24 June 2020
Topics in this article
  • Cost Optimization
  • Retail

No longer can retailers rely on their product offering alone. The demise of the high street portrayed in the news is all too often attributed to the rise of the internet, a cash-poor society, political uncertainty in the wake of Brexit, and now Covid-19. Undeniably, these have a considerable part to play – Generation Z has never known a non-digital world – but what if there’s a bigger force? One where the right quality and a fair price no longer satisfy your consumers, but in fact, they are switching from brand to brand to find the right experience and ethical partner, buying the change they wish to see in the world. Could retail procurement be the answer?

An example of this can be drawn from Nike’s decision to pull a product that was deemed as possibly offensive, which after the item being pulled, saw the sports brand experience a stock price increase of around 2%, or nearly 3 billion dollars.

Mary Portas, queen of the high street, has termed the current era of buying behavior as “status sentiment: A shift from buying from, to buying into”. With more information now than ever before, consumers are making informed decisions because they care. They care about their impact on the world around them; about diversity and equality; working conditions; carbon footprint; animal welfare; community health. Local and global. It’s about understanding the person behind the consumer.

This will be key to a post-COVID world. Organisations will need to use retail procurement to communicate empathy and show understanding and support, both morally and financially. A feeling of solidarity must be evoked rather than vulnerability, and this goes for consumers and employees alike.

Before, retailers may have been forgiven for surrendering to the lure of competitive prices, available capacities, and supplier capabilities in low-cost countries in return for our ignorant demand for “fast fashion,” but no more. A movement becoming synonymous with the younger, emerging consumer group, evident even in the use of Instagram where there’s a shift away from the saturated feeds of influencers promoting the likes of Boohoo, to an increasing trend of the caption ‘#thrifted’ under proudly donned charity shop finds.

This pressure imposed by Millennials and Generation Z consumers really is shaping the industry. It makes sense, right? With so much choice on offer at their fingertips, retailers need to offer differentiation, and consumers need to consider other factors when whittling down the marketplace to choose which retailer they buy the latest make up palette from. In 2020, Gen Z alone represents 40% of all consumers, with a spending power of over $140 billion. This creates a race in retail, who can prove they’re listening, who can prove it first, and who can use the most effective retail procurement strategies?

However, to achieve this, retailers must align their supply chain to the same standard. The immediate impact of media means that consumer trust that has developed through investment and refinement can be lost in an instant. Suppliers are the most likely source of good or bad news, emphasizing the importance of ensuring they can walk your CSR talk – think of those retailers who continue to recover from their infamous associations with sweatshop conditions, child labor, and deforestation.

So, how can retailers learn from the past and ensure being transparent doesn’t highlight any broken links in the chain, within both their direct retail procurement and GNFR:

1. CSR starts at home

Be a company that champions their CSR agenda. Top to bottom, side to side, internally and externally. If you don’t believe in it, why should consumers buy into it?

Think about your messaging too. The bar of good citizenship is continually being raised, and so too are customer’s expectations on the matter. This means sustainability goals and in-store recycling schemes are not enough to secure your future. Your message needs to be deeper, one that nods to a recognition of your responsibility outside of the four walls of your store. That said…

2. …Avoid greenwashing

Seriously, it’s not worth it. Over-egging green credentials will set you up for mass reputational backlash, distrust in consumers, and a tough route to recovery – just like Volkswagen. Making bold claims can be risky if the evidence is not there to back them up. Look at Nestle; ongoing lawsuits against their claims of “sustainably sourced cocoa beans” suggest to consumers that they are nothing of the sort.

There will be no sympathy for cases of ‘un-knowing’ greenwashing either. If you are making a claim, it is your (and specifically retail procurement’s) responsibility to ensure the supply chain is fully adherent. You may be claiming ethically sourced clothing, but what about the hangers that they sit on? There is a balance that must be struck between being honest as to where you are now, and transparent with your plan to be better. This narrows what is known as the ‘authenticity gap,’ building trust in the customer base.

3. Supplier management, partnering and creating shared value (CSV)

Just as the corporate policies have become a given, so too have supplier management practices as a solution to increasing supply chain visibility. When corporate time and energy has been invested in promoting a sense of shared value with your customer base, you cannot afford for the supply chain to be singing from a different song sheet – your customers will know, and their response will leave you in a worse position than where you started. Research found 94% of consumers are likely to be loyal to a brand that offers complete transparency.

Creating shared value is based on company productivity being so intertwined with the social needs and economic value of its internal and external network, that ignorance is simply not an option. Of course, there are complexities. Unilever was the first of its kind to publicly disclose all palm oil suppliers and millers, placing 300 and 1,400 respectively under the human rights and environmental microscope. However, it may remain that middlemen and agents are often used in the shadows causing grey areas in traceability.

This calls for rigorous supplier processes, more than just checking the existence of a policy document. This requires feet on the ground, robust auditing of factories, investment in communities, collaboration with charities, and consequences for the non-compliant.

4. Invest in your workforce and promote diversity

Millennials currently entering the workplace want an opportunity to make a difference. Tapping into this first-hand experience early on will help futureproof the company and foster a culture of holding the business to account – just think about the generation that will hold decision making positions in 10 to 20 years.

Similarly, diversity in the workforce is crucial to retail success. Having established by now that people buy into what represents their values unless you reflect extensive diversity within your brand, then you are, by definition, shutting the door on consumer groups.

Not only is diversity a sure win for innovation, bringing to the table viewpoints from a variety of backgrounds, beliefs, and perspectives, but gender diversity has also seen higher revenue. The challenge will be to ensure you partner with suppliers who promote the same values and are able to demonstrate these.

5. Get familiar with technology

It’s no longer a time of raising awareness, it is a time for retail procurement action – fast, effective action, and technology can help. Tracing the movement of global objects, collecting extensive data, and sharing information can really help shape a supply chain. Importantly, this means suppliers have fewer places to hide, and with a real-time view of their activities, you as a retailer can make real-time decisions on whether they’re the kind of partner you want onboard.

These ideas highlight the triple bottom line’s intricacies – how one factor can seldom exist without the other. Today, some retailers are nailing it and some with further to go, but one thing is for sure; the sooner retailers tune into the person behind the consumer and are able to align their internal and external networks to those same shared values, the sooner they will access the true profitability of good citizenship.

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