Technology: Changing the Way Retailers do Business

By Amy Rybar Menefee, CPA, CFE, Partner

Technology: Changing the Way Retailers do Business

By Amy Rybar Menefee, Business Assurance & Advisory Services Senior Manager | Manufacturing, Distribution & Retail Team

Technology is an industry driver for retailers and has changed the way retailers do business.  Two areas that have had significant changes in recent years include the use of information systems to help efficiently operate retail businesses and the customer check-out experience, including use of chip credit cards to reduce fraud.

Large retailers have implemented sophisticated information systems including enterprise resource planning (ERP) in order to have an effective supply chain management process. 
These systems can coordinate between raw material suppliers, manufacturers, distributors, warehouses, transporters of goods and the end user, individual stores, in order to track merchandise, place customer orders, help control inventory levels, and determine customer demands.  Companies are even able to participate in a more cooperative form of supply chain management where sales, supply and production data is shared between retailers, manufacturers and suppliers of raw materials to help all parties reduce inventory costs and minimize expenses due to write-offs from lack of customer demand.  The most sophisticated information systems link point-of-sale, inventory, forecasting, purchasing and administrative functions including payroll, finance and accounting together to streamline operations.  The use of integrated information systems has increased efficiency in operations and has allowed retailers to react to changing customer needs more quickly.

Checkout procedures have also changed with new technology. 
More retail stores are providing customers the option to self check-out, which reduces the number of employees needed by the retailer.  In addition, some retailers include mobile contactless payments using smartphones or biometric identifiers such as a fingerprint.  Mobile contactless payments include Apple Pay and Google Wallet, among others.  Based on a survey conducted by the Federal Reserve, in 2014 34% of 18-29 year olds had made use of mobile payments, compared to only 7% of those sixty and older.  According to eMarketer, continued rapid adoption by consumers of mobile payments is expected, and double-digit growth is projected through 2019.  Approximately one-fifth of smartphone users in the United States are expected to use their phone to pay for goods in 2016 and by 2019 one-third are expected to do so.  Another technology, handheld checkout devices, eliminate the need for a large amount of floor space dedicated to check-out counters and allow that space to instead be used for merchandise, increasing the sales per square foot, a measure, used by retailers, of efficiency.

Additionally, many retailers have been targets of hackers, who have stolen customer personal and credit card data in recent years.
Negative publicity can make or break a retailer and so better data security has become a top priority in the industry.  October 2015 marked the voluntary deadline for retailers in the United States to upgrade to point of service systems that can process chip credit cards, which contain an embedded security chip.  Retailers who did not meet this deadline are exposed to liability.  If a retailer accepts a chip card but does not have a chip reader, the bank will no longer bear the responsibility if the card is fraudulent, and the risk shifts to the retailer.  Retailers who are not in compliance with the voluntary deadline should perform a cost benefit analysis on how much credit card fraud they are experiencing to determine if changing to a chip reader is cost beneficial.

Investment in technology is an important area of emphasis for retailers to remain profitable and competitive.  As new technologies continue to emerge, retailers will be required to evaluate the business case for making a greater financial commitment to technology to meet customers’ needs and demands.

Questions on this topic? Contact our Manufacturing, Distribution & Retail Team  or Email | 804.747.0000


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About the Author

Amy Rybar Menefee

Amy Rybar Menefee, CPA, CFE, Partner

Amy is a member of Keiter’s Not-for Profit, Manufacturing, Distribution & Retail, and Mergers & Acquisitions teams. She serves clients in a variety of industries including: not-for-profit, manufacturing, distribution and retail, insurance. Amy has extensive knowledge in areas of finance including financial review and analysis, the audit process, financial reporting, and Sarbanes-Oxley set-up and testing.  Read more of Amy’s insights on our blog.

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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


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