(Retail) Frictionless commerce – how back-end operational efficiency impacts the buying experience

Customers expect to get the product they want with minimal hassle at a good price. They like choice and variety. They want their shopping experience to be effortless and enjoyable.

In fact, the consumer only becomes aware of back-end operations when something has gone wrong which impacts their transaction.

But retail is one of the most difficult sectors to ensure a seamless transition from the back-office to the customer. There are many points of potential friction along the way. Retailers have complex supply chains and higher-than-average transaction volumes, which mean that even without the challenges of the pandemic, problems can easily arise to affect the buyer’s overall experience. We take a look at how AP automation can help.

Keep your suppliers happy and prices down 

As retailers need goods on shelves to satisfy buyers and keep sales high, any disruption in the supply chain is a major issue. Admittedly, there may be several external factors why the supply chain has broken down: a container ship blocking the Suez canal, the consequences of Brexit or the global pandemic.

To overcome these problems, the retailer may opt for more expensive suppliers and costlier freight means than usual, which will impact their margins. This in turn could lead to a hike in their prices, having a direct impact on the consumer.

But the breakdown in supplier relations may be closer to home. It could be due to the fact that the retailer hasn’t paid their suppliers on time, meaning relationships have deteriorated as a result. 

In fact, research shows 73% of procurement professionals think supplier relationships suffer because of late payments. So, while retailers may go to a lot of trouble trying to find the right suppliers, this is all for nothing if they fail to process and pay their invoices on time and have to start all over again.

Problems with payment could also result in the supplier charging late payment penalties which would again be reflected in the price to the consumer. Alternatively, in a competitive marketplace the supplier may simply decide to trade with someone else, exacerbating the retailer’s supply chain problems. 22% of procurement specialists say they experienced a situation where a supplier refused to work with them because of late payment and they had to buy from a more expensive replacement.

Improve operations

The reason for suppliers being paid late is often attributed to poor operations. In fact, 30% of finance professionals report having experienced damage to supplier relationships due to inaccuracies or delays in the accounts payable process. In an outdated paper system, with invoices piled high on desks, it’s easy for invoice dates to get forgotten or simply missed. Sometimes this can be down to the sheer volume of invoices waiting to be processed.

With an automated AP system, however, all the arduous, manual tasks are eliminated and retailers can pay their suppliers on time or even early. This builds strong and trusting relationships, which can have additional benefits over time, such as:      

• Placing the retailer higher up the list if an essential product is suddenly in short supply.
• Eliminating disputes that may lead to orders being refused which would damage the retailer’s inventory.
• Being able to negotiate more favorable deals/discounts which they can pass on to the consumer.

Once an automated AP system is put in place, this can lead to other improvements such as a full end-to-end source to pay (S2P) system which enables the retailer to find better ways to find suppliers. This, in turn, leads to buyers getting the goods they want faster without seeing major price increases, so the end consumer benefits.

Explore new avenues with less risk

In addition, AP Automation can help retailers explore other options when using their normal supplier is not possible. It can make these new avenues less risky for their bottom line by allowing them to negotiate more favorable payment methods with virtual cards  and agree advantageous terms. It can also facilitate cross border payments for shipments from suppliers in China, for example, and helps manage any rapid fluctuations in exchange rates.

Spot trends more easily

With AP automation in place, retailers can take advantage of the better analytics and insights   provided by an end to end S2P process  This means they have full visibility into spend trends, enables them to manage their cash more effectively and are in a better position to make the business decisions needed to bring the best consumer experience to the wider population. By identifying trends and freeing up working capital, the retailer can reinvest in bestselling products which will keep shoppers coming back to store.

Keep consumer confidence high

What’s more, AP automation gives the retailer a complete view of the procurement process and is designed to boost compliance and control. With set supplier agreements in place, retailers don’t get pulled into ad-hoc agreements or maverick buying. It also means they’re at a lower risk of fraud, which in turn builds the consumer’s trust in their brand, knowing there have been no scandals from fraud or data breaches.

An automated AP will provide an efficient back-end retail operation that will lead to a frictionless consumer buying experience. With less dysfunctional payment procedures, retailers will be able to move on to exploring a streamlined (S2P) process. But there’s no point in improving the way retailers source suppliers if they’re not going to be able to pay them on time. So get the basics in place and focus on encouraging the consumer to return time and again.