BDO Retail CFO Survey: Key takeaways, recommendations

Retail CFOs are prioritizing their workforce, adjusting their pricing strategy and betting on generative AI in 2024.

These are some of the findings of BDO’s "2024 Retail CFO Outlook," which also found that generative AI and data privacy risks are also pervasive. To counteract these risks and build strategic resilience, 44% of CFOs plan to increase their involvement in digital transformation strategies, likely in an effort to improve efficiency and reduce costs.

Retail CFOs report positive outlooks for 2024, but are expectations in response to fixed consumer budgets and inflation. While 40% of CFOs anticipate profit growth between 10-25% in the year ahead, their paths to profitability vary, according to BDO. Some, for example, are adjusting their pricing strategy, while others are leveraging scenario modeling technology to improve supply chain operations.

Survey Key Takeaways

•Price increases lie ahead:  Seventy percent of CFOs plan to raise prices again this year, though the majority say those increases will be slight as opposed to significant.

•Retailers are tired of inventory inaccuracy: To help better forecast inventory needs, retailers turn to technology, with 55% planning to deploy scenario modeling and predictive software this year.

•Retail CFOs look to maximize talent: Fifty-two percent 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 experience.

•Retailers are bullish on generative AI: Forty-five percent say they are building a proprietary generative AI platform. While the greatest opportunities are still being uncovered, CFOs expect it to support all areas of their business including compliance, customer service, safety monitoring and more.

Recommendations

To navigate yet another tricky year ahead retailers should diversify their tactics, advised BDO, which recommends the following:

•Use data to drive discounts: Promotional strategies can significantly impact a retailer’s profit margins. CFOs should use AI tools to be deliberate about the timing of discounts, in concert with planned price hikes, to maximize sales and compete with discount retailers. This will be critical as consumers continue to hunt for discounts, forcing retailers to adjust.

•Keep an open line with lenders: Communicate financing plans to lenders and be forthcoming about any signals of distress early on to build credibility and trust. This may help to secure more favorable terms in the future and is especially true for those taking on additional debt.

•Don’t ignore the store: Relocation, such as moving out of major malls to neighborhood storefronts, is an important real estate strategy to be closer to target consumers, particularly as many customers still work from home and no longer commute from dense areas, where larger format locations may primarily be.

•Prioritize supply chain improvements: While retailers are likely to be limited when it comes to spending, increasing warehouse operation efficiencies and improving inventory management could be worthwhile investments. Leveraging predictive analytics can greatly help organizations pick SKUs that sell.

The 2024 Retail CFO Outlook Survey polled 100 retail CFOs from companies with revenues ranging from $250 million to $3 billion or more in October 2023. The survey was conducted by Rabin Roberts Research, an independent marketing research firm, using Op4G’s panel of executives.