INDUSTRIES
Outsourcing retail services
Executives in the retail industry are currently facing conflicting pressures: the need to reduce costs on the one hand and the competitive imperative to improve their connection with shoppers using innovative processes on the other. Retail industry players have seen dramatic changes to their business landscape over the span of a few years as digitalization and social commerce redefined what qualifies as a marketplace and competition. Consumers are moving across a complex mix of touchpoints and expect brands to be as nimble as they are throughout this journey.
Most companies are seeking game-changing solutions that can make their operations more efficient while gaining a competitive advantage and reducing costs. For some, working with an outside service provider is the best way to drive innovation and access industry-leading technology and processes. Through outsourcing, many retailers were able to re-engineer their efficiency platforms to generate cash quickly and position themselves ahead of competitors in meeting shifting consumer demands and expectations in an omnichannel world.
IT functions, for example, were traditionally kept in-house by retail businesses even as counterparts in the financial services and healthcare industries reaped the benefits of outsourced IT solutions. But as digital transformation became an increasingly necessary ingredient of a thriving operation, IT needs began to overwhelm in-house teams.
According to tech research and IT advisory firm ISG, only about 7 percent of retailers availed of outsourcing and managed services in the early 2000s. But from 2009 onwards, about 80 percent of the retailers included in ISG’s outsourcing trends tracker were already outsourcing for project work and to augment staff with mounting responsibilities.
Retail industry challenges
Retailers today are confronting many hurdles — from high operating expenses to market saturation, to disruptive technology and diminished buyer loyalty.
High operating costs. Retailers are contending with increasing overhead and operating costs, including rental rates, utilities, and HR. To absorb the costs and plan HR campaigns more effectively, most retailers have no choice but to look internally.
Complicated logistics. Managing multiple suppliers and several fulfillment locations is a complex undertaking that is made even more challenging by stricter regulations, rising supply chain management costs, and geopolitical tensions. To further reduce per unit costs, many retailers are forced to carry the supply risk burden when they serve as suppliers in a collaborative supply chain model.
Saturated market. The retail industry is already saturated with brands that now have to compete with direct-to-consumer players that likewise abound in the social media space.
Omnichannel shopping and the rise of third platform technologies. By 2027, retail e-commerce sales are expected to surpass $8 trillion, intensifying the pressure on companies to optimize their online presence and offerings. In the US alone, e-commerce comprised more than 15.6 percent of total retail sales in 2023. That share is expected to expand to 20.6 percent by 2027. Like companies in other industries, cloud services, mobility, social media, and big data are impacting how retailers do business. With mobile devices and social media channels as points of purchase, companies without a digital transformation strategy risk being left behind.
Outsourced retail solutions
Outsourcing among retailers remains a strong growth proposition because it offers solutions that do not require compromise. Here are just some of the ways an offshore partner can help a company become a top-performing brand:
Better flexibility and scalability. With outsourcing, retail executives do not have to choose between cost reduction and process improvements. Retail BPO vendors have access to better technology and greater scale and cost efficiencies. As companies save more through outsourcing, they can reinvest resources in processes that will position them towards growth and competitiveness.
Better alignment of business goals. Third parties have the resources and effective processes in place that help retailers minimize losses. A third-party analytics provider has sophisticated tools to make better forecasts, paint a clear picture of market trends, handle legacy systems, and spearhead digital transformation.
Drive innovation. By partnering with a third-party retail service provider, retailers gain skills and technological assets. For example, a vendor can design and implement a cost-effective and collaborative supply chain that shortens cycle times, or a secure e-commerce website/application that reduces the incidence of online fraud, improves client-customer engagement, and provides shoppers with a personalized experience. A vendor can also design business growth strategies that counter market saturation.
Drive business process efficiencies. Due to the nature of the retail industry, business process overhead tends to be high. Using agile and intelligent methodologies, an experienced third party can improve processes such as HR, IT, and distribution while bringing down costs and increasing productivity. Clothing company Levi Strauss engaged a third-party logistics provider to support its strategy of accelerating its omnichannel growth and becoming a direct-to-consumer led retailer in a cost-efficient manner. The logistics partner brings to the table a fully-automated “green” facility that will oversee product distribution across wholesale, retail, digital, e-commerce, and marketplace channels.
Improved competitiveness. Small retailers can compete with larger and more established firms through outsourcing. When inventory started overflowing for Canadian clothing retail startup Tentree, for example, the company outsourced warehousing and distribution to a third-party logistics provider so the team could focus on managing growth and keeping up with demand.
Retail outsourcing in the Philippines
Retail outsourcing to the Philippines with a service provider such as Sourcefit can help ensure the long-term success of retailers by connecting them with highly skilled offshore professionals for a fraction of local cost.
Please contact us to find out about Sourcefit’s custom outsourced retail solutions.
