Following the Statista forecast, US retail sales will increase to $ 5.94 trillion in 2024, up from $ 5.47 trillion in 2019. The client sees beautiful shop windows, friendly staff, and quality products and can’t stop. But agree that all of us think about who puts the goods on the shelves while we sleep.
So what is retail from the inside? Which systems work allows us to buy conveniently? It is time to reveal secrets.
What Is a Retail Back Office And How Does It Look?
“The back office is what makes the internal retail processes work. The task of automation is to make it as small as possible. And even more: the back office should disappear at some stage. A variety of processes, supported by staff, can be supported without their participation, just using software and technology. Achieving this goal is one of the primary indicators of a complete digital transformation.”
Victor Kmita, XME.digital CEO
Retail is a complex system whose goal is to make a profit by ensuring a constant goods turnover. It is wrong to believe that retailers are only trying to sell something at a higher price. Thus, everything that the buyer sees, and that hidden from the eyes, functions to support the stable goods movement.
So, the shell of this business does not surprise anyone. But what about the internal organization structure?
Retail back office systems are areas of activity that fully ensure this business existence. They act independently of the others. But the work of all elements is supported by common goals. Thus, they interact closely with each other. For example, it is impossible to hire employees or develop marketing without the financial system functioning.
And sure, everything that the client can directly perceive by ear, sight, etc. depends on the back office work. That's why all components should:
work smoothly and accurately;
be flexible and allow the seller to satisfy a dynamic demand;
achieve goals for the sake of overall development.
Today, it's hard to imagine these systems operation without introducing digital *back office solutions.* A significant number of processes would be impossible to perform without modern approaches. Also, fierce competition forces retailers to optimize business activity.
Therefore, the largest retailers are often pioneers in using new technologies.
The retail back office is a complex structure, including countless systems and subsystems. However, three enormous whales support all this business from inside:
Financial Sector. Its principal task is the correct distribution of resources.
Logistics & Distribution. The area is responsible for the movement of goods, storage conditions, etc.
Marketing & Sales. The system that develops consumer interest and works to speed up product turnover.
Another equally dominant factor in retail functioning is the *back office management.* It is a group of people who control the company’s movement. Due to seeing the big picture, it is empowered to develop strategies, set goals, monitor the performance of each area.
Thus, management is another link that keeps systems working jointly.
Financial Sector and Its Role in the Back Office Activity
The area includes accounting, legal support, and human resources management systems.
The *back office accounting* sector controls the flow of funds. It's responsible for transactions, bills, checks, and taxes.
The same system calculates the employees' salaries, financing of any projects, campaigns, etc. To service it, retailers usually buy ready-made digital solutions or develop them only for their company.
The legal subsystem is engaged in full legal support of the company registration of deals, marketing campaigns, transportation, relations between the retailer and government authorities, and so on.
The human resources area generates and uses information about the staff. Thanks to it, the retailer can analyze how many employees work in the company and which qualifications they have. Or whether additional personnel is needed to carry out the processes. It allows optimization of the people's work, managing their time, productivity, etc.
Logistics & Distribution: Its Tasks and Importance for Retail
This system regulates everything related to the transportation and storage of goods. By the way, the last one is handled by the warehouse storage system. It helps to determine volumes of warehouses, specific places for products on storages, and so on. In addition, there is a control system for loading and unloading goods. Because of it, employees know what to load primarily and what - later.
It's also worth highlighting the transport management and route control systems. The first one determines the type, size of transport for goods delivery as well as its maintenance schedule. While the last one is needed to optimize routes and spend less time on them.
Thus, logistics is the most complex retail back office system. If properly structured, it can not only accelerate turnover but also improve the retailer's position in the market as a whole.
Marketing & Sales: Structure and Goals
It is the last but not least component of the retail back office. The first marketing task is to grab the customer's attention and collect data for analyzing clients' behaviour. The successful approach is when the retailer's response to demand is updated in a real-time mode and precisely meets new customer needs. A prime example would be a selection of recommended items based on previous customer experience.
The marketing field includes omnichannel interaction with the client. Its effectiveness is an indicator of the seller's growth. The essence of this system is to maintain communication with the client through different channels: call centres, SMS-mailings, mobile applications, websites, etc. The connection makes it possible to understand clients better and fulfil their desires timely.
Integral parts of sales are also the product catalogue and retail space management. The first one is responsible for what the company sells, in what quantity, and how many units still need to be ordered to meet the demand. The second one is focused on goods placement, and what will surround them.
Thus, a system that unites everything related to marketing and sales helps the retailer to move the product from the manufacturer to the end consumer faster, increasing the client's demand and a necessity for a purchase.
A *retail back office* is a complicated system of independent but interconnected components. They can be divided into three primary groups: finance, logistics, and sales. Knowing the scale of this structure is even more interesting to discover what allows it to support processes and remain flexible. It is all about back-office digital solutions, which will be analyzed in the following articles of this series. Next time XM will tell you which benefits does retail get from the usage of back-office software.
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