Insights

Publication | BRG Retail

COVID-19 Drives Reexamination of Retail Indirect Costs

July 1, 2020

Retailers face lower revenues, decreasing demand, and shifting channel mix as a result of the economic slowdown. They will need to focus on costs levers to survive and thrive.

Retailers face declining revenues and decreasing demand in the face of the global pandemic and continued slowdown of economy. In addition, government safety and health mandates require companies to invest in new hygiene and sanitation standards to ensure both employee and customer safety. Companies must proactively evaluate and manage indirect expenses to align with the reduced revenue caused by store closures and declining consumer demand.

Indirect expenses are a significant part of the retail cost structure and include everything from shopping bags to computer software and services. These costs are addressable through third-party contracts, internal demand management, and corporate policies. Many of the contracts involve pricing or discounts based on volume thresholds that may no longer apply in the new business environment.

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