By Ronnie Wilson, Group Executive Vice President, Serviceware
It has been a turbulent time for retail and, whilst the high street isn’t extinct, brands that fail to invest in a new omnichannel strategy may soon be. At this pivotal moment, the very next investment decision could be make-or-break. Industry CFOs must therefore have complete transparency over costs to make sure these decisions count.
Whilst many physical stores have struggled over the last year, e-commerce has thrived. But it doesn’t have to be an either/or situation. Now that lockdown restrictions have lifted, and the high street has largely reopened, consumers have returned with a new set of expectations about what they want, from both online and in-store shopping. To keep up, retailers must invest to meet the demand for omnichannel offerings and experiences, to retain loyal customers. And, whilst CFOs may hold the purse strings needed to make this a reality, those strings will undoubtedly be tighter than ever following the past year’s strains.
Challenges for the c-suite
The role of the CFO has evolved in recent years, into a function fully involved with shaping the future of businesses. However, with greater involvement comes more responsibility, and certainly more challenges. Today’s CFO must balance competing demands – the need to protect enterprise value today, while also enabling future growth. This is something that can only be achieved with access to accurate cost data. In fact, a recent study revealed that the agility to adapt to continuous change (62%) and willingness to experiment and take calculated risks (54%) were considered the most important leadership qualities for a CFO to succeed in the future. This requires the ability to scenario plan to truly understand the potential impact of investments before committing.
In this climate, while the CEO can shift overall business strategy, it is the CFO who has the power to deliver this boost to retail businesses through cost optimisation. And in this respect, they actually hold the key to the future success of retail in line with developing consumer demand. But before they can think about omnichannel investment, they would be better placed to invest in financial management tools that truly reveal current investment capabilities against prospective ROI. In doing so, they can enter this new retail world without jeopardising their future role in it.
The need to analyse market trends and trajectories to optimise costs is nothing new, of course, but the accelerated reliance on digital channels has put extra pressure on how CFOs direct funds. Some well-known brands have tried to get ahead of the curve by pre-empting future demands – M&S has sought to reimagine the use of physical store layouts to also accommodate office space, while John Lewis is reducing its brick-and-mortar presence.
For the majority of brands, though, the omnichannel solution lies somewhere between these two extremes. Sharon White, chairman of the John Lewis Partnership, comments: “The high street is going through its biggest change for a generation, and we are changing with it. Customers will still be able to get the trusted service that we are known for – however and wherever they want to shop.” For Sacha Berendji, M&S’s Retail, Property & Operations Director, the launch of its proposal to redevelop Marble Arch is the latest example of how M&S is ‘shifting gears in creating a store estate fit for the future’, highlighting the brand’s focus on emerging stronger from the pandemic.
When online and offline worlds collide
The future of retail is likely to move beyond siloed online and offline shopping; instead, it will reflect an amalgamation of the two. Consumers have missed the in-person experience, the ‘try on and test’, and the social sides of the high street. But they will have also enjoyed the accessibility, flexibility and level of choice provided by online shopping. The answer therefore lies in technologies that can accommodate and support retailers to combine the best of in-store experiences with the ease of online shopping. However, balancing online and offline worlds can seem like a costly mission – and it will be, without effective cost optimisation that can only be achieved through real-time investment visibility.
We’re already seeing this demand for the ‘best of both worlds’ on the online side, with the rise of chatbots, augmented reality and dedicated Q&A portals. Further digital investments should now be targeted towards in-store experiences – digital catalogues that provide quick stock availability checks, specific product launches or catwalks, fun and quirky treasure hunts or games for younger shoppers, or makeovers to take ‘trying and testing’ to the next level. This must come with an acceptance, and even an aim, that an eventual sale will likely still be conducted online, after the experience has been provided.
A prime example that businesses should be exploring is experiential retail. Today, customers don’t want to be bystanders – they want to be immersed in, and interact with, stores. New technologies, like touchable digital canvasses and developments in the mixed reality space, will help trigger emotional reactions and create a powerful connection with shoppers. Taking an experience-first approach can also pay dividends for retailers in the long term, as this will not only help businesses attract new shoppers, but also encourage repeat visits. Westfield’s recent ‘How We Shop’ report reveals that 59% of consumers predict that by 2025 stores will dedicate more than half of their floorspace to providing experiences, while 75% of consumers believe this will happen by 2027. The primary role of the physical store is changing, and retailers need to enter another decade of reinvention to remain relevant. Focusing on experientialism will enable retailers to bridge the gap between both online and offline worlds.
And that’s why the CFO’s future port of call should also be based around fulfilment – order management systems, warehouse inventory solutions and real-time stock availability technologies that can facilitate modern buyers’ demand for flexibility when it comes to hybrid experiences such as click-and-collect, buy online and return in-store, or browse in-store and buy online.
Creating a competitive edge with accurate cost data
To be able to compete in this new omnichannel world, businesses must achieve the right balance when it comes to performance, cost and risk. Step one for CFOs includes acknowledging changing, post-pandemic consumer behaviours and expectations. The next step will be to ensure they can deliver a high level of real-time insight into their business capabilities, capacities and goals, to make the required investments – and at the right time.
To achieve this, it is imperative that retailers implement and take advantage of Financial management tools to gain a transparent view of costs vs business value generated. This will enable them to gather vital and real-time operational, project and vendor cost data, in order to make strategic and informed investment decisions. By freeing up liquidity to invest in new omnichannel initiatives, retailers can build loyal relationships with both existing and new customers, putting themselves in the best possible position to compete in a new retail era.