The high street certainly isn’t extinct, but retailers who fail to balance and optimise a new omnichannel climate may soon be
At this critical juncture, industry CFOs’ next investment decisions are absolutely vital, and it’s never been more important to have a transparent view of their costs to inform these next steps.
The events of the past year have resulted in many physical stores struggling, or merely existing. In their place, e-commerce was given an extra shove into the retail hot seat. But it’s not an either-or situation. As non-essential shops return and the high street is brought back to life, consumers are ready to flex their newly-shaped expectations about what they want from both online and in-store shopping. To meet this expectation head on, retailers must invest in the demand for omnichannel experiences, to ensure their loyal followers don’t become ex-customers. However, while the CFO holds the purse strings at the core of this new norm, those strings may be tighter than ever following the past year’s strains.
Sleepless nights 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. 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.
An omnichannel future based on experimentalism
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 the 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, retailers 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.
Clear cost data ensures a competitive edge
In order to succeed in the new omnichannel world, it’s important that businesses strike the right balance when it comes to performance, cost and risk. Acknowledging changing consumer behaviour is phase one of the CFO challenge post-lockdown. Phase two is ensuring that they can deliver a high level of real-time insight into their business capabilities, capacities and goals, to make the requisite investments – at the right time – in response to this consumer behaviour.
Now, more than ever, it is imperative that retailers utilise the tools needed to gain a transparent view of costs vs business value generated. Here, financial management tools can help, as they enable businesses to gather vital and real-time operational, project and vendor cost data. By leveraging this intelligence, retailers can make strategic investment decisions that will be crucial to creating a competitive edge as the high street continues to rebuild after COVID. By freeing up liquidity, without sacrificing service quality, retailers can build loyal relationships with both existing and new customers – ensuring they are well-placed to compete in the new age of retail.
About the Author
Ronnie Wilson is Group Executive Vice President at Serviceware. Serviceware stands for a unique solution and consulting offering for the digitization and automation of service processes, which companies can use to increase their service quality and lower service costs. We support you with our all-in-one package: from strategy development to deployment of the right solution all the way to managed services.
Featured image: ©Drazen_Zigic