RETAIL SECTOR Boost Your Margins Through Virtual Payments · Retail Changes And Challenges Costs are soaring Booming wage bills, steeper imports, increasing business rates ... costs

RETAIL SECTOR

Boost Your Margins Through Virtual Payments

AirPlus.com+44 (0) 20 8994 4725 / [email protected] 03

Going Digital Is More Than How You Face Customers

Make Your Payments Process VirtualUpdating how you manage payments is a perfect

example of digitalising your retail business.Two major trends dominate retail today:

It’s a tough market. Costs are up, profits down and too many big high street names have hit the wall.

Retail is going digital – big time. UK online retail sales grew 9.4 per cent in 2017, when the market as a whole grew only 1.9 per cent.

But digitalisation isn’t just about selling online. It’s about managing your entire business better. That holds true whether you are more bricks or more clicks as a retailer.

Digitalising your business processes is what can help you not just survive but thrive in this tough environment.

We aren’t talking in this eBook about the payments you receive from customers – although there is plenty of potential in that too, such as accepting mobile payments.

Instead, we cover the payments you make as a company – whether your department is travel, procurement or accounts payable and other teams within finance.

Payment has been through its own digitialisation revolution. The world of payments has gone digital too. Virtual cards suit retail ideally. You can use them to:

Cut admin costs – no more lengthy reconciliations, for example.

Improve spend visibility.

Control employee spend and stamp out fraud.

Flex perfectly to modern retail needs, like funding voucher payments and goods for fashion Instagrammers.

What’s insideThis eBook explains:

Changes and challenges for retail companies – and how they relate to your payment needs.

What virtual cards are.

How your retail business could benefit from virtual cards.

What to look for when picking a virtual card provider.

“UK online retail sales grew 9.4 per cent in 2017, when the market as a whole grew only 1.9 per cent.4”4 Retail sales, Great Britain: December 2017, Office for National Statistics


... it’s a necessity. Online sales as a proportion of UK retail sales have climbed every month since records began, and moved up again from 16.1 per cent in April 2017 to 17.3 per cent in April 2018.2

2 Retail sales, Great Britain: April 2018, Office for National Statistics 3 The Digital Transformation PACT, Fujitsu, February 2018

6 Retail Changes And Challenges – And How They Affect The Way You PayDigitalisation: no longer a “nice to have” ...

Retail Changes And ChallengesCosts are soaring

Booming wage bills, steeper imports, increasing business rates ... costs are on the up.

Meanwhile, consumers’ improved ability to compare prices is holding back how much you can charge. It all means margins are shrinking.In a sector with squeezed profits, every penny lost on unnecessary expenses or operational inefficiencies is a critical waste.

How that affects the way you pay

It’s time to look at new payment processes that slash admin time (on reconciliation, for example), while maintaining much tighter controls on employee spend.

Retailers get the message: 93 per cent say they have a clearly defined digital strategy, and 54 per cent are implementing digitalisation in existing business processes and functions.3

93%

54%

Much of the drive towards digital has focused on sales and marketing, from ramping up online and mobile channels to deploying technologies like beacons, virtual reality and Internet of Things within physical stores. But the revolution doesn’t stop front-of-house. Today’s retailers need to think and act truly digitally throughout their business to get where they need to be.


Too many business payment processes are rooted in the old world that digital is leaving behind. Some companies, for instance, still fax the front and back of a senior manager’s corporate card to hotels to guarantee reservations for other employees. That’s massively inefficient, lacking transparency and a huge fraud risk.


Retail Changes And Challenges

Retail Changes And Challenges …continued

In an inventory-intensive sector like retail, strong cashflow is what makes or breaks a business.


One current threat to cashflow comes from the travel management companies (TMCs) which book your company’s trips. Airlines are shortening their payment terms to TMCs, so in turn TMCs are

pressuring corporate clients who pay them by invoice to accept shorter terms too. Switching to (digital) card-based payments, with generous settlement terms, is the answer.

Cashflow is king

With 54 per cent of its workforce aged under 34, retail is the second-youngest out of all 17 major employment sectors (only accommodation/food services is younger).4


Our youth are our future. But that doesn’t mean you want to let them loose with plastic corporate cards. Equally, you can’t expect employees to fund business trips out of their own pockets and wait for reimbursement. Today, there are safer, faster ways to pay for their travel and other business needs.

Scaling a fast-growing business

Retail companies which find success can suddenly grow very quickly. But when sales boom, the business’s supporting admin processes don’t always keep up.


Passing one plastic credit card around the company to pay for travel bookings no longer works once you have more than a few dozen employees. Neither does submitting expenses on spreadsheets or – even worse – paper. It’s time to introduce a slick, consistent payment, expense and reconciliation process.

Retail is a youthful industry

4 2015 Annual Population Survey, Office for National Statistics

‘‘When sales boom, the business’s supporting admin processes don’t always keep up.’’

The rise and rise of compliance

Compliance issues are forcing their way up retail’s agenda, with codes of conduct and more pressure to show business transparency.


Traditional payment processes – like using one plastic corporate card to pay for everyone’s travel expenses – aren’t always very transparent. Digital alternatives solve the problem by providing more, and better, data.


Like retail, payment processes have also gone digital. Like retail, payment processes have also gone digital. Mobile payments – like Apple Pay, or the phenomenally successful WeChat and AliPay, which have taken China rapidly cashless – are the obvious example.

When it comes to how retail and other business sectors make payments, rather than take them, the big trend is virtual cards. Using virtual cards addresses the many changes and challenges for retail mentioned earlier.

