CFOs Adjust to Retail’s New Reality

The term “omnichannel” has its fans and detractors, but by any name, hybrid online-physical shopping and payments experiences are the next normal so many wondered about in the depths of the pandemic, bringing the best of both worlds to connected economy consumers.

In a discussion for the Visa B2B Series: What CFOs and Treasurers Can Teach Payments about Going Digital, PYMNTS’ Karen Webster was joined by Roland Jeon, CFO at lease-to-own financing platform Kafene, and Jeff Barker, CFO of bespoke home goods marketplace Parachute, to explore retail payments challenges in an evolving omnichannel environment, and how CFOs are managing new flows and business models that ride along.

Showing ongoing shifts in omnichannel tectonics, Barker noted that while Parachute started as a digital-native D2C business, it’s physical store footprint is doubling to 25 locations by the end of the year as the correlation between digital and physical shows up on the bottom line.

He said “we’re looking at a lift of almost 3x in revenue from consumers that are both shopping online and in store. Not only are we seeing that lift in revenue, but our ability to touch the consumer where they would prefer is allowing us to look at our messaging differently, how we target our marketing investments how we ensure the seamlessness of the payment process.”

It’s especially important in markets where Parachute isn’t well known, he said, noting that they opened a store in Charlotte, North Carolina earlier this year, “and about 10 weeks after we started to look at all our zip code KPIs and…saw a lift of 20% of the online shopping that was happening for those stores. There’s great unit economics just to open these stores.”

On the flip side, Kafene is a point-of-sale lease-to-own financing platform now available through over 700 retailers “primarily physical” Jeon said, although the approach is channel-agnostic.

“There’s no particular consumer segment that we’re going after,” he said. “It’s just that we’re cognizant of the fact that this lease to own technology exists. We want to distribute it in a most seamless way across several segments to help the merchants capture a customer segment that they couldn’t necessarily get before.”

See also: CFOs Bring New Risk Mindset to Digitization 3 Years After Urgent COVID Shutdown

The New Math of Omnichannel Metrics

Asked if innovations from cross-channel shopping to payment methods is forcing a review of business metrics to be more relevant, the answer is a qualified “yes.”

Pointing to learnings from deep in the contactless COVID era, Barker said “now as we look at pro formas before we go out in new retail locations we’re making assumptions that 10% to 15% of the revenues generated are going to be BOPIS or buy online pickup in store. We got accustomed to let me look at it, do my research online, but I don’t necessarily want to go through the whole transaction when I get there. I want to get it, get in my car, and leave.”

As part of that Parachute is leveraging third-party apps more.

Barker noted that apps “have data, they have insights that we don’t have available to us, but there are customers that use those frequently enough that we can offer certain promotions. We can tell them when there’s certain things in their location that would make sense, like an event at a retail store.”

Jeon said Kafene utilizes the same core measures as any financing firm — credit performance, underwriting and portfolio metrics — but its Merchant Engagement Team is also measuring “a lot of metrics that have to do with merchants…such as activations, applications and conversions to ensure that our product is working as designed at the point of sale, which means the merchants are using the product in a useful way” providing a satisfying customer experience.

See also: Why CFOs Demand Transparency for Themselves, Customers, Vendors

Go With the Flow

Embracing omnichannel means changing not only consumer payments but suppliers as well, as billing and fulfillment flows change to meet new cross-channel requirements.

Seeking to balance receiving goods with the timing of supplier payments, Parachute leaned into automation for invoice processing and related payments. “Not only did that help in terms of moving you cash much more swiftly and dynamically between the two businesses, what it did internally for us is really kind of reset some of the functions of our team,” Barker said.

Webster cited recent PYMNTS research in which 84% of CFOs surveyed are investing in automation in part to overcome issues created by these new payments flows.

Jeon echoed those sentiments from the Kafene perspective saying, “by automating the vendor payments, invoice recognition and audits, we’ve saved a lot of cash by just not having a person having to do that and shift that resource to more strategic analytical items.”

Conceding that 2022 turned out to be a very different year than businesses had planned for, Barker said drastic shifts in traffic and spending “allowed us to narrow our focus tightly, and what that narrowed on was this omnichannel approach and building that further because we do think there’s longer term value and opportunity by doing things like that. It’s shifting away from some growth initiatives that probably don’t have a year, two or three return at this point.”

Shifting economics also altered Kafene’s priorities. Jeon said, “we are focusing more on the vendors and the services that have immediate measurable ROI, and not the ones that are more process driven,” adding that while process improvements are valuable he’s more concerned now with “what can we realize right away that we can put to use so that we can quickly deploy those savings to other areas of the business.”

Much of this can and will change if the economy slips into recession, but neither panelist seemed convinced of that outcome, though they agreed on a “cautious” approach to investment and expansion given “data noise” and general uncertainty dominating markets.