The Retail Cash Chain: A new twist on an old idea

24 February 2015

United Kingdom

Sion Roberts

Glory Global


I discovered recently that the “Retail Industry” (or at least the concept) was officially founded in the Middle Ages - tailors would cut their larger bolts of cloth into smaller quantities for individuals to buy in consumable amounts to do with what they would.  The word “retail” comes from the Old Norman French word “retaillier”, which quite literally means: “to cut off, clip, pare or divide”.

Early on in my career (but still, after the Middle Ages), I would be occasionally reminded of this simple definition - that retailers exist simply to break large boxes into smaller ones and take money for them (we now call this the last part of the consumer supply chain).  This reminder usually came while lost in my latest retail innovation PowerPoint masterpiece, extolling the virtues of technology and the benefits it would bring to the retail industry.

As a technologist serving the retail industry, what I have grown to appreciate is - and I apologise in advance if this is not a “light-bulb moment” for everyone - that successful retailers get supply chain right (i.e. the process of taking big boxes, moving them, breaking them, and arranging them for sale) before everything else. Before Omnichannel, In-store WIFI, Big Data, mobile payments, popup stores, assisted scanning, and a whole host of other in-store “service focused” technologies remains the essential need to get the right product to the right place, at the right time and for the right price. This is fundamental to successful retailing, as a good retailer will always remind you.

Retail Supply Chain relies heavily on new technology and process automation. Using technology to gather data on what is needed, where and when is key; as is automation to remove slow, manual tasks such as stock counting and checking in inventory from one place to another.  Tracking and tagging technology is essential to ensuring that stock shrinkage is also a focus area even though we are not yet in the era of “the Internet of Things” and RFID tags on low value consumables. Use of all of these principles together - visibility, automation, analysis, tracking and so on - ultimately ensures enough of the right product is in the right place, securely, quickly and cost effectively supporting that very core driver for successful retailing.

If my recent analysis of exhibitors at this year’s National Retail Federation “Big Show” is any measure, retailers are not yet done with Supply Chain Technology. Despite the new “millennial-driven” technology trends impacting retail, 25% of the show exhibitors were talking “supply chain optimisation”. After forty years of these ideas having been around, one has to wonder how much of the supply chain is left to be optimised?!

I do believe, however, that this prevailing retail idea around the supply chain is essential to other aspects of the industry, and I’d like to turn your attention to Cash. Yes, Cash… that payment mechanism that has reputedly been on the decline since the Mondex trials of the mid 1990’s, but continues on as the most popular payment mechanism in the retail space today. While P2P payments may take the place of credit and debit cards; while contactless takes on “Chip and PIN”, cash remains so important according to Central Bank forecasts (the Federal Reserve, the ECB and the Bank of England to name but a few) that supply of cash in recent years has increased not decreased and is predicted to do so for the near future.  Millions of dollars/ euros/ pounds are continually invested in improving security and durability of cash - it is a payment mechanism that will see out my career in IT, of that there’s no doubt.

Although some enlightened retailers are already adopting these well accepted “Supply Chain Principles” of ensuring the right “product” is in the right place, securely, quickly and cost effectively into their cash processes, for most it is still largely manual, slow and insecure.

Analogous to the Supply Chain Technology industry, consideration of the “Retail Cash Chain” is now emerging - the key drivers being: to eradicate cash shrinkage through automation; optimise cash inventory within the store and across the estate using sophisticated demand forecasting tools; eliminate multiplicative counting, handling and moving processes to get cash from “pocket to profit” as quickly as possible; refocus “cashiers” as “servers” and “associates” and thus improve service; and outsource logistics to reduce processing costs.

In order to capitalise on the multiple opportunities that Optimising the Retail Cash Chain can offer, retailers must engage in discussions around the journey, the role and processing of cash within their organisation.  This opportunity to contribute to the bottom line is huge and often overlooked - retailers with a deliberate cash chain automation strategy can save millions (often in excess of 2% of cash turnover) through considered end-to-end optimisation, with returns on their investments within twelve months. Savings come through tangible benefits - dramatic reduction in shrinkage through counterfeit elimination, employee “mishandling” and more severe attacks; real reduction in costs of cash counting, cash preparation, cash movement; significant profitability and balance sheet improvements by banking the right amount of cash more quickly to name a few. Given that cash acceptance and processing costs remain largely within the store estate (and not baked into an uncontrollable, external merchant service charge for example), the benefit from these savings can fund such things as new technology payment experiments, or be passed onto consumers through price reductions.

The glamour of optimising the Retail Cash Chain may not keep up with implementing the latest and greatest that SMAC (technology’s latest buzzword for technology implications of millennial behaviour) can offer, but it may well provide the much needed financing for those initiatives to the pragmatic “Retailliers” out there who strive to succeed every day in this competitive, increasingly price-sensitive and exciting consumer-driven industry.

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