Underinvestment – Is it a burning platform?

Retailers must ingrain investment into a future focussed strategy if they want to enjoy ongoing success. Too often investment is cut when money starts getting tight. However this is shortsighted.

Zero sum game

Market share is a zero sum game. Market share growth achieved by one retailer is at the expense of its competitors. The speed of change in retail from innovation, technology, competition and new entrants, means it is increasingly difficult to sustain a strong market position without ongoing investment.

If your sales growth is underperforming your market, somewhere, one or more of your competitors are executing better than you are and capturing your market share. It is as simple as that.

Investing in the right areas

Too often we see ‘hockey stick’ forecasts without an understanding of, and investment in, improving the key drivers. Basing forecasts on category performance alone is playing a game of chance. Any investment needs to be deliberate and based on what management is able to control.

The key to regaining market share and growing sales is being able to identify what gives, or can give, you a competitive edge. Keeping up with competitors may protect or slow the loss of market share however, in order to increase it, you need to invest in doing something better than your competitors.

Analytics critical

Analytics can be used not only to provide insight into what is happening, but also foresight to support investment decisions and understand the likely impact of pulling different levers. See Retail analytics: more than Marketing for a deeper look into analytics for Retail.

It is important at both a company and market level to be able to identify who is winning market share, what drivers are allowing them to do it, and what you might be able to do to stop it.

While strong category performance can mask retailer underperformance for a period, a lower growth environment is starting to expose some retailers.

Too often retailers fail to recognise these is an underlying issue or leave it too late to act; meaning the only levers left are on the cost side which, without investment in other areas, only slows the inevitable decline. This has been a contributing factor to many recent retail failures.