Retail: The Direct Impact of Indirect Costs
While there are benefits to maintaining a physical retail presence, there are also high costs associated with operating stores. Overhead expenditures such as rent, payroll and leasehold improvements can eat into profits and are often the focus when looking to cut costs. However, changing locations, reducing staff or cutting back on the look and feel of the store are all factors that can affect the overall customer experience.
One area where significant reductions in expenditures can be derived without negatively influencing the customer experience is in indirect costs such as telecom. As stores under the same banner open in different states at varying times with separate management, services such as telecom are purchased sporadically from multiple providers to meet immediate needs. Additionally, telecom services management is often decentralized from evaluation of needs, contract negotiation and payment, which are distributed between IT, procurement and accounts payable, making it difficult to align actual needs and usage with errors and expenditures. This often results in minimal focus on optimizing plans and streamlining costs across the company, leading to unnecessary over-payment and reduced margins.