Every element of the retail landscape has been forced to undergo drastic transformations in order to stay afloat in an over-competitive market where companies of all scales are embracing and adapting to the changes. The global fashion retail industry, which is now valued at $3 trillion is no exception, where retailers are trying to keep up and cater to the changing consumer demands and behaviours.
While the shift to digital and e-commerce, omnichannel strategies, and creating enriching in-store experiences are all subjects discussed amply, one aspect that is often overlooked is the transformations pertaining to the finance functions of a retail chain. As digitization accelerates in fashion retail, it is drawing in sizable new investments in technology. But for retailers with omnichannel strategies in place, measuring the impact of investments on sales and returns, for each channel, is anything but smooth. What does that then mean? It simply implies that finance functions can no longer be a back-end process.
Javed Shaikh is the Chief Financial Officer at REDTAG, a BMA International subsidiary, who has co-piloted the brand’s growth to over 200 stores, overseeing critical finance functions, risk management and MIS reporting, while guiding strategic decisions across business initiatives. With his rich market experience in KSA, Bahrain, Kuwait, and UAE, he has facilitated REDTAG’s transformation while successfully acquainting his team with the evolving role of finance departments in retail.
“The retail industry had a head start in digital transformation, but it still had its silos. The financial teams were mostly confined to traditional modus operandi, dissociated from fashion trends, consumer behaviours, etc. So, important functions like budget allocations were performed without awareness of some critical details, in the form of validating data,” said Javed Shaikh, CFO of REDTAG.
“This is no longer the case. We now have better access to data-driven insights, which are resulting in innovative financial models. Be it brick-and-mortar retail, or e-commerce; these models can be leveraged to optimize business bottom lines and customer experiences, across each touchpoint,” he added.
Traditionally, retailers would rely on human-led procedures for pricing and costing, which came with its own set of challenges including that of time efficiency, accuracy, and the inability to be proactive and forecast trends, behaviours and make data-driven recommendations. Today, artificial intelligence and the access to data will help finance professionals make recommendations to their companies on what products to sell and how much to produce, as well as make well-informed financial decisions like allocating funds within the organisation.
“We have expanded into many new locations and malls recently, despite the disruptions. This move was driven by insights generated by the actual recorded footfall in our stores. We wanted REDTAG to be accessible to customers at close proximity to their homes. And the insights convinced me of the viability of allocating funds into expansion. We are now at 190 outlets – and counting,” he explained.
The role of finance teams and CFOs in general saw an evolution in a short span of time last year where cost optimization, salary reorganization, budget allocations for new software and hardware required for remote working became priority.
Rental renegotiation became another important role for finance teams that required a change in approach given the new order of pandemic times. In fact, even before Covid-19, the urban retail rental landscape was going through a massive transformation, as foot traffic to malls were falling. Retailers had started reconsidering the size and numbers of their physical outlets, having realized that a large number of stores don’t necessarily equate to a bigger volume of sales. The role and purpose of stores were being reconsidered and this reassessment was accelerated during the pandemic.
“Rent negotiations are keeping pace with changes, based on new innovative models of shared space, pop-up stores, and ‘order & deliver’ or ‘shop & pick’ concepts. A hybrid model, which gives shoppers options to browse and shop – either online, or in physical retail outlets – is what customers are increasingly inclined towards,” he said.
“This could lead to the use of smaller physical spaces, coupled with tech-enabled, interactive interfaces to showcase the brand and products. Meanwhile a fulfillment centre could attend to order deliveries, in such a model, with short turnaround times of less than 24 hours,” he added.
For a long time, retailers relied on age-old metrics like sales-per-square-feet to measure their success, disproportionately focussed on savings and returns, and invested in bringing more products in, than fostering stronger relations or creating better experiences for their customers. In a data-led retail environment, every function – planning, design, merchandising, budgeting – has scope to achieve better efficiency, course correction, and overall optimization. Finance teams, in particular, can become the custodians of the generated data, champion new investments in technologies, and align the brand with the digital revolution.
“We are confident to double down on technological investments and optimize our existing omnichannel strategies and hybrid models. Additionally, we are encouraged to bring more efficiency into logistics and streamline returns-exchanges. Globally, at least 20% of all products ordered online are returned, compared to 9% in physical stores. We can leverage data and digitization to bridge this gap.
“Even when it comes to physical stores, investment into immersive experiences pays dividends. Malls across the Middle East are reopening now, and consumer spending is expected to increase this year. This is a perfect setting to integrate data analytics into our omnichannel strategies and deliver consistent, personalized experiences,” he concluded.
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