Now is an important time to understand the difference between Good Cost and Bad Cost.

Retailers have done a lot of cost-cutting in the last 12 months. But Cost Cutting and Cost Management are two different strategies that retailers should understand to improve their profitability and growth.

Cost cutting simply involves reducing expenses, ideally by eliminating non-essential activities, but most often is just an ask, “Tell me how you are going to reduce your budget by 15%”.

Cost Management, on the other hand, involves optimising the use of resources and processes to achieve the desired outcomes and add value for customers.

While cost-cutting can provide immediate savings, it can also have negative impacts on quality, innovation, and customer satisfaction. Cost cutting can be unsustainable, may erode competitive advantage and slow growth, and often those costs just come creeping back in future years.

Cost Management, on the other hand, can help retailers align their costs with their strategic goals and customer needs. As well as reducing waste in processes or legacy practices, Cost Management enables retailers to invest in areas that can generate more revenue, such as marketing, product development, or customer service.

Cost Management also fosters a culture of continuous improvement as employees seek to eliminate waste and inefficiencies and enhance value creation.

Therefore, retail businesses should not rely on cost-cutting alone but rather adopt a Cost Management approach that can help them achieve sustainable and profitable growth.

I have been involved in many of these exercises over the years - both the cost-cutting ‘ask’ as well as the proper implementation of Cost Management and have seen for myself how the latter can cause a better working environment for colleagues, less frustration, and less waste. And conversely, positive engagement with roles becoming more enjoyable and meaningful. A winning culture and significant bottom-line growth that is sustained

If you want to talk about what this looks like in practice and how this might benefit your business, I’m always open for a chat to share my experience and lessons learnt along the way.

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