Releasing the GNFR Genie…
Part #1 – Introduction
How a fresh approach to new store projects can bring untold savings to your P&L
1.1 A Traditional View of GNFR
It has long been argued that GNFR is poorly understood by many key stakeholders in the retail sector and is rarely given sufficient priority. This means that potentially substantial cost savings are being missed that impact 100% on the bottom line of a retailer’s P&L. The very fact that GNFR is defined by what it isn’t – Goods Not For Resale, rather than what it is, speaks volumes!
Part of the reason GNFR has been traditionally overlooked is because it can be hard to tackle. There are often many partially interested stakeholders, which can often cut across numerous departments and product categories. As a result, commercial justification can often be split across multiple budgets and commercials can be complicated to unravel. Such issues can place departmental objectives directly in conflict with each other – meaning the issue can remain unaddressed, leaving money on the table.
1.2 GNFR Defined
GNFR is typically split between consumables, services and equipment. Retailers will often have advanced procurement processes which can be more easily applied to consumables in a similar way to produce and merchandise. The two elements of GNFR that are relevant to new store projects are services and equipment. For various reasons, these pose an altogether greater challenge for retailers.
1.3 Store Development Services
Store development services are essentially a commitment or promise by a supplier to a retailer to complete a defined store change activity or process. Such services are normally accompanied by a set of performance and/or compliance criteria. The fact that they are instantaneously consumed at the time they are provided, makes them often difficult to benchmark retrospectively against the retailers’ performance measures. Furthermore, the quality of store implementation can vary. In simultaneous multi-store rollouts, it becomes extremely challenging to capture the detail within the bigger picture.
Timescales are often drawn out and many decisions are not seen as front-line priorities, although they may be fundamental to the infrastructure and smooth-running of a store. As budgets have become more constrained, both time and resources available to dedicate to store change have become more heavily scrutinised.
In recent years, greater focus has been placed on minimising disruption to consumers and to stores. Store projects can cause a temporary downturn in sales while the work is being completed. If there is no buy-in at store level, such projects can even be counterproductive. This is exacerbated where project execution is poor or behind time. This is compounded when, in retail, store development services will often tend to be conducted out of normal working hours. Furthermore, retailers have a natural propensity to simply seek to buy it cheaper through negotiation with the existing provider, re-tendering or by pooling total volumes. Add to this the pressure on resources for retailers whose businesses are subject to seasonal fluctuations, and the complexity becomes increasingly challenging.
1.4 Fixtures & Equipment
Retailers have frequently benefited from the inevitable economies of scale in adopting standard manufacturers’ equipment. However, store fixtures can be a way for retailers to create a point of difference. As a less frequent purchase than goods for resale, bespoke fixtures are more challenging to procure effectively. It is inevitable that the trade-off between in-store aesthetic appeal and what is practical for manufacture, has not always been fully understood.
Retailers may seek to source from Asia to reduce costs. Factors influencing this decision can include delivery lead times, volumes, quality assurance and ethical trading concerns. Tight project timescales and late specification changes add to the risks. Prototyping is also more easily dealt with closer to home. The decision between domestic, European or Asian manufacture is not always clear cut and needs to be fully understood.M
Figure 1 - Routes to Fixture supply
The decision between domestic, European or Asian manufacture is not always clear cut and needs to be fully understood.
1.5 Why Change Now?
Traditional retailers are being impacted by a multitude of factors, which can include rising costs from legislation such as the Living Wage, rents and rates, with economic and political uncertainty always being a concern. The relentless surge of the discount retailers and online retail is transforming the competitive landscape. Figure 2 below summarises these key change drivers.
1.6 A Fresh Approach
The current pace of change within the retail sector is unprecedented. Meanwhile, technology promises to continuously raise the consumer experience to ever higher levels. The relationship between retailers and their customers is being constantly redefined as new innovations in retail emerge. Through technological advancements, consumers are experiencing this acceleration of change in their homes, their workplaces and through their mobile devices. Change has become the new normal.
It is therefore natural that these same consumers would expect such transformation to be replicated in the stores they visit. Creating a seamless experience that transcends the boundaries between online and bricks-and-mortar retail that integrates as an omnichannel experience has become one of the industry’s major challenges. It has become a fundamental expectation of the customer to be able to shop anywhere via retailers who maintain a presence everywhere.
Figure 3 below summarises the evolution to what we now know as Omni-channel retailing that is now becoming typical with larger high-street brands. They are merging their established bricks and mortar presence with technology that ensures a unified online/offline experience. The most recent trend that demonstrates this is click-and-collect, where the smart retailers have understood that some customers will research, browse and purchase online, but don’t always like waiting around (or are unwilling to pay) for a product to be shipped to their door.
The good, old-fashioned bricks and mortar store
Online shopping has skyrocketed in recent years
Various, disconnected channels for customers to use independently
An integrated, seamless experience across multiple devices and touchpoints
Figure 3 - From Traditional to Omnichannel retailing
Effective execution of major store development projects can be pivotal in determining a retailers’ level of future success. However, introducing such emerging technology into the physical store environment is costly, time-consuming and increasingly complex. With capital expenditure under greater scrutiny, the perceived risks of such projects are higher than ever before. By contrast, evidence suggests that not embracing such change is perhaps the greater risk.
The three most important objectives of a retailers’ store change program are typically as follows:
Traditional GNFR purchasing and decision-making processes would typically seek to fragment and simplify the store change process. This would often consist of a staged approach to tendered work with different providers completing each aspect of the work consecutively. This enables the retailer to retain closer control of each stage with accountability and responsibility easier to define and departmental objectives remain unconflicted. However, with the added complexities of introducing new technology into major store change programs, a different approach is needed.
Established methods of store development project management can no longer be relied upon.
Given all of these developments, retailers must now take a more holistic approach to store development projects. A greater number of internal stakeholders will be required to ensure commitment and buy-in to the process. The physical transformation of stores will require more integrated planning from a wider number of stakeholders. A broader range of skills will be required simultaneously to complete projects. Upgrades to store facilities and infrastructures (such as mechanical, electrical and even structural) are more likely to be required to support the new technology. Due to the level of disruption and Health & Safety factors, much of the work will need to be completed outside of normal trading hours.
Many of the skills and specialisms needed, will fall outside of the traditional retailers’ capabilities. Specialist providers are likely to be needed to complete certain aspects of the work that are seamlessly integrated into the overall store change program. With retailers now having less resource available to closely manage all projects, this will fall increasingly to external providers. Ideally, suppliers will offer a broader range of services as a single end-to-end provider. They will need to provide dedicated expertise within each area but also strong overall project management capabilities. Such providers must have a willingness to provide greater transparency of costs and commit to a wider range of KPI’s. Furthermore, they should be expected to demonstrate innovation and value add by identifying cost savings and improvements opportunities within the supply chain. Overall, a closer collaboration between retailer and external provider will be needed to ensure success of such future projects.
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