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Implementing a comprehensive retail procurement strategy for physical stores and eCommerce shops improves the customer experience by providing trendy, high-quality merchandise with fewer stock-outs. Procurement strategy initiatives yield higher revenue and profitability for merchants, giving your retail business a competitive advantage.
Using the best ERP and integrated automation systems for retail procurement and accounts payable automation results in cost savings, tighter spending control, and improved supplier relationships.
What is Retail Procurement?
Retail procurement is a strategic process for eCommerce and other retail businesses that includes identifying market trends and goods and services needs, selecting suppliers based on the value provided, negotiating contracts with favorable pricing/terms, approving purchase requisitions, issuing purchase orders, receiving and accepting ordered items, and scoring supplier performance.
The procure-to-pay cycle adds the accounts payable process for paying supplier invoices after procurement.
What are the Three Types of Retail Procurement?
Retail procurement includes three types:
- Direct procurement
- Indirect procurement
- Services procurement
Besides the retail sector, these three types of procurement also apply to other industries.
Direct Procurement
The first type of procurement in retailing is direct procurement, which is used to purchase items as goods offered for sale to customers. In companies that manufacture products, direct procurement is for raw materials and manufacturing supplies included in finished goods as end products offered for sale to customers. Some retailers manufacture some of the products that are offered for sale.
Indirect Procurement
Indirect procurement is for products used to operate the retail business, such as office supplies, equipment, insurance, and software subscriptions.
Services Procurement
Services procurement by retailers includes logistics and delivery services, janitorial, maintenance, and repair services, IT services, independent contractors and consultants.
Which Types of Retail Businesses Use Procurement?
All types of retail businesses use procurement as part of their omnichannel strategy. Retail includes eCommerce, brick-and-mortar stores, catalog businesses, and other customer-facing merchandise providers.
The Unique Challenges of Procurement in Retail
Procurement in the retail industry faces these challenges:
- Recruiting, hiring, training, and retaining the best procurement professionals
- Developing strategic sourcing abilities
- Buying the right products as inventory items that will appeal to customers (and apparel that fits well)
- Maintaining product quality standards to make sales and minimize returns
- Ordering the correct quantity of goods when needed for optimal inventory levels
- Responding to supply chain disruptions and resulting bottlenecks that could significantly delay the receipt of goods
- Obtaining on-time delivery to avoid stockouts that result in lost revenue
- Negotiating favorable purchase orders (POs) and contract terms for lower procurement costs
- Solving inefficient purchase requisition intake and approvals and purchase order creation
- Paying invoices on time to qualify for early payment discounts and keep orders shipping
- Achieving higher profit margins, profitability, and customer satisfaction goals
- Improving partnership and supplier relationship management
- Establishing and enforcing risk management policies, including shoplifting prevention, cybersecurity, internal controls, and corporate governance for better protection and financial results
- Overcoming costly inefficiencies from using outdated technologies and systems by implementing modern systems and technology
Procurement automation software solves many retail challenges.
Automate purchase requisitions and purchase orders in retail procurement and better control business spending with increased visibility and electronic document management.
How to Optimize Your Procurement Strategy for Retail
To optimize your retail procurement management strategy, consider the 3 Cs of procurement: control, consolidation, and cost savings. Then, establish and implement other retail procurement strategies, including sustainability, social responsibility, or other desired elements.
How-to’s of retail procurement optimization include:
- Consider the 3 Cs in the procurement framework.
- Control
- Consolidation
- Cost savings
- Gain adequate control to minimize procurement risks.
- Establish and implement effective company procurement and approval policies requiring at least three competitive quotes and best procurement practices.
- Ensure that item quality, value, specifications, and functionality requirements will be met.
- Vet potential suppliers; only use vetted and validated suppliers when placing orders to reduce fraud risks and gain quality through adequate supply chain management.
- Use vendor performance evaluations to monitor on-time delivery and quality metrics and score the suppliers.
- Develop and implement a reasonable and cost-effective consolidation policy to limit the number of suppliers.
- If your direct retail purchases for resale to customers and indirect purchases for operating the business regularly use fewer suppliers, your company may gain volume discounts that reduce costs and simplify procurement processes.
- When adopting a supplier consolidation strategy, maintain a list of vetted backup suppliers in case the primary suppliers cannot deliver goods or services when needed.
- Ensure that your procurement strategy includes methods for obtaining cost savings without sacrificing quality to get the most value for your business spending.
- Deploy effective procurement team bidding or competitive quote processes and negotiation for purchase costs and payment terms.
- Select and implement one or more integrated procurement automation systems to streamline processes, gain efficiency, produce cost savings, and reduce fraud risks and errors.
- Optimize inventory demand forecasting, order quantity and timing, and inventory management to minimize warehousing costs, excess and obsolete inventory, and reduce inventory theft or damage risks.
