Understanding Retail Finance Transformation

Published on 15 Apr 2023

Consumer data analytics

In retail, disruption is parred for the course. In recent years, traditional retailers have taken a beating from market shocks, omni-channel interaction, social media, and changing customer tastes. Still, those with vision and a hunger for digital transformation have found lucrative new prospects.

KPMG's 2019 retail forecast provides sharp edges around the themes that characterize this year's dynamic industry. They include:

  • Consumer-focused data mining for enhanced personalization
  • Adapting to the needs of sophisticated shoppers who have access to a plethora of retail outlets at varying prices
  • Consumers' increasing familiarity with AI-powered service agents
  • Using cutting-edge shopping platforms that harness the potential of transactional data in novel ways

Stores that refused or put off modernisation in the face of these changes risked losing ground to more adaptable rivals.

2020: Disruption Leads to Complete Anarchy

The first three months of 2020 would make the turmoil of the previous year seem like a picnic. As a result of lockdowns and occupancy restrictions brought on by the COVID-19 epidemic, annual retail sales fell by approximately 20% between March and April. 

March was a record-breaking month for necessary retailers like grocery shops and pharmacies. August through November showed double-digit growth for retailers selling new necessities like furniture and home improvement tools. 

In the wake of the epidemic, people rushed to protect their homes, purchasing apparel and other things online in record numbers. Amidst the rise of disruptive innovations, the evolution of consumer behavior, the testing of novel business models, and the pressing need to use data strategically, we now face this. According to KPMG's 2020 Retail State of the Industry Report, "Retail as we know it is over."

The Core of Finance

Even in "normally disruptive" times, market instability affects every aspect of a business. However, its impacts are seen most strongly in the financial sector, where a complete picture of a company's health may be gleaned from financial and operational data.

The retail industry's chief financial officers and finance departments worked tirelessly during the epidemic to adapt quickly to new circumstances. Although some fared better than others, everyone was affected by the tremendous disturbance, for better or worse.

Exposing Dangerous Weaknesses

Many retail CFOs, bewildered by the pandemic's issues, have realized that preexisting flaws in their finance, analytics, and planning environments have been revealed.

With declining foot traffic, unsold floor stock, and unreliable supply chains, these CFOs discovered that their organizations needed to be improved by legacy systems and processes that made it difficult to forecast swiftly and execute confident decisions.

There Will Be No More Waiting

According to KPMG's Zaman, the next step for retailers is clear, and CFOs who want to lead their companies in the face of growing uncertainty can't afford to wait. Since "you're seeing the need to have an agile, responsive organization" firsthand, "our view is that now is the ideal time to invest in your back office," he adds. And the revolution of digital finance is the fundamental facilitator of that.

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