The traditional retail model isn't working. But it can be fixed through strategy and innovation in procurement and finance.
Why the traditional retail model isn’t working
With the closing of popular stores such as Toys ‘R’ Us, American Apparel, Forever 21 and Barneys New York, it may seem that predictions of the ‘Retail Apocalypse’ will come to fruition. However, it’s not all doom and gloom. As an industry, Retail is certainly changing. Yet, it’s amidst a “retail renaissance” where innovative approaches will win out over traditional models to sustain an industry previously deemed dead.
“The entire industry is in survival mode,” Barneys CEO Daniella Vitale said. “The model is not working, it’s not working for Neiman [Marcus], it’s not working for Saks, it’s not working for us, it’s not working for Nordstrom.” (According to CNBC.com)
Technology has encouraged transportation, manufacturing, and basically every other industry to evolve. And the same goes for retail. Retail’s traditional manual processes and outdated technologies aren’t sustainable. So, retail must evolve. And it can start by becoming more strategic in its finance and procurement functions.
Strategic finance in retail
Without a strong financial backbone, organizations will fail. It doesn’t matter what industry you’re in—finance is likely the backbone of your business success. Proper management of financial operations and innovative technologies play vital roles in a company’s growth and profitability.
But with great technologies come great amounts of data. With so much data now available to retailers, the challenge is to understand which is most critical to innovation, the bottom line and new value creation. With this sort of data on hand, retailers can improve efficiencies, benchmark against and overcome their rivals, and even gather consumer insights from their data.
Technological advancements such as data-based analytics, mobile-capable platforms, artificial intelligence (AI), and robotic process automation (RPA) offer the finance function an exciting opportunity to recreate its role in retail.
Automation, digitization, and the changing state of global commerce are increasing the pressure on finance. And as these three macrotrends rise, finance must learn to balance their traditional accounting roles with their new roles as business forecasters and analysts.
This is the new role of finance in retail. No longer are they solely responsible for the more traditional finance, treasury, regulatory, and information delivery related functions. It’s now more strategic, focused on integrating technology, harvesting data, and informing actionable insights to guide how the business as a whole makes plans to ensure future profitability.
Passive procurement – a thing of the past
The continual rise of ecommerce and online shopping is making Retail increasingly more competitive. It’s getting harder and harder to get and keep consumers’ wallet share. So, for retailers to become successful amidst these changes and a highly competitive marketplace, they must adopt advanced procurement strategies and technologies that go beyond typical practices to truly ensure savings are being maximized and waste eliminated.
It’s also important that behind these strategies and technologies are a combination of tools and processes. These will help empower retail organizations with visibility and process control over their entire procure-to-pay (P2P) cycle.
Procurement teams of today are leaving the reactive and passive role behind and instead are reinventing procurement to become strategic advisers for their retail organizations. They’re able to contribute to more value-adding priorities such as:
Increasing cost saving through adopting e-invoices and eliminating paper.
Improving supplier relationships through onboarding campaigns to make it easier to connect suppliers and reach common goals.
Simplifying approvals by reducing bottlenecks and eliminating excessive approval requirements and steps that add no value to the process.
Integrating automated technologies that empower procurement data that informs advanced analytics.
Gaining visibility into your sourcing and procurement processes by locating and eliminating maverick spend.
Ready to learn more?
In order to support your retail organization and best prepare for the future state of finance and procurement, you need a team that’s experienced and prepared. Basware has been named a Leader in Procure-to-Pay, with over 30 years’ experience helping companies cut costs and streamline their operations. Download Gartner’s 2019 Magic Quadrant for Procure-to-Pay Suites report to learn more.