Retail Outsourcing is the New Way Ahead

March 31, 2016 11:21 am | Updated 6 months ago.

By Arup Gupta

Geographic borders and time zones are no more a cause of concern for retailers competing for a share in the global economy. Supply chains that cover the entire globe, ensure that products reach the market and into the hands of the consumers are delivered quickly and efficiently. In this digital age, technology has also raised the expectations of consumers. Retailers are gradually opting for multi-channel retail to solidify their position. Business Process Outsourcing or management (BPO/BPM) is being utilized by the retail companies to increase their foothold in the global market.

The retail industry has been taking the help of third parties to handle the entire supply chain. The company hires external help to deal with an area which is outside the domain of the company’s core business. This proposition not only helps the company to save money but also assimilates experts to streamline, cut costs and increase profits. Outsourcing can help companies avail the most advanced level of expertise in all of its business activities without having to individually master each one.

Challenges faced by Retailers

Retailers around the globe today are facing the challenge of rising overhead expenditures along with market saturation and increased globalization. Some of the major challenges faced by retailer’s are

  1. Focus on analytics – The humongous amount of data that is generated needs to be analyzed properly to extract meaningful information. Retail organizations in order to leverage their position in the market need to spend on analytics to make accurate forecasts, map consumer behavior and realign strategies according to changes in the market.
  2. The growth of e-retail – As per a research done by Forrester Inc, online shoppers in the US alone will spend about $326 billion in the year 2016. Apart from increasing their online presence retailers will also have to think about ways to handle a surge in traffic.
  3. Digital Transformation – The surge in the use of tablets, smartphone and other mobile devices to shop has forced retailers to re-think about their strategies. The influence of social media on purchases also has to be dealt with.

Outsourcing the way ahead

Outsourcing is the key solution to the challenges faced by the retailers. Retail outsourcing will help organizations to bring in innovation and fresh thinking into the existing business. Retailers can think of outsourcing in the following lines.

  • IT Systems outsourcing – To enhance the technological capabilities of a business and to keep up with the changing times, small or medium-sized retail companies will have to think about IT outsourcing. Taking the help of third –party to manage technological solutions and services will not only help in lowering IT related capital expenditure but will also give the much needed technological leverage to retail organizations. In order to become market leaders, retail organizations need to have a website, an online ordering system, a storage infrastructure that can be monitored and maintained automatically. Retail IT specialists can offer service IT platforms and give access to new technology.
  • Mobility – Modern retail is acquiring a new shape as mobile technology and offering app functionality to customers is becoming a common practice. For small and medium-sized retailers this innovation will require investment and may seem out of reach. Entering into a partnership with an outsourcing company to provide app – based mobile technology will augment the retailer’s position in the global market.
  • Data Analytics – In order to remain ahead of competitors, retail organizations need to have knowledge about their customers. Technology has helped organizations to gather detailed information on the buying habits, online activities and in-store behavior of consumers. With so much data in hand, analysis has become a necessity for retailers to administer better services to consumers. For a small and medium-sized retailer, analyzing such huge amount of data can be dreary, so outsourcing this analysis to a specialist company will give them the much-needed leverage in the retail market.
  • Supply Chain Management and Process Automation – Expediting the ordering and delivery system, minimizing waste by keeping a track of the stock are processes which directly affect the revenue-generating capacity of a retail organization. Outsourcing this to a specialist partner will give small and medium-sized retailers access to the latest supply chain management technology.
  • Marketing – Finding the right partner to oversee marketing campaigns both print and social media can help save time. Moreover, connecting with new customers in a creative way can be daunting. Outsourcing it to a specialist will enable retailers to remain focus on their core competencies.

The reason for a retailer to outsource is indisputable, but finding an outsourcing partner who understands the retail sector can be challenging. Thus, the following steps need to be taken care of when outsourcing:-

  1. Identify the activity to be outsourced – The activity to be outsourced needs to be determined as it might prove detrimental to the entire business process if an activity which creates a unique identity for the organization is outsourced.
  2. Assess the financial impact of outsourcing – Outsourcing should offer a cost advantage to the organization. The non-financial benefits also need to be assessed.
  3. Choosing the correct outsourcing partner – Choosing the correct partner will ensure the smooth running of the organization. It is essential that the outsourcing relationship remains productive over time and is flexible enough to accommodate the demands of the changing retail environment.

Outsourcing will enable retailers to systematically develop smart business growth strategies. It will help them to counter market saturation and provide a unique shopping experience to the customers.