Navigating Retail Headwinds: An Introduction to L.E.K. Consulting’s Four Levers for Success

Retailers around the globe continue to grapple with persistent headwinds. Although inflation has reduced from its peak and real wages are growing again, pressures remain. In the UK, rising tax and regulatory burdens add complexity, while in Germany, low consumer confidence continues to weigh on the sector. Global uncertainty around the impact of tariffs also looms large.

Despite these challenges, forward-thinking retailers have shown remarkable adaptability: they are optimising costs, enhancing their propositions, personalising the customer experience and seeking new revenue streams (for instance, through retail media). 

Companies that act decisively to address current pressures and continue to improve and innovate will be best placed to capture meaningful market share. As conditions stabilise, these proactive retailers will be poised for accelerated growth.

Four strategic levers for retail differentiation

Across our engagements with leading retailers, we have identified four strategic areas where focused initiatives can yield significant gains ― in some cases improving revenue by 10%-15% and profit by up to 25%. 

In our upcoming series, we will examine how each lever can help retailers emerge stronger in a challenging environment (see Figure 1). 

1. Customer strategy

Truly understanding evolving customer needs ― and translating those insights into a winning value proposition ― lies at the heart of sustainable growth. Retailers can set themselves apart by tailoring their offering to distinct consumer segments and missions, thereby driving loyalty and higher lifetime value. 

• Customer segmentation and value proposition: We bring clarity as to which customer groups matter most, the specific needs they have and how your proposition can be tailored or adapted to best suit the needs of those segments. 
• Customer engagement and loyalty: We help our clients devise tailored engagement tactics for different segments, optimising long-term value through the right loyalty programmes and communication strategies.
• CRM and next best action: We work with retailers to deploy automated, data-driven marketing and personalisation at scale, enhancing both the frequency and value of customer interactions.

In one engagement, L.E.K. helped a European tour retailer develop a data-driven approach to targeting customer segments, significantly boosting repeat bookings and overall lifetime value.

2. Store and network optimisation 

Even as consumer behaviour evolves and online shopping grows, physical stores remain valuable ― but only when strategically designed and placed to meet the needs of target customers and their shopping missions. 

• Store proposition strategy: We work with retailers to define the right proposition to best serve the needs of the local catchment, including optimising space allocation and identifying how to tailor the range, assortment and services to maximise store profitability. 
• Format development: By understanding local demographics and shopper missions, we help develop the store formats and sizes most likely to drive profitable growth in each location.
• Network optimisation: We help retailers define the role a physical retail network should play (for both sales and marketing), optimise store locations and network density, identify and quantify whitespace opportunities, and benchmark store performance.

For instance, L.E.K. developed new store propositions for a major European convenience chain, achieving a 10%-15% revenue uplift and a 25% profit increase.

3. Pricing and promotions

With ongoing cost pressures and consumers paying ever-closer attention to price, delivering value without eroding margins is a crucial balancing act. 

• Pricing strategy and architecture: We define pricing structures that maximise revenue and profitability, while remaining competitive for each priority customer segment.
• Promotion strategy: We help retailers use promotions more effectively, striking the right balance between volume growth and profitability.
• Pricing organisation structure and governance: We define the structures and operational processes needed to manage pricing and value across channels as well as to identify ways to measure performance.

L.E.K. has seen firsthand the impact of a well-structured approach, evidenced by a national apparel and footwear retailer’s profit increase of 300-600 basis points after adopting a targeted pricing and promotion strategy.

4. Ecommerce and omnichannel

Despite ongoing economic uncertainty, ecommerce continues to outpace much of physical retail. True omnichannel journeys need seamless integration across digital and in-store experiences to meet consumer expectations ― and to protect the economics of each channel.

• Integrated ecommerce and multichannel strategy: We support retailers in defining and deploying well-structured ecommerce and multichannel strategies to improve integration between digital and physical experiences, drive customer engagement and conversion, and focus resources on the most value-creating growth levers.

Many retailers are also turning to AI and machine learning to streamline operations and personalise digital interactions, enabling cost efficiencies and higher customer engagement.

Looking ahead

This is the first instalment of L.E.K.’s series on retail optimisation. Over the coming months, we will take a deeper dive into each of these four strategic levers ― sharing practical insights, case examples and suggested next steps for retailers looking to secure profitable growth in an uncertain market. 

Watch our companion video for insight into how leading retailers are applying these four levers in practice.

If you have any questions or want to discuss how we can support your business, please get in touch. 

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