Many retail banks have slashed costs dramatically over the past decade by promoting digital services, closing physical branches, and taking a hard look at the activities done in head office. Mobile telecoms operators in Europe have cut more than a third of their costs per subscriber, by reducing non-essential activities and improving the efficiency of the remaining tasks. In both cases, the motivation was to remain profitable even as individual customers brought in less revenue, and market growth was low.
Retailers are facing the same problem, and it is time now for them to do the same. Though retailers have always been cost conscious, they have traditionally focused on incremental reductions to shave low-single-digit percentages off overall cost levels. Now, however, they need to take big, radical steps that will slash costs by between 20 and 40 percent.