Part Two: Retail
The retail sector continues to suffer from a whirlwind of macro-economic factors. The good news is that with the right strategy, processes, and systems they can reach the pot of gold.
From devastating weather events to the ongoing effects of the global pandemic, 2022 was packed with unpredictability, which continues to challenge both the global and local economies. These last couple of years have been a test of resilience and adaptability, as companies are forced to think on their feet and respond to an evolving business environment. Whether it’s disruption from destructive weather events, turbulence due to COVID and waring countries, economic instability with sky-rocketing energy prices, stagnant wage growth and inflation, businesses continue to be unsettled and struggle to forecast how long this stormy weather will continue to impact their sectors. Companies need to find a way to keep their heads above water and rethink their strategy, embrace change and build competitive advantage, while assessing the impact across the financial, commercial, and operational aspects of their business. This is especially true for the retail industry, which has suffered some of the largest effects of this erratic business climate. Now is the time for retailers to make it rain – in a good way!
In the eye of the storm
The retail sector has had its share of challenges in the past few years. During the pandemic, the state of the retail industry seemed dire: rising costs and declining margins, supply chain challenges, empty store shelves, resource challenges, sustainability practices being forced aside, all combined with unpredictable and rapidly changing consumer behaviours. We all remember the lockdowns and the toilet paper panic buying that defined the pandemic, along with the empty shelves at our local supermarkets, staff shortages due to illness and isolation requirements, and a forced shift to single use products like masks, gloves and coffee cups. If the last few years have taught retailers anything, it’s that they need to be agile, so they can pivot quickly to avoid being washed down the storm water drain.
As COVID started to be better managed, the start of 2022 saw many retailers begin to feel cautiously optimistic about their ability to recover from the challenges they faced during to the pandemic. However, more unexpected headwinds emerged, which continue to make the environment challenging for retailers and their suppliers alike: floods and droughts impacting supply, the rising price of fuel and raw materials driving up the cost of business, rapid inflation and a cost-of-living crisis that is diminishing consumer spend. It’s hard to forget the time when a humble ice-berg lettuce skyrocketed to more than $10 and resulted in KFC replacing this ingredient with cabbage – a dire situation for the chicken burger lovers amongst us. On top of this, COVID still remains a lingering concern with new variants emerging.
These persistent and somewhat unpredictable headwinds have driven many retailers to reassess the strategies, processes and systems which had previously met the needs of their industry for many years. However, getting into a position of strength requires longer-term transformational thinking. Retailers should be looking to restructure outdated supply chains and supplier management processes, improve demand planning to optimise inventory management, review pricing structures and strategies, remodel promotional activities, reinvent the customer experience for the digital age, and so forth. This applies to retailers both globally and locally here in Australia and New Zealand. In addition to the need to adapt to emergent technologies (such as the internet/digital era of the last few decades) and changing consumer preferences, the Australian retail sector needs to respond to growing competitive pressures as international barriers come down, all combined with social and political forces.
Seeing the rainbow
While retailers have faced some challenges and pressures to adapt and innovate, there are great opportunities for the industry to stabilise and grow. The future is still sunny – the brightest rainbows follow the darkest storms. Australia has managed the virus successfully in comparison to other counties, and as a result, we started to see an exuberant return to spending and doing so via physical retail spaces. However, there is recognition that we have been living, working, and shopping differently for a few years now, so customer habits and loyalties have changed as a result of this experience. New technologies are paving the way for more streamlined experiences, supported by automation in the supply chain and supplier management process, which underpin any retail business. If Retailers want to thrive, they need to focus on optimisation of their cash management, ensuring contract compliance across their logistics and operational processes, including freight, labour and facilities management, as well as managing merchandise and associated short term incentives. The retail sector has demonstrated that it can be resilient to some of the harshest conditions and with the right awareness and investment in process and technology transformation, these storms can be weathered with minimal damage. Start with setting a strong financial foundation, don’t simply hand over your hard earned money to your suppliers due to process errors.
