As we approach 2025, the retail sector faces a variety of accounts payable challenges that require both operational agility and innovative solutions. Retailers must tackle traditional issues like invoice processing inefficiencies and vendor disputes, alongside new complexities from the pandemic, digital transformation, and geopolitical tensions.
Beyond managing supply chain disruptions and rising operational costs, retailers need to use innovations such as automation and AI to stay competitive. Building consumer trust in a selective market, while embracing the e-commerce boom, requires balancing technology with personalized customer experiences. Additionally, preparing for economic uncertainty — characterized by inflation, fluctuating interest rates, and shifting consumer behaviors — calls for robust financial strategies and agile finance management.
This blog outlines the top five accounts payable challenges in retail for 2025, providing insights and strategies to help retail leaders optimize their processes effectively in 2025.
1. Overcoming Supply Chain Disruptions
Retailers in 2025 will continue to deal with significant supply chain disruptions. Global events like the pandemic, geopolitical wars and extreme weather conditions have caused material shortages and logistical bottlenecks. According to the Association for Supply Chain Management (ASCM), supply chain disruptions have become the norm, prompting organizations to adopt proactive risk management. Retailers are increasingly relying on three key technologies:
- Procure-to-Pay Automation
- Supply Chain Visibility Tools
- Artificial Intelligence (AI) for Demand Forecasting
Procure-to-pay automation reduces manual errors, ensuring timely payments and financial efficiency. Supply chain visibility tools provide real-time tracking, helping maintain inventory levels and meet customer demand. AI for demand forecasting analyzes consumer behavior to predict inventory needs accurately.
These tools aid retailers in maintaining stable operations, reducing waste, and improving vendor relationships. Embracing these innovations is crucial for a competitive edge and meeting consumer demands in an unpredictable market.
Learn more about how retailers are utilizing these technologies to address supply chain challenges – Harnessing Technology: How Retail Supply Chain Challenges Can Be Navigated.
2. Navigating Rising Retail Operational Costs
Retailers are grappling with rising operational costs due to inflation, labor shortages, and energy prices. According to KPMG, retailers are under pressure to reduce costs by 20% in order to remain competitive. Invoice automation has emerged as a vital tool for streamlining financial operations and controlling costs. The benefits include:
- Reduced Manual Labor: Automating invoice processing cuts labor costs by minimizing data entry errors and staffing needs, improving accuracy.
- Faster Processing: Automation accelerates invoice handling, ensuring timely payments and allowing retailers to take advantage of early payment discounts.
- Improved Cash Flow: Real-time tracking and automated approvals enhance visibility in accounts payable, aiding in cash flow management and quick responses to financial changes.
- Stronger Vendor Relationships: Automation guarantees on-time payments, fostering strong vendor partnerships which may lead to better discounts and terms.
- Lower Costs and Sustainability: Digital invoices reduce storage and paper costs, aligning with sustainability goals.
- Data-Driven Insights: Automated systems provide data for analyzing spending trends, enabling retailers to make informed financial decisions.
Embracing automation helps retailers to maintain profitability by reducing overheads and improving financial management. As the retail sector evolves, integrating these solutions is key to thriving amidst rising operational costs.
You can read more about this in our blog – The Role of Automation in Navigating Rising Retail Operational Costs.
3. Building Consumer Trust in a Competitive Market
In today’s market, building consumer trust is paramount for retail success. According to a report by Mastercard and Harvest Business Review, 75% of surveyed consumers say that trust in an organization is an important factor when deciding to buy a product or service.
Consumers have become more price-sensitive and selective, demanding transparency and value. Retailers can enhance consumer trust by focusing on 3 important strategies:
- Strengthening loyalty programs with first-party data.
- Using Artificial Intelligence (AI) for personalized experiences.
- Integrate and adhere to ethical business practices and transparent pricing.
Retailers can significantly enhance loyalty programs when they leverage first-party data, to create personalized experiences, tailored offers, and rewards that resonate with individual preferences. AI in retail personalizes interactions, creating meaningful connections with customers. Furthermore, ethical business practices and transparent pricing are crucial. According to Capita, 62% of UK consumers say a retailer’s ethics are more important to them now than pre-pandemic. Therefore, retailers must commit to ethical sourcing, sustainability, and straightforward pricing to build and retain trust.
By focusing on these strategies, retailers can foster loyalty and differentiate themselves in a crowded marketplace. Ultimately, building consumer trust not only mitigates financial risk but also drives long-term success and customer retention.
Read more about these strategies in our blog – Building Consumer Trust: How Retailers Can Win in a Competitive Market.
4. Adapting to the e-Commerce Boom
In today’s dynamic e-commerce landscape, retailers are navigating a digital revolution that is reshaping consumer expectations and business operations alike. Forbes forecasts that the e-commerce sector will grow by 8.8% in 2024, this presents opportunities and challenges for staying competitive. To thrive, businesses can enhance the customer experience through innovative approaches, including:
- Omnichannel Retailing
- Logistics Automation
- Enhancing Last-Mile Delivery
Omnichannel retailing integrates online and offline channels to provide a seamless shopping experience. Customers can start their journey online and complete it in-store, or vice versa, offering flexibility and convenience. Retailers must leverage data from various interactions across different channels so that they can personalize offers and services, enhancing customer satisfaction and loyalty.
Logistics automation streamlines order fulfilment and reduces delivery times, cutting operational costs while meeting prompt service expectations, thus enhancing customer loyalty and satisfaction.
Enhancements in last-mile delivery ensure that products reach consumers swiftly and efficiently. This is crucial, particularly given that eMarketer report that 25% of shoppers will buy from another retailer if their order doesn’t arrive in three and half days.
Embracing these technologies not only meets the demands of the modern consumer but also positions retailers to capitalize on the growing e-commerce market.
5. Navigating Economic Uncertainty
Retailers in 2025 face mounting economic challenges, including inflation, rising interest rates, and shifting consumer spending habits. According to a recent IDC report, many retailers are unprepared to address these hurdles, which place pressure on profit margins, complicate budgeting, and increase operational costs.
To navigate this uncertainty, retail finance leaders are turning to strategic solutions, including:
- Effective Cash Flow Management: Optimizing accounts payable and receivable processes to ensure liquidity and operational stability.
- Implementing Cost-Cutting Measures: Streamlining supply chains, outsourcing where necessary, and focusing on targeted marketing to reduce expenses.
- Leveraging AI and Automation: Utilizing advanced technologies to improve forecasting, pricing, and inventory management, fostering agility and data-driven decision-making.
Conclusion
Staying competitive in 2025 will require retailers to embrace innovation, prioritize financial efficiency, and remain agile in the face of uncertainty. Those who do will be well-positioned to navigate challenges, drive profitability, and achieve sustainable growth in the ever-evolving retail landscape.
