And not only that but using contract management combined with intelligent AI, means rebates, contractual obligations and supplier performance can all be managed to improve supply chain and inventory.
Working closely with suppliers – under flexible, collaborative contract agreements – can help mutual understanding of demand planning and SKU forecasting to ensure optimal inventory is available.
It’s all about being agile
As history has taught us, in the retail space slow is dead. The UK high street is littered with brands that didn’t move quickly or cleverly enough; Arcadia in the UK is one of the most recent, and largest example for several years.
But developing agility isn’t just about having the right people and the right processes in place – although these too are vital. It’s about having the right information at hand when you need it to make effective decisions that can change the course of a product journey, sales target or new real estate location.
The data within your contracts, especially when combined with other interdepartmental data from procurement, HR and your supply chain can make all the difference to your growth trajectory.
Retailers know it’s time to change. As McKinsey states in its latest retail report: “Retailers must assess their revenue management practices, operating models, digital capabilities, capital investments, and M&A strategies—then make bold moves to transform themselves.”
That’s a long list of priorities for retailers to be thinking about – even McKinsey admits that focusing on all of this, especially at scale, is too challenging for most. However, data – and contract data in particular – is one place to achieve insight and overview into these areas.
Preventing revenue leakage, managing risk, helping to digitize processes and perform analytics on potential M&A are all core benefits of a robust contract management strategy. With a fundamental need to transform to survive, retailers should get to grips with their contracts to give them the stimulus they need to thrive in the new normal.
To find out how Exigent’s contract management system can help transform your organization, contact us today.