GNFR is delivering unexpected value for many retailers, here’s why

Goods Not for Resale (GNFR), also known as Indirects or Non-product Related (NPR) depending on an organization’s preferred lexicon, generally refers to goods and services that are not directly sold to the end customer. Historically, GNFR procurement has often been viewed as what is needed by a retailer to enable it to function, rather than what is needed to enable it to sell.

Yet despite generally accounting for 20-30% of a retailer’s operational expenses, GNFR spending is frequently deemed less important and less impactful to business performance. As such, it is rarely scrutinized in the same manner as its GFR (Goods for Resale) cousin and habitually being managed by an under-invested team that may not necessarily represent the organization’s best procurement talent. 

GNFR can influence why and how a customer chooses to purchase

But the world of GNFR is changing. Our recent whitepaper explains how as generations shift and technology evolves, GNFR is playing an increasingly essential role in influencing the motive and means behind a customer’s purchasing choice. In other words, the “how” and “why” have become as important as – if not more important than – what the consumers buy.

The illustration above demonstrates just how pervasive GNFR spend is within a typical retail location, highlighting the considerable influence GNFR management has on the visual and emotional triggers that may encourage a shopper to choose one retailer over another.

The impacts of COVID-19 and social activism

The retail sector took a particularly hard hit amid the unprecedented confluence of headwinds caused by the ongoing COVID pandemic and sustained large-scale protests triggered by the death of George Floyd. As foot traffic grinded to a virtual halt, sales have plummeted, with certain non-essential purchases such as clothing falling by as much as 79% during the height of 2020. Although latest figures would suggest that the worst is already behind us, recent resurgence of case numbers and discovery of potentially more virulent mutant strains of the virus could mean a long and arduous return to normalcy despite the efforts by many countries to vaccinate their populations.

Amongst the rapidly changing market dynamics is the intensification of two significant, hard-to-miss trends – the rise of e-commerce and preference by consumer for purpose driven brands.

E-commerce’s share of total retail spend has steadily risen over the years, by 2019 hitting 8.9% and 14.1% in the US and around the world, respectively. The predilection for online purchase has been accentuated substantially in the past year as lockdowns forced many people to stay at home and perhaps even shopping remotely for the very first time. A recent report by NPD revealed that at its peak per capita online spend rose by nearly 40% while brick-and-mortar store sales dropped by 15%. Although these numbers are likely to rebound as full re-openings eventually take place, this temporary change in shopping pattern could very well accelerate the already noticeable shift in long term consumer behavior as many have become more accustomed to getting what they need with the ease of a click.

Similarly, while the consumer’s increasing preference for purpose driven brands – companies standing for a social or ethical purpose that aligns with their core clientele’s own beliefs and values – wasn’t just born in 2020, it got a significant boost in everyone’s collective consciousness during the US-wide and global protests following the death of George Floyd, who was an African American. Whether it’s calls to support black-owned businesses or companies that have pledged to battle climate change, shoppers have become ever more vocal to vote with their dollars, a sentiment corroborated by 63% of the respondents in an Accenture survey.

Such trends are unlikely to subside but rather on course to accelerate in 2021 as conditions are ripe for the continued seismic realignment in consumer purchase patterns. Demographically, there will be more people living alone, living in urban centers, and living in single-parent households, all of which will reshape the desire to get things faster, more conveniently, and for less. On the social front, with global powers like China upping its commitment to reduce emissions and the Biden administration’s recent announcement to rejoin the Paris Climate Agreement, the tone has been set at the top by political leaders for the first time that are in lockstep with the wishes of a younger but ever more influential cohort of the population they govern.

This moment of awakening should be a call to action for incumbent and aspirant industry leaders alike to capitalize on these opportunities to revamp their organization’s GNFR strategy. Creating a safer in-person shopping experience is only possible by working in conjunction with facilities management to redesign store layout and provide contactless payment options. Building a bigger digital presence requires well-thought-out investments in IT & marketing categories. Aligning corporate values to a shopper’s social beliefs may necessitate the need to work with startups and minority-led businesses, whose presence will more likely be found in the Indirects space due to their traditionally smaller scale of operations. Essentially, whatever the retailer’s objective is, a strong GNFR procurement strategy will be quintessential to its success.

What can a strong GNFR procurement strategy deliver?

A robust GNFR Procurement strategy can deliver values to many aspects of an organization’s key objectives:

1. Optimization of the cost of goods or services
2. Improved back office and supply chain processes
3. Visibility and control of expenditure and risks
4. Innovative solutions to engage customers and retain their loyalty

While most businesses understand the process of buying and selling GFR, it is often a surprise to decision makers that despite lower in value, GNFR purchases are far more complex and difficult to execute….

Learn more about GNFR in Retail

For further details about the role of GNFR in retail please take a look at our white paper The Great Retail Opportunity by clicking on the image below: