The role of the CFO in navigating the new digital divide

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The retail transformation: the role of the CFO

Hard solid numbers are key

The global retail environment is a complex ecosystem of changing economic conditions and customer preferences. The finance function should be able to provide much needed strategic and operational insights to refine the investments in digital solutions and adjust the Order to Cash process to the developing customer needs.

Yvonne Daas & Arina Torop - 19 februari 2016

Digital as a positive force in retail

The mix of retail and Etail has changed the shopping experience in the last decade. Well informed, sophisticated and tech savvy customers had many retailers worried about the future of their business. But reality calls for a reconsideration of the so called ”threats of digital” for brick-and-mortar retail. The Deloitte report “Global Powers of Retailing 2016 - Navigating the new digital divide” has identified digital influence as a positive force for retail. For example, customers that are using digital devices in-store are more inclined to make the purchase in-store as well. The prediction is that using digital interactions will increase every dollar spent in-store with a whopping 64%, translated to 2.2 trillion USD. These numbers show that digital is a dominant force in retail that companies are learning to embrace and grow.

However, there is no one size fit all approach. Digital influence has drawbacks if retailers do not satisfy customers’ increasing expectations. This is referred to as “the new digital divide”. This is an expectation gap that companies must learn how to bridge. But how can retailers track what works and what doesn’t in their supply chain, and react swiftly? The task is even more complex for multinationals that operate in several geographies that have distinct digital adoption rates. How can retailers understand where the soft underbelly of their operations is, and how to refine their order to cash process based on their rapidly changing customers’ preferences?

Finance transformation

To keep their finger on the pulse and be able to predict trends, companies need hard solid numbers. Where in most companies the marketing and sales department is traditionally busy with market research, the finance function can serve as a strategic partner for the business – especially in times of uncertainty. A modern finance function is not only about periodic financial record and report activities. Today’s finance department must evolve to delivering real time integrated financial, commercial and operational information which is crucial to manage in the turbulent retail environment. Business intelligence is a key strength an organization should have in order to capture, monitor and analyze all of variables that influence purchase decisions, and how they interplay in real time. In order to refine the retail experience, companies need to have accurate, reliable data. The intersection between the finance function, technology and marketing is therefore growing in importance, especially in a turbulent retail environment. To monitor the market, an organization must have a finance function that is a true strategic business partner with a forward looking approach, and the business analytics to back that up.

The retail environment has and will be a complex ecosystem of wants and needs that change rapidly. Many variables come into play in purchasing decision, with increasingly nuanced features that big scale customer segmentation splits simply cannot identify. Demographics, product type, stage of purchase and digital adoption are prominent variables that can alter the customer journey. Therefor using sales data per type of distribution channel, customer, product, buying stage, geography and more variables throughout the O2C process will enable to identify supply chain issues, lagging sales performance and successful marketing endeavors. An effective finance department can evaluate the effectiveness of individual retail channels for the business to quickly react to customer needs and change underperforming strategies.

Add value through the finance function

One might ask what is the substantial difference between marketing analytics and finance analytics? In other words, what value does the finance function in an organization has to add to the business side that knows the client the best? The combination of finance and commercial data can show the real effect of digital and commercial choices and investments.

While the marketing department is busy with understanding what kind of stories their customers want to hear, the finance department can examine whether the company is successful in telling them. Besides, the finance department can examine the efficiency of the supply chain structure, the return on investment per interaction channel and where a company should allocate its digital investments.

Now it's time to really get the business value from all the data the organization is collecting.


Read more:

Global Powers of Retailing 2016
Create a competitive edge with your online and offline data


More information on the role of the CFO?

Do you want to know more on the role of the CFO? Please contact Yvonne Daas at +31 (0)88 2882679.

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