Leverage Automation in Your Procurement Processes
Adding cost-effective automation to your procurement processes with integrated procurement software will increase process efficiency and give your finance and procurement team members visibility for more informed decision-making. Integrated procurement platforms and AP automation systems work with your retail ERP system to sync data and enhance functionality.
Your retail business can select different software integrations and analytics tools that cover each phase of the procurement cycle and the procure-to-pay process.
Tipalti Procurement
Tipalti Procurement system uses automation to enable simple employee purchase requisition (PR) creation and approval, with stakeholder visibility during the process. Tipalti Procurement includes contract and procurement document management and automatically creates purchase orders from approved purchase requisitions.
With Tipalti Procurement, your retail or eCommerce business will have real-time dashboard visibility to control spending with better procurement decisions (when you use an integrated, real-time ERP system or accounting software).
Use both Tipalti Procurement and Tipalti AP automation software products for a unified procure-to-pay process.
Tipalti AP Automation
Tipalti AP automation is a paperless, end-to-end accounts payable invoice processing system that includes:
- Self-service supplier onboarding through a Supplier Hub and supplier validation
- Digital capture using OCR and AI
- Invoice verification with 26,000+automated rules
- 3-way or 2-way matching with purchase order (PO) and goods received note (GRN)
- AI-generated account coding
- Automated global regulatory compliance
- Approvals routing
- Global payments to 196 countries in 120 currencies with 50+ global payment methods
- Automated tax compliance reports
- Real-time payment reconciliation, with integrated ERP data syncing
- Automated payments status for vendors
- Dashboards and AI-driven analytics for real-time spend control and decision-making
Tipalti AP automation starts with supplier onboarding, including collecting W-9 or W-8 tax forms before the first payment. It then captures digital invoices, validates suppliers to prevent fraud, automates PO matching, and detects errors before making approved global invoice payments in large batches. Finally, Tipalti AP automation performs real-time payment reconciliation for each batch.
Tipalti Retail Customer Testimonials
Tipalti provides retail and eCommerce solutions that meet their customer’s needs. In your automation software selection process, consider these Tipalti eCommerce and retail customer testimonials from our case studies for Zola, Brooklinen, and Vivino.
Zola + Tipalti Case Study
Zola, a wedding planning and registry eCommerce business, has been a Tipalti customer since 2018. Zola uses Tipalti AP automation software integrated with Sage Intacct accounting software to automate invoice processing, including global payments, for over 600,000 invoices yearly. According to the Tipalti case study, Zola accelerated its monthly close without hiring additional staff.
Last year, we processed more than 600,000 invoices. And this year, volumes are increasing, so being able to keep up with this workload without adding headcount was the need of the business. We needed to build a scalable infrastructure to avoid having to hire a large AP staff.
—Shayon Donaldson, Zola, Accounts Payable Manager
Brooklinen + Tipalti Case Study
Brooklinen, a Tipalti customer since 2020, is a company that operates as an eCommerce retailer and manufacturer of linen products, including sheets, pillowcases, and towels. Brooklinen uses Tipalti AP automation software integrated with QuickBooks Online accounting software.
After using Tipalti AP automation software, Brooklinen digitally transformed its manual invoice processing and payments to eliminate manual processing time by one week each month. Brooklinen appreciates Tipalti’s instant, automatic payments reconciliation feature that saves staff time.
The Brooklinen AP team no longer needs to follow up on W-9 tax form collection from suppliers because Tipalti AP automation self-service supplier onboarding requires submitting tax form data before your company makes the first supplier payment.
Since integrating with Tipalti, we have strengthened our financial controls. Once we approve the bill, it automatically pushes through. We see our expenses reflect in our financials in real-time—our CEO knows exactly how much he is spending. Our vendors like Tipalti because they get paid on time, and they can track when their payments are coming in.
—Shawna Stewart, Brooklinen, Staff Accountant
Vivino + Tipalti Case Study
Vivino, the largest eCommerce and app marketplace for wine that operates in multiple countries, has been a Tipalti customer since 2020. Vivino integrates Tipalti AP automation software with NetSuite ERP.
With Tipalti AP automation software, Vivino reduced its payment process from hours when using a manual process to 10 minutes with automation. It likes Tipalti’s multi-language software capabilities.
A huge benefit to the team has been visibility. Tipalti provides a better interface to see where global cash is flowing each week and provides the full picture required for strategic planning in each of our entities. Tipalti helps you do the right [vendor] background checks, making sure there’s no issue with the bank accounts, and helps collect the necessary tax information which is really beneficial when doing 1099s at the end of the year.
—Becca Simmons, Vivino, Head of Finance-EMEA
How to Get Started
To get started with a unified, cost-effective, and efficient procure-to-pay automation system, consider using Tipalti Procurement and AP automation software products that integrate with your ERP or accounting software. Learn more about how Tipalti finance automation software for procurement gives your accounts payable staff visibility into a streamlined purchasing process.