Profectus helping reach the pot of gold
Our research shows that companies in the retail sector are missing out on millions of dollars in lost revenue, primarily due to a lack of automation within the procure to pay systems and processes – a foundational area where Retailers can optimise the business. Profectus can help reach the pot of gold at the end of the rainbow – we provide world leading technologies and services to identify issues and to recover previously unknown financial leakage within your supplier management processes, an area within the retail sector that involves significant spend. Think of this simple example, where a marketing or rebate allowance has been agreed via email but was forgotten to be actioned due to human factors such as organisational team changes - it happens!
For example, a product is put on sale for $4 instead of $5 and the supplier should be reimbursing the difference, however the promotional scan rate has been entered incorrectly or been missed entirely. If identified, outcomes from these programmes could be invested in internal initiatives to drive further innovation and transformation, creating a positive feedback loop.
With the natural shift towards using technology enabled solutions, Profectus can help companies automate compliance and payment processes, as well as paving the way for ongoing, robust financial risk mitigation
Making better things happen
Officeworks is Australia’s largest supplier of home and office products, with 167 stores Australia-wide and more than 40,000 products available on its website. This requires a well-oiled transport and logistics operation. However, such a complicated and multi-dimensional part of the business brings with it significant complexity in how to manage the growing number of supplier contracts and invoices from transport companies.
With this increase in scale has come an in-kind rise in the sheer number of invoices from transport suppliers, and the possibility of contractual and financial errors taking place – often in the form of incorrect invoices, overcharging and contractual agreements being missed. It’s clear that with any business at this scale, there are several points at which errors can creep in.
Officeworks started working with Profectus Group in 2005 and continues to rely on us to act as its one-stop shop to streamline rebates and invoice management, to ensure contract compliance and to provide granular reporting capabilities. Profectus makes sure that all agreements are accurately recorded and can be easily searched for, and granular line-item data can be analysed within seconds. The solution automatically highlights discrepancies in contracts versus invoices, enabling the retailer to accurately pay the correct invoice amount by processing a credit (approved by the carrier) for any overcharges. In addition, the merchandising audits performed by Profectus have allowed Officeworks to bank hundreds of thousands of dollars straight to their bottom line. Being able to successfully manage these financial, commercial and operational aspects of the business have been crucial to their business, especially in recent years.
Living more beautifully
An online furniture and lifestyle retailer with a large subscriber base of more than a million Australians, delivers goods to thousands of customers every day. A business of this scale has a complex supply chain requiring a significant amount of coordination, involving hundreds of stakeholders across its value chain. Their supply chain was pressure-tested during the pandemic, with the company having to deal with skyrocketing delivery demands thanks to an explosion in online shopping, more discretionary spend, and people wanting to adapt their home environments. With this exponential growth came equivalent increases in supplier invoices. Given the volumes, any error in a consignment or an overcharge from a courier company had the opportunity to compound to very large dollar amounts. Hence contract compliance became a critical role – and one that is too impactful to attempt handling manually.
This popular online retailer began working with Profectus to leverage our leading technology-driven compliance and recovery solutions. Profectus has worked with the Retailer to solve the reconciliation issues that were occurring at scale, something that is near impossible to do manually and without the right technology and supporting services. The recoveries came through Profectus acting as the Retailer’s compliance insider, leveraging a solution to automatically identify instances of overcharges from suppliers or undercharges to vendors, and being able to claim monies owed. They started seeing recoveries almost immediately and the money spent on Profectus has already been repaid many times over in the form of recoveries claimed.
Is your company one that needs to fulfil thousands of online orders and manage the purchasing and transportation of hundreds of thousands of goods on a daily basis? If so, then Profectus can help streamline your operations and increase the profitability of your business – essential components to creating a more resilient and commercially viable organisation.
Profectus is the leading technology-driven services provider of compliance and recovery solutions. The emphasis for many retailers has shifted towards improving profitability and achieving greater business efficiency, with a focus on technology and source to pay functions in particular. By automating compliance and streamlining operations, retailers will be more likely to weather the future storms and enjoy the rainbows. Now is the right time to review your business, automate processes, improve compliance, and ensure that your business is in good stead for whatever comes next.
Where to get started?
To learn more about our compliance and recovery solutions, as well as how we've assisted other major organisations across the retail, banking, transportation and mining industries, click the relevant links below.