The U.S. retail industry is, as a whole, large, fairly consolidated and non-homogeneous. It is the biggest market in the world but also the most competitive market for the industry players. In America, the 12 largest retail companies hold over one-third of market share. The industry has grown consistently in recent years due to an improved economy and the popularity of online shopping. Total retail sales in 2020 are projected to amount to $5.48 trillion, up from $4.35 trillion in 2012.
Graph: Total Retail sales in the United States in 2012 to 2020
Source: Statista 2018
However, the world of retail has entered a period of enormous transformation. With retail market growth at a pace of 3% annually, many retailers are finding themselves in an uphill battle to profitably increase growth and market share. While retailers may anticipate confident spending by consumers in the near future, preparing for uncertainty by anticipating and responding to potential challenges has to be a large part of their overall strategy.
In this article, Quatrro outlines some of the critical challenges confronting the retail industry in the US
Challenge # 1: Operational inefficiency
Managing complexities and coping with the rapid change is probably one of the most difficult tasks for a retailer to do, yet it is essential, if they want to bring efficiency in their operational tasks and processes. Even today, retailers depend on manual processes as a part of their day-to-day operations which is an
open invitation to inefficiencies and losses.
According to Boston Retail Partners, Retailers Benchmark study, 46% of North American Retailers still use static spreadsheets to run and manage their business
Furthermore those business that are running their operations based on spreadsheets quickly find that it
does not allow them to be scalable and grow with the business. Therefore, efficiency in managing their
operations are apt to be required for retailers to thrive.
Challenge # 2: Accounts payable
Retailers deal with hundreds of different suppliers and manually managing their constant flood of invoices
makes true control over their accounts payable process seemingly impossible. This overwhelming task
can quickly lead to a direct impact on the financial forecasting of the business and ultimately, their bottom
line. Retailers that partner with industry players find that the relationship enables them to empower
fewer resources to manage the accounts payable process while simultaneously increasing process
accuracy, accelerating invoice processing and optimizing payment timing to allow them to take advantage
of vendor offered discounts.
Several studies have found that the median cost to process an invoice across
industries is approximately $6.00.
Challenge # 3: Technological enablement of business processes
Most retailers understand the necessity of optimizing their operational processes, though many of them
face technological challenges in trying to effectively do so. Many retailers continue to use outdated
technology which needs to be updated or replaced, but the business either can’t, or won’t, make the kind
of investment needed. Ever-evolving technologies, including Automation and Business Intelligence, have
immense potential to transform the day-to-day operations of a retail store. Automation can provide substantial operational cost reductions when applied to extremely repetitive, rules-based, high volume tasks that can be optimized - such as routine accounting processes, payroll tasks etc. Business Intelligence tools supply greater visibility and decision-making support to the retail business owners and operators.
Savvy retailers are realizing benefits and defraying costs through partnerships with innovative service providers that can help them gain access to best in class asset-free technology.
Challenge # 4: Frequency of financial reporting
Retailers require frequent financial reports to gain a better understanding and insight into their financial status. Monthly reporting enables retailers to take a proactive approach to manage their company’s finances and developing financial trends in the business. It is a powerful tool that enhances internal business performance helping retailers to measure their financial results, cash flows and financial position. Inaccurate, or late, financial reporting will hurt the company’s credibility and give rise to bad decision making among the leadership team. In spite of the importance, though, retailers often face challenges in receiving updated and timely financial reports.
Is your retail store prepared enough to respond to these challenges?
Responding to these challenges requires innovative thinking and a comprehensive review of business practices to standardize business processes and achieve cost savings.
Quatrro possesses over 25 years of experience in helping retailers to increase business agility and decrease operating costs. We offer tailor-made accounting and payroll solutions, such as financial reporting, accounts payable, cash flow management and analysis, financial forecasting and reconciliation services that keep in mind the needs of our retail clients while ensuring efficiency and utmost quality in our work.