Virtual CardsDigital Payments To Drive Digital Retailing A virtual card is a 16-digit number just like one you see

stamped across the middle of plastic credit and debit cards. But with virtual cards no plastic is involved. The number is generated (along with a three-digit security code) at point of payment and used only once.

What Is A Virtual Card?

It means each transaction you pay for has a unique card number – and that’s how reconciliation, control and many other benefits come in.

For each virtual card, you can:14%

1/4

Digital payments worldwide totalled $3.85 trillion in 2017, up 14 per cent.5

5 Digital Payments Snapshot, 2017, Juniper Research

6 Commercial Cards in Europe 2018, RBR

Virtual cards are forecast to account for almost a quarter of commercial card spending in Europe by 2022.6

Only allow it to be issued once essential data has been added,

such as employee number, cost centre or project code.

Set a limit on how much can be paid.

Specify the merchant, or category of merchant

(e.g. a hotel).

Set a date for payment to be made.


How Virtual Cards Help Your Retail BusinessSIX reasons why virtual cards tick all the boxes:

From staff conferences to roadshows to photo shoots, retail

companies handle all sorts of meetings & events.CONTROL what your employees can (and can’t) spend You’re in the driver’s seat, setting a limit on how much can be spent – and where and when.

END time-consuming manual reconciliation Wasting frustrating hours cross-checking purchase and payment data becomes a chore of the past. Now you just auto-reconcile the two by matching up the unique card number.

PAY for everyone You can use virtual cards to pay for all stakeholders, including trainees, interns and external contractors. And employees face no end of month expense claims either, because you settle all the virtual cards centrally through one monthly bill.

REDUCE fraud risk Virtual cards are used only once, and for a specified transaction, so they can’t be stolen (or lost).

USE with any booking channel For travel booking you can go virtual for any payment, whether through your TMC or directly via any website or app.

TIP: The ideal way to pay for meetings & events

Paying for them on a single employee’s plastic corporate card, as often happens today, is far from ideal:

1

4

2

GAIN total visibility of spend Being able to input extra details like cost centre or project number for every payment makes all the difference. It helps you track costs and budgets with a fine tooth-comb.

5

3

6

Virtual cards nail the M&E payments problem.

Each payment can be given an event code to make spend totally transparent and easy to allocate.

Spend is unlimited (but controlled).

Figuring out which payment on the card relates to which event

can be confusing.

There is significant danger of maxing out the card spend.


Case-Studies - Payment Digitalisation in ActionMatalan – Boosting efficiency, reducing costs and risk

“Operationally, it’s been a much, much smoother process to book with

A.I.D.A. sat in the background on our booking system,’ says Matalan.

‘It has brought efficiency to our financial teams, who are able to

reconcile much faster because of the data available on the statement.”

Piers Gibbons, Head of Operations, AirPlus International UK

Case-Study

Fashion Instagrammers are a great example of how new retail business practices need new process thinking to support them.

ASOS – Funding fashion Instagrammers

Before

Getting online bloggers and influencers to model your clothes on their sites has become a key marketing tool for fashion companies. But ASOS had no process to fund Instagrammers to buy ASOS clothes without being able to spend the money elsewhere.

After

ASOS now issues approved Instagrammers with AirPlus A.I.D.A. virtual cards, which are capped at a fixed amount and can only be used on the ASOS website. The bloggers get their clothes; ASOS gets its marketing – and control over the whole process.

Matalan is a classic example of how virtual cards can transform retail business processes.

Before

Matalan’s travel manager paid for many employee trips on her own corporate credit card. That led to:

After

Matalan digitalised by introducing AirPlus A.I.D.A. virtual cards. Improvements since then have included:

A fraud risk, with her card number being shared around too many hotel front desks.

No fraud.

Maxing out the spend limit on the card, leaving the company unable to complete bookings (and prices rising by the time more credit was authorised).

No exceeding of spend limits.

Limited spend data – little more than supplier, amount and date of purchase.

Detailed supplier and internal stakeholder spend data for each transaction, with all data in one report.

A monthly nightmare of reconciling spend on the card.

No need for reconciliation. All booking and billed data is inherently reconciled, with full cost-centre allocation.


Choose The Right Virtual Payment Provider For You We hope that by now you agree going digital through virtual payments could really help your business. But how do you select the virtual payments issuer that is right for you?

Here are some key factors to consider.

Is the solution pre-paid?

Many are pre-paid, in which case you lose one of the key benefits of cards for any retailer: improved cashflow. Look instead for virtual cards which can be settled through a credit-based centrally billed account.

What’s your overall payment strategy?

Virtual cards need to be seen in the context of your entire corporate payment needs, which could also include lodge cards (ideal for air ticket payments) and plastic corporate cards (important for frequent travellers). Make sure your issuer can offer the best in all three categories.

How well does your issuer integrate?

Seamless digital payments for your travel needs depend on deep integration with TMCs, online booking tools, expense management systems and many others. Not all virtual payment issuers are as well integrated as others, so check how well they hook up with your chosen service providers.

‘‘Instead of prepaid, look for virtual cards which can be settled through a credit-based centrally billed account.’’

AirPlus.com+44 (0) 20 8994 [email protected]

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How virtual payments can boost your travel and finance programmes? Contact us today!

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RETAIL SECTOR Boost Your Margins Through Virtual Payments · Retail Changes And Challenges Costs are soaring Booming wage bills, steeper imports, increasing business rates ... costs