Retailers and consumer goods companies live under constant margin pressure. They must deliver products on time at competitive prices while absorbing inflation and supply chain disruption. Procurement has traditionally focused on direct spend: the merchandise, ingredients, components and packaging that go into what is sold. That focus makes sense, but it leaves a large opportunity on the table.
Indirect spend, everything bought to run the business rather than to resell, is often far less controlled. McKinsey estimates that indirect costs account for an average of 10 to 15 percent of sales in retail. This guide, refreshed for 2026, looks at why indirect spend is hard to manage and four approaches that bring it under control.
Why is indirect spend so hard to control?
Most retailers know their indirect spend is not optimized. The questions leaders ask are familiar: do we have visibility into all of it, is it growing faster than sales, what does uncontrolled spend cost us and how can we govern it better? The obstacles are also familiar:
- Limited visibility: spend is scattered across stores, regions, cost centers and cards
- Fragmented ownership: marketing buys marketing, facilities buys facilities, IT buys IT
- Unclear spend authority: many people can commit money, few are accountable for categories
- Weak incentives: budget holders are rarely rewarded for spending less
- Silos: not for resale categories are sourced separately from each other and from direct spend
Typical categories include store maintenance and cleaning, energy, logistics and warehousing, marketing and print, packaging supplies, IT and software, professional services and travel.
Approach 1: build a cross functional team
Transforming indirect spend needs more than procurement. A cross functional team brings in the people who define the need, the people who use the service and the people who pay for it. Together they can question requirements, agree on preferred suppliers and make balanced trade offs.
The team works on two levels. Supplier levers, such as competitive bids and supplier consolidation, decide who the retailer buys from and at what price. Process levers decide how the retailer buys, for example by steering purchases through preferred suppliers and catalogs. When every function follows the same policy, maverick spend falls, visibility improves and the retailer can negotiate better prices and payment terms.
A logistics example shows why this matters. A team redesigning a distribution network may choose to raise one cost, such as moving some deliveries from sea to air, because faster delivery protects sales and reduces markdowns. Procurement alone, measured on unit price, would rarely make that call.
Approach 2: manage demand, not just price
The biggest savings in indirect categories often come from buying less or buying differently. Standardize specifications, such as one store fixture design instead of five. Reduce frequency where service levels allow, for example cleaning schedules matched to footfall. Remove duplicate subscriptions and services. These changes need the business to agree, which is why the cross functional team matters.
Approach 3: run indirect categories as strategic sourcing events
Many indirect categories are bought tactically for years without a proper market test. Regular sourcing events with weighted criteria, covering service quality, coverage across stores, sustainability and total cost, reveal better options and consolidate the supplier base. See tactical vs strategic sourcing.
In RFPflow, Aavenir AI reads supplier responses against the weighted criteria and drafts scores with reasons, and evaluators accept or change each one. The award flows into the contract, so the negotiated terms are not lost.
Approach 4: hold the savings in the contract
Negotiated savings in indirect spend leak away quickly. Suppliers invoice at old rates, stores buy off contract and price increases arrive at renewal without challenge. Three habits keep savings in place:
- Put every preferred supplier agreement in one repository, linked to the category owner
- Extract rates, caps, rebates and renewal dates, and assign each to an owner
- Check invoices against the contract rate before payment, and review price increases against what the contract allows
See supplier price increase review, invoice to contract compliance and contract management for retail.
Where should a retailer start?
Pull twelve months of indirect spend by supplier and category, even if the data is rough. Pick two or three categories with high spend, many suppliers and little contract coverage. Form a small cross functional team for each, run a sourcing event, and track the resulting contract terms after signature. The early results build the case for the rest of the portfolio.
The bottom line
Indirect spend is a real margin lever for retail and consumer goods companies. Give it cross functional ownership, manage demand as well as price, source it strategically and hold the savings in contracts that someone actually tracks.