Innovate for Profit

Imagine your personal work performance being played out in the public domain and constantly commented on by “experts” and stakeholders. This is the lot of elite level football coaches with the brutal relentless emphasis on results. Ask any international coach at the current UEFA Euros in Germany. They all seem to be enduring agonies on the touchline. The criticism of Gareth Southgate, England’s coach from all quarters is unremitting. ?Let’s hope that he turns the tide later today.

Football was first codified in England in 1863. It soon became a serious professional sport across the globe. It has come on a long way since then in all aspects. Watching matches on You Tube from the 1970’s and comparing to today’s games, the difference is staggering. The technical standards, fitness levels, and athleticism make the game a totally different animal. Not only the playing abilities but also the facilities, people diversity, stadiums, playing surface quality, media coverage, crowd behaviour and involvement have all moved the game forward massively over the previous fifty years. The sport has innovated in every area, making it compelling worldwide. This in turn has attracted eye-watering commercial revenues hence the laser focus on results and the consequent pressure on the coaches.

Innovation is well underway in other major sports too. Cricket has experienced a transformation since the launch of the Indian Premier League (IPL) in 2008. The Twenty20 format is compelling for fans and the media. Media rights for 2023 to 2027 sold for $6.4 billion to Viacom18 Star Sports. Last year’s final was the most streamed live event with 32 million viewers. The IPL has also had a profound impact on Test cricket inspiring faster scoring and sharper fielding.

Could wholesale trigger industry-changing innovation? Businesses need continual investment. This requires cash and cash requires profit. Sales and margins are under pressure. Overheads are rising; punitive energy cost hurting, business rates soaring, and the new minimum wage increase of 9.8% which represents the largest ever labour cost increase in cash terms is a challenge. There is a profit imperative in wholesale. Is it possible to innovate for profit? Michael Boyles (Harvard Business School) defines innovation as a product, service, business model, or strategy that is both novel and useful. Innovations don’t have to be major breakthroughs in technology or new business models; they can be as simple as upgrades to a company’s customer service or features added to an existing product. How might we harness such innovations?? Here’s a few real-world suggestions.

Emulate the discount retailer “middle aisle” strategy by featuring seasonally relevant high margin non-food ranges. These ranges are incredibly popular with all shopper types. Merchandise in a highly visible location, powerfully themed and supported by the marketing. Introduce electronic point of sale shelf labelling across the depot. This technology is now widely used in Europe and Asia. It significantly reduces time taken to adjust shelf pricing and opens possibilities for flexible pricing which could strengthen margins and help clear short-life goods. The additional benefit of the labour, paper, and printing savings in replacing hard copy labels adds further value. Next up is space efficiency. Stock equals money and slow-moving stock is capital tied up that could be better employed elsewhere. Defining what a “slow seller” is and then purging from the range is vital. Just as important is recognising declining markets and slimming down the space and range to make way for the growth markets. The overall range becomes more productive resulting in higher margins and improved liquidity.

Product availability is pivotal to any successful business. Substantial profit is lost through missing products. Monitoring and following up on the stock-out status is a constant challenge for management. CJ Lang & Sons have adopted a camera system which scans shelves to identify low or no stock. ?Seventy cameras count stock automatically overnight and monitor product positioning during the day, producing product availability reports for management. Morrisons is implementing a similar camara-based system that will provide real-time on-shelf data to direct staff to where stocks are running low, improving service, and saving labour.

Supercharge online and digital. There is so much profitable mileage to be gained from exploiting digital is many areas. Stepping up WhatsApp marketing through Meta’s business package enables low cost, agile, and targeted marketing to the customers who best respond and return the highest profit. The shorter lead times for WhatsApp campaigns make it a perfect vehicle for tactical calls such as weather-related offers and sports events. And there is a spin off saving in brochure costs. The beauty of WhatsApp is that it requires no technological development, and most businesspeople operate 24/7 on their mobile devices. This can be linked to extracting value from the customer files to incentivise the most profitable customers and to lock in loyalty driving sales in the most customer appropriate categories to improve margin mix. The next level up is an app-based loyalty scheme. Loyalty schemes are being operated effectively in varying sectors such as coffee shops and vape vendors. Commentators attribute Lidl’s over-indexing sales growth to the “Lidl Plus” rewards initiative launched in 2020. It rewards users with personalised product discounts and enables Lidl to collect data on their purchases and preferences. In February, Lidl focused on discounts on bakery purchases and secured a twenty-four percent increase in sales in the first quarter as a result. Wholesalers could drive profitable sales in selected categories using similar methodology.

Open banking offers serious cost savings in payment functions. Implementing open banking across all channels is straightforward. It is a frictionless experience; customers can see what they owe and view previous invoices. They can pay off a balance, an invoice, or multiple invoices. Money can be transferred immediately, and high merchant fees associated with a business of personal debit card can be avoided. This can save wholesalers hundreds of thousands of pounds every year. In parallel, the accounts team receives an email confirming that monies have been received, who the sender is, and which invoice the payment relates to. With open banking, requests for payment are incorporated into automated digital notifications sent to customers based on the specific payment terms of the invoice or account thus closing the follow-up loop.

Even in our margin thin industry, by critically analysing all profit elements and by taking an innovative approach to improving business results, wholesalers can enrich bottom line performance. Not as brutal as elite sport– just as effective.

?David Gilroy 2024

A version of this article was first published in the June 2024 issue of Better Wholesaling.