Retailers continue to face sustained pressure. Inflation is abating a little bit, but consumer purchasing power is still depressed. Operating costs are continuing to rise. There is increasing regulatory complexity that retailers are dealing with. At the same time, customer expectations around convenience, value, and customer experience are continuing to rise. There are digitally native competitors that are increasingly setting the bar higher and higher around personalization and the sort of agility with which they are able to respond to customer needs. And then AI is obviously a big transformative factor that allows retailers to be much better in interacting with customers and improve their processes, but it also creates a lot of transition and a lot of change to processes.
We at LEK have identified sort of four pillars that are the key factors that retailers really should focus on. The first one is customer strategy. The next one is store and network and optimizing everything around that. The third one is pricing and promotion, and the last one is ecommerce and omnichannel experience.
It starts with customer understanding. There are obviously lots of important retail fundamentals around getting your sourcing right, getting your purchasing, your supply chain right. All of that's true, and you need to do that to be successful.
But you cannot be a top class retailer these days anymore without really deeply understanding your customers and increasingly personalizing your offering to meet their needs. Generally, retailers tend to be pretty data rich. You have usually a wealth of information from your transaction data, from any retailers, from loyalty schemes, and so on. What retailers typically struggle with is their systems and their data are still not in an ideal state.
So the sort of holy grail of the whole one customer view across all of your different channels, touch points, and different data sources tends to remain elusive for most retailers. Retailers are generally able to use better customer understanding for some very meaningful quick wins around improving their store and their store network. What they ideally should do is you want to understand, are there different clusters of your stores that behave in a similar way that customers use in the same way? Know how are they using these stores?
What are they using them for? What sort of service experience do they want to have, and what do they want to buy, and then optimize their store estate accordingly and really tailor their offering in each cluster to best meet customer needs.
LEK can help retailers with us in a number of ways. We combine deep understanding of the retail sector with sophisticated data analytics and machine learning tools that allow us to extract maximum value from datasets that retailers already hold to really, get the most out of all the data they have available to make data driven decisions. And then we can help you think through what does that actually mean for the different parts of your store state, how should you optimize your proposition to really fit those customer needs? We enable retailers to turn strategy into actions and deliver high impact results that are really tangible impact on how retailers operate.
Anything from changing the space allocation in a single store to helping them comprehensively redesign their estate. We have seen from some of these interventions very, very material improvements for retailers. It is not uncommon to achieve ten, fifteen percent revenue uplift across your store estate, and that can translate to up to twenty five percent increased profitability.
