Retail is an industry that has seen a great deal of disruption recently - a trend that is likely to continue through the 2020s. Despite current geopolitical tensions and an uncertain market, which could normally prompt companies to take a more conservative approach to spending, retailers are investing heavily in new digital transformation initiatives. These initiatives serve to help retail businesses keep up (or get ahead) with a shifting environment by increasing organizational agility, reducing costs, and allowing organizations to act strategically.
While a retail digital transformation requires a team to execute, key among them should be the CFO, especially if the transformation includes transitioning to a new financial management system.
A Changing Landscape
Before getting into the CFO’s role during a retail transformation and why it is critical, let’s examine some of the market changes that make modernization efforts essential.
As you are no doubt aware, few industries have been so heavily impacted by the rise of the Internet than retail. Consumer expectations are changing, and savvy retailers are adapting in order to keep up.
For example, since purchasing products online is more convenient, traditional retailers have focused on creating better, more compelling customer experiences in their physical locations. Best Buy, for example, educates in-store customers that are shopping for smart home products with on-hand experts and informative displays. While the customer may have researched an item online, they still look to onsite staff to answer more complicated questions and guarantee that the item they are considering will meet their needs. As a result, attracting and retaining in-store subject matter experts is increasingly important for physical retailers.
Omnichannel shopping has also changed the retail landscape. While ecommerce websites were once considered simple extensions of physical stores, the paradigm has shifted a bit. As a result, many physical stores are taking on new roles – as local extensions of a retailer’s website. Nordstrom, for example, saw success during the 2019 holiday retail season thanks to its “buy online, pick up in-store” initiative, an approach that many other retailers have adopted as well. At the same time, many retailers with physical stores are shipping out products from those locations instead as opposed to warehouses in an effort to reduce shipping timeframes.
With omnichannel shopping, inventory needs to move more freely between physical stores and online warehouses and be tracked in real-time. This necessitates more advanced supply chain management solutions, like those provided in modern cloud-based ERP solutions.
While aware of the need to change, global retailers struggle with execution. Reliance on dated legacy systems makes it difficult to pivot, especially when they are comprised of a patchwork of different tools. This puts established brands at a disadvantage to newer ecommerce companies, which can quickly adjust to changes in the market. Global retailers also face an uphill battle when it comes to changing existing business processes, some of which being in place for potentially decades. The result – large brands are undergoing retail transformations to bring their enterprises into the modern era.
Retail Transformation: Where the CFO Fits In
Here are a few reasons why CFOs should help lead retail transformation.
They Can Shape Strategy
One of the greatest boons of an HR and finance transformation is the wealth of data that it can provide. Transitioning to a cloud-based ERP grants retailers access to powerful analytics dashboards, which make it easier to assess the organization’s current challenges and opportunities. The CFO is perhaps the best equipped to analyze this data and leverage it to formulate a plan given that data analysis is already a key function of their role.
They Can Help Lead a True Business Transformation
In addition to playing a key role in overall corporate strategy, CFOs need to lead their departments from being transactional to strategic in nature. When retailers truly embrace an HR and finance transformation, it doesn’t just change the technology that is used – the people and processes change as well. As mentioned earlier, changing business processes and getting employee buy-in can be a challenge, requiring CFOs and others in the C-suite to act as shepherds of change.
They Can Advocate Agility
One advantage that smaller ecommerce retailers have demonstrated is the ability to see a sudden opportunity in the market, develop a product that meets that need, then offer it in a short amount of time. This is possible because newer, ecommerce sites can be more agile, something that is difficult for a global retailer.
Undergoing a retail digital transformation allows global companies to embrace an agile methodology by simplifying and streamlining their technology stack, providing real-time data, and by making it easier to shift resources to projects as needed. Retail CFOs are uniquely positioned to help facilitate this transition to the agile methodology, as they can establish finance streams to fund agile initiatives as well as monitor their performance.
In order to stay competitive, retailers need to modernize. Modernization goes beyond simply buying the latest and greatest technology solution, however. A true HR and finance transformation changes how companies operate on every level and therefore requires CFOs and other finance leaders to take an active role in shaping the new organization.
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