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Author's profile photo Nathen Shin

Why Sustainability Should Still Matter To Midsize Retailers During A Recession

By Joerg Koesters, Head of Retail Marketing and Communications, SAP

Against a backdrop of inflationary pressures, rising interest rates, and a potential global recession, midsize retailers are taking stock of organizational excesses and weaknesses. And the first initiatives traditionally placed on the back burner are often related to environmental, social, and governance (ESG) improvement.

But findings from SAP Insights research indicate the industry’s traditional reaction to a potential economic downturn may not be the best option forward. In a survey of retailers with annual revenues of less than $1 billion worldwide, respondents consider sustainability as a critical part of their strategies for growing revenue, increasing business efficiencies, and strengthening brand reputation.

Incorporating ESG into decision-making uncovers new opportunities that go beyond attracting consumers with sustainable goods. In fact, retailers have made moves that optimize their supply chains and have seen benefits such as reduced supply chain disruption and lower logistics costs. Other positive outcomes include:

  • Moving distribution centers to locations closer to plants and consumers to enable faster response to changing demand in physical stores and e-commerce channels.
  • Proactively seeking alternatives to shipping service providers and carriers that reduce the distance that goods travel to dramatically reduce logistics costs.
  • Expanding multi-tier vendor options that demonstrate ethical labor practices to protect compliance continuity and ensure consumer confidence.

Dialing back on any of these efforts to drive short-term cost savings as a response to the economic downturn would close the door to larger business benefits and shopper and consumer value.

The good news is that midsize retailers are thinking about the best ways to respond to economic stagnation. Nearly half (45%) of organizations surveyed by SAP Insights consider it a global risk they must be ready to address. This view has led to investment in various technologies, including cloud computing, cybersecurity infrastructure, employee collaboration tools, automated business intelligence dashboards, and business process intelligence.

By leveraging all these technologies within a modern, cloud-based ERP environment, retail organizations can responsively adapt to economic and market changes based on a combination of business and ESG data, processes, metrics, and expectations.

Take, for example, Distribuciones DANA, which is known for its close relationship with customers and internationally recognized consumer products brands such as Colgate-Palmolive, Henkel, and Unilever.

The leading distribution company in Mexico across grocery, wholesale, and retail channels developed a distribution and logistics solution with a cloud ERP to bolster its reputation for reliable and efficient product deliveries. The ERP’s intelligent infrastructure facilitates smoother reservations, purchases, payments, and transportation processes and encourages teams to collaborate with greater agility and speed by automating forms and messages.

Equipped with better projections of shipping volumes, the company can better manage its transportation planning, so it can offer logistics services that provide the best coverage at the most competitive prices and with the lowest-possible mileage. Additionally, it can generate detailed information on routes, customers, and suppliers and deploy GPS systems to further support timely and sustainable delivery.

Another prime example is Super Q. The operator of convenience stores throughout Mexico is already following this approach across its 200 retail locations to enable business continuity and customer service excellence. An industry-specific cloud ERP helps the business improve information flow and visibility, accelerate finance and accounting closing processes, and reduce paperwork by eliminating spreadsheets and manual processes.

As a result of its business transformation effort, Super Q integrated 100% of its regulatory processes for manual audits. This outcome allows the retailer to make inventory information available online and process store sales data quickly for more accurate decision-making – immediately impacting operational efficiency and ensuring reporting compliance. As a result, the company now has real-time visibility into operating costs, opportunities, and risks, as well as point-of-sale and product category profitability.

As proven by Distribuciones DANA and Super Q, players across the retail value chain can optimize their revenue potential by using cloud ERP to gain a structured business perspective while embracing sustainability holistically. Doing so empowers retailers to become environmentally responsible and socially ethical brands that people want while improving promotions, demand forecasting, waste reduction, and the customer experience.

Thriving retailers value long-term ESG goals

No single strategy can recession-proof a business. But retailers that leverage sustainability data and values across their operations and decision-making can emerge stronger than their competitors.

By fine-tuning sustainability performance along with business strategies, midsize retailers can establish a habit of responsible cost savings and efficiency improvement to protect their brand and revenue generation during every downturn. And when the economy begins to recover again, they’ll be many steps ahead of the competition – seizing growth opportunities faster and more effectively.

To learn more, read the SAP Insights paper “The Transformation Mindset: How Midsize Retailers Can be Customer Centric and Run a Sustainable and Resilient Business.”

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