How Retailers Can Cut Software Costs Right Now

This is a guest post by TJ Papp. TJ has held senior executive positions at Nike, Victoria’s Secret, and Kenneth Cole.

Right now, retail needs help. Due to a tectonic shift, uncertainty has set in across several categories, and we’re rethinking our businesses. We’re all in different stages of processing. For those of us trying to get the business moving again, there are  difficult decisions to be made on spend.

This piece is designed to help you make those decisions with firsthand information and data from my friends at Tropic.

Diagnose the Challenge

Here are some challenges that many of us in retail, including close friends, are dealing with:

• Supply chains have ground to a halt
• Painful headcount changes
• Technology licensing challenges: people are paying for tiers they no longer need
• Significantly reduced acquisition budget

Many folks are spending a lot of time with their CFOs and their COOs along with their extended marketing teams to discuss back-of-house costs associated with all these changes because, naturally, they are impacting profitability, runway, and survival.

The New Strategy

If you haven’t implemented a change in strategy, this is for you. Here are some of the strategic changes others are implementing to react to the challenges above:

• Our top revenue priority is to reward our best customers. It’s okay to be more aggressive selectively, with our most active customers, because they generate the greatest value for us over time.
• We’re shifting focus from acquisition to double down on the bottom of our funnel. That means more personalized touch points across all of our owned channels.
• We need to save cash anywhere we can. Our runway looks very different now. We have to take out cost left and right to keep the ship afloat.

3 Tactics for Retailers to Cut Software Costs

So, we need to take out cost as quickly as possible. We don’t want to make headcount sacrifices, and we’re spending a ton on technology. How can we make decisions right now that drive out cost?

I sat down with the Tropic leadership team to talk about software decisions they’re seeing on their platform. If the retail mandate is to take out cost, how are retailers and their vendors getting creative?

Here is what they found.

DECISION 1: CONSOLIDATE

You probably have tools in your stack that are redundant. Before you cut from the wrong place, ask yourself these questions about your tools:

1. Is there a free version of this?
2. Am I paying for point solutions that some of my platforms also deliver?

Takeaway: right now, it’s better to use a platform feature than a best-of-breed point solution if it means taking out cost. Task a team with finding these opportunities and you can cancel best-of-breed contracts. I use Tropic to help with this personally.

DECISION 2: RIGHTSIZE

Be diligent about the value you’re receiving from your agreements and push for price reductions that rightsize price to value. Commit to longer agreements in return.

Here are some questions you can ask to unlock savings opportunities:

1. Are you getting lower performance than was promised? If your partner quoted you an ROI number during the sale that never materialized, perhaps there’s room to adjust the price accordingly.
2. Do you have features you are paying for but aren’t using? it’s a thoughtful point to begin a dialogue around ways to reduce the price, even if they’re part of the standard tier.

Takeaway: there are likely opportunities to leverage the actual value of your tools as a means of driving down standalone contract values.

DECISION 3: MODERNIZE

There is actually an opportunity to improve your stack right now. It’s the Netflix Principle. When the economy tanked in 2008, historically recession-proof cable providers saw their stocks plummet as customers switched to a cheaper, more innovative alternative: streaming. Netflix added 3 million new users between 2008 and 2009.

Now is the time to think about switching to the Netflix version of core marketing tools.

• If you’re using an enterprise software provider for any of your owned marketing, there is almost certainly a more innovative startup alternative that is a fraction of the cost. Talk to these companies. They’ll be thrilled.
• Be candid about your experience with your current provider and get out of a contract that is hurting you. A good startup will likely lean in to help you with the switching.

Takeaway: don’t be afraid to make bold moves. The economics will help you get your organization on board with radical changes that might otherwise die in the red tape under normal circumstances.

In summary, there are three ways you can start to get your technology costs down: consolidate, rightsize, and modernize.

Retailers Are Customers Too

Let’s remember that as retailers we are customers too.  As customers who have far less discretionary spending power than we used to, we have to change our corporate spending habits to meet the demands of a new lifestyle. Hopefully the above steps are useful. If you need help, contact Tropic. They’re helping for free.

Currently, Tropic is offering retailers a free Savings Assessment. A Tropic expert will look at your tech stack and demonstrate your opportunities to cut costs. Click here to get started.

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