The Many Merits of Outsourcing in Business

‘Outsourcing Works!’ Say the Experts

When Farmerscart and Linen ‘n Things were purchased, a few eyebrows were raised. What had an online food delivery company got to do with a traditional brick and mortar retailer?

Similarly, when Florida-based group Retail eCommerce Ventures (REV) purchased a prominent sporting goods store, people were questioning how three totally different businesses could thrive.

As COVID-19 went on the rampage, the number of companies available to buy increased, with more brands being forced to the wall as retail went online.

Source: OECD, COVID-19 and the retail sector: impact and policy responses

The list of acquisitions goes on

Over the next few months, REV made several acquisitions of well-known and loved brands. Again, no common theme emerged in the sectors that the companies operated in, but they share several fundamental features.

Each of the companies had spectacularly failed to embrace the internet era and move sales online. Almost all were shackled into long and expensive leases on physical stores and had been particularly poorly managed.

In short, each company just looked antiquated. However, it wasn’t all bad.

Each of the brands had a loyal customer base and very distinctive intellectual property, from the “Gotta Go to Mo’s” jingle of Modell’s Sporting Goods, to the signature signage of an age-old electronics chain, named RadioShack. Truth be told, these are well-known brands.

Each of the companies had spectacularly failed to embrace the internet era and move sales online.

They also had extensive customer lists which allowed REV to keep loyal brand customers up to date with what was going on with the relaunch of the business.

People are generally more willing to put up money for a brand they recognise, than a no-name-brand of equal quality.

Turnaround – How Outsourcing Revives Tired Brands

Today, business consultants are adopting a novel approach to re-energising tired brands. In the case of many failing, ‘high-profile’ enterprises, experts are doing the unthinkable. They buy the IP of the brands, and the intellectual property rights. This has the benefit that they aren’t tied into the store leases and can shed any debt that might be holding the company back.

The problem is that in buying only the intangible assets, REV then has none of the infrastructure it needs to run a successful business.

This isn’t a problem, as when it buys a company, REV uses a well-tested formula to develop the company into an online model.

The first thing they do is to look at the marketing and in particular the website. Software agnostic, the REV group tends to use standard software with little in the way of customisation to manage its business and it standardises across all its brands.

People are generally more willing to put up money for a brand they recognise, than a no-name-brand of equal quality.

On each of the individual brand websites, you’ll find links to other stablemates and this is a key part of the REV strategy. The aim is to allow loyal customers of one brand to discover the other companies in the group and this shows why REV has developed such a diverse portfolio.

Control the Core Operations and Outsource the Rest

Outsourcing has long been known as a way to save money but it also has the additional benefit of allowing the staff to concentrate on the core functions of the business and leave things like the back-office functions to third-party suppliers. What REV has done is to develop an outsourcing model that makes full use of aspects such as drop shipping and direct to consumer deliveries from manufacturers.

This is a model that worked very well for several businesses already. By turning businesses around, one online retailer at a time, it is possible to maintain a strong market presence.

Restructuring is possible by using brand assets to produce a completely new website and leverage the brand appeal that these companies have built up over the years.

These companies are now enjoying tremendous levels of success, and the strategy is working. Based on the results we are seeing, it is clear that outsourcing and moving to an online model reduces the need for large staff numbers.

Leveraging the Power of Smart Tech to Perform to Expectations

As a case in point, when it went into liquidation, Dressbarn had over 9,000 people manning its stores and head office. It now operates with only 30 people based in its Dallas home.

Based on the results we are seeing, it is clear that outsourcing and moving to an online model reduces the need for large staff numbers.

As Shayan Zadeh, CEO of Dressbarn and former co-founder of Zoosk with Mehr says: “We are lean and leveraging tech to do something that would have taken hundreds of people to run”.

What are the benefits of outsourcing?

Outsourcing has a large number of benefits, as the REV group has already seen.

The good news is that any-sized company can use outsourcing techniques, and they are particularly helpful for smaller companies that want to bring in high-level expertise but don’t have the money to pay for a full-time person.

Some of the benefits of outsourcing:

• Cost – Outsourcing can save money by buying only the services you need, when you need them, thus reducing the full-time staff requirement.
• Increased efficiency – Buying services from specialists rather than trying to do everything yourself in-house is much more efficient.
• Focus on core areas – Executives and managers can concentrate on strategy, and their core areas rather than the day-to-day issues.
• Save on technology and software – If you outsource your payroll, then you don’t need to pay for payroll software.
• Access to skills – Experienced, high-level staff cost a lot of money but outsourcing to good people is possible if you only need a few hours of their time.
• Built-in agility – You can switch on/switch off services at any time giving your business the ultimate agility.

Top business consultants implement outsourcing and enjoy all of these benefits. They have built these frameworks into their operating model. This offers a competitive edge that boosts profitability.

Can other companies use the model?

The simple answer has to be “yes”. The REV operating model isn’t exclusive to them and without a shadow of a doubt, any business can use this method to expand.

Buying the IP of a competitor, or a complementary brand, can really help to drive expansion and growth.

All companies are different and the amount of outsourcing that will be appropriate will differ depending on individual circumstances. The ideal approach is a fusion of the best of what REV has to offer, and craft it to personal expectations.

By looking at innovative retailers like REV, companies can find novel ways to transform their businesses and adapt them for the future.