70% of CFOs in global retail sector plan to raise prices in 2024: BDO

To help better forecast inventory needs, 55 per cent of the retailers are planning to deploy scenario modeling and predictive software this year, the survey revealed.

Fifty-two per cent of CFOs plan to pursue more upskilling or reskilling opportunities for their employees, which is, at least partly, to create data-driven models around customers, products and experiences.

Forty-five per cent said they are building a proprietary generative artificial intelligence (AI) platform.

Retailers will be counting on pricing modifications and cost optimisation strategies supported by AI this year as potential alternatives to continued discounting. Forty-two per cent plan to pursue pricing strategy adjustments.

While these tactics can help, they are unlikely to take retailers from surviving to thriving, particularly because raising prices will likely drive customers to lower-priced competitors or customers won’t make the purchase at all, the survey report noted.

Sixty-five per cent of CFOs expect increases in revenue this year, down from 86 per cent last year. However, respondents report a slightly more optimistic profitability outlook for the year ahead: 40 per cent say they anticipate profitability will grow by 10-25 per cent, up from 31 per cent last year.

Retailers likely expect price adjustments, cutting costs and better inventory accuracy will help protect their margins. Many CFOs also anticipate inflation will continue to ease, which would help encourage discretionary spending.

While some retailers remain hopeful this year, many are still building in cushions. They are borrowing more money to cover costs, with 79 per cent expecting debt increases this year compared to 48 per cent last year.

Inventory accuracy and forecasting is top of mind for retailers this year, but the challenge is less about an insufficient understanding of customer demand to inform inventory decisions. Instead, the primary issue is a lack of timeliness and retailers’ inability to act on the data quickly enough.

Retailers have come a long way in understanding what their consumers want, but the demand data used is often not far enough in advance to make real-time, let alone predictive decisions, with confidence. Compounding this is the speed at which retailers analyse said data and communicate with suppliers—especially those overseas—with enough time for them to act on it, the survey report said.

In most cases, retailers’ production and inventory lifecycle systems are not set up to pivot in lockstep with consumer trends as they cycle, yet they need to be.

To improve inventory accuracy and restock shelves faster with in-demand products, retail CFOs are turning to advanced technologies such as scenario modeling and predictive AI, the report added.

Fibre2Fashion News Desk (DS)