Adapt to Compete

Enabling transformational cost out to better serve the business and the shopper

The unfortunate reality is that most consumers are struggling in today’s economic environment. According to our most recent consumer trends research, six in 10 consumers (61%) are concerned about their financial situations, and almost half (44%) say they are reducing their overall spending.
While the global economy shows signs of recovery, retailers and brands cannot rely on tried-and-true traditional cost out models. They need to embrace transformational cost out, identifying opportunities to reduce waste, increase efficiency, streamline processes or reduce overhead – and pass those cost benefits on to consumers.

For example, a retailer can achieve transformational cost out by leveraging advanced technology, such as traditional or generative AI, to modernize demand forecasting. With these tools, companies can gather and analyze a far wider variety of data sources to better understand and predict shopping patterns and adjust inventory locations and levels accordingly. By using AI in this way, retailers can reduce costs by optimizing shipping routes and reducing waste. At the same time, it can also drive growth and profitability by ensuring the products people need are available for sale and reducing the need for promotions to manage excess inventory.  

Another trend we are seeing in the industry that stems from consumer price sensitivity is the shift to private labels. Traditionally, U.S. consumers, and much of the global market, have preferred major brands, especially for categories like snacks, packaged foods, health and beauty items, and household goods. Now, as shoppers face higher prices, we see that they are shifting purchases to private label brands that are usually more affordable.

This represents an important revenue growth opportunity for many retailers. However, to tap the potential, retailers must adapt the business to ensure it has the capabilities and skills to operate under an expanded identity. For example, if retailers are offering an in-house brand, the company now needs to operate as a manufacturer and a procurement agent, as opposed to a category manager. This evolution of the business is the key to establishing favorable margins and growing them over time.

The bottom line is that in this environment, the goal of every brand and retailer is to take cost out of the business to serve the customer in a time of price sensitivity. Brands and retailers need to dramatically rethink every aspect of the business – their organizational structure, operating practices, go to market strategy, and even their identity – to lower costs for the company and, in turn, lower prices for shoppers.

Unsere Experten

Achim Himmelreich

Global Head Consumer Engagement, Consumer Products and Retail
Ich berate meine Kunden, wie sie mit der Digitalen Transformation umgehen und neue digitale Geschäftsmodelle anpassen oder gar entwickeln können. Ich habe bereits Kunden dabei unterstützt, eigene neue, digitale Geschäftsmodelle zu entwickeln, die auf dem Markt erfolgreich waren.

Marcus Groß

Industry Lead Consumer Products & Retail, Insights & Data Germany

Oliver Stratmann

Retail Transformation & Digital Strategy

Andreas Unruhe

Vice President, Head of Market Unit CPRDT – Consumer Products, Retail, Distribution and Transport