Technology to have most significant impact on industry; Modest growth expected in 2013 as fluctuating consumer confidence, unemployment and regulation remain barriers
Amid an environment challenged by rapidly changing consumer confidence and high national unemployment rates, retail executives say they will be investing capital to spur growth, with an emphasis on expansion and enhanced technology, according to the 2013 Retail Outlook Survey by KPMG LLP, the U.S. audit, tax and advisory firm.
Most executives (85 percent) expect capital spending will increase or remain the same over the next year. When asked where they will increase spending most, executives most frequently cited geographic expansion (61 percent), information technology (IT) (40 percent), and advertising and marketing/branding (24 percent).
“Technology is paramount to driving growth and enhancing customer engagement for retailers,” said Mark Larson KPMG global retail leader. “With consumer behavior, spending and demographic profiles changing rapidly, it is absolutely critical that companies take an omnichannel approach to engage consumers, utilizing all the platforms at their disposal, including brick and mortar, online and mobile.”
The opportunity for technology to drive transformation in retail
In fact, when asked which technology-related trends are having a significant impact on retail businesses, executives most frequently cited social media (71 percent), mobile and online shopping (52 percent), and mobile and online promotions and coupons (51 percent). Additionally, the 71 percent of executives who say their companies are using social media to reach more customers and explore new ways of doing business is up significantly from 58 percent in last year’s survey.
Data and analytics is also a tremendous opportunity for retailers. In fact, when asked about how their companies are leveraging data, executives most frequently cited that data analytics plays a key role in helping provide customer insight (72 percent), as well as in the areas of brand and product management (67 percent) and pricing decisions (56 percent). Executives also say they use data to drive operational excellence and actionable insights (50 percent), and acquire customers (36 percent). However, a gap exists between this opportunity and retailers’ ability to realize it, as 43 percent of respondents rate their companies’ data analytics literacy as only average.
“A key to success will be investing in technology to harness the vast amounts of structured data that reside in a company as well as the unstructured data online and in social media,” added Larson. “That data can drive the insights that will allow retailers to interact with consumers more effectively and capture more ‘wallet-share’, as well as identify new markets, new strategies and new operating models to generate growth and profitability.”
On the topic of cloud computing, more than two-thirds (68 percent) indicate they have adopted, or plan to adopt, cloud technologies into their business strategies and operations. Additionally, the 2013 survey shows significant change in how executives view the impact of cloud computing on their business models and operations. Thirty-seven percent indicate cloud will provide management with greater transparency on transactions and 31 percent say it will reduce costs, up from 11 percent and 14 percent, respectively, in 2012.
The increasing burden of regulation and legislation
Despite the positive outlook on innovative use of technology-related trends on the industry, retail executives are increasingly concerned with the impact of government on their businesses. In fact, 30 percent of respondents cite increased government regulation as a major factor hindering industry growth, nearly double from the 16 percent reported in the 2012 survey. Furthermore, in addressing barriers to company growth, 22 percent of respondents indicate regulatory and legislative pressures and increased taxation as top of mind, both increases from last year’s results of 15 percent and 19 percent, respectively. Additionally, when asked what poses a major threat to their business model, 42 percent cited political/regulatory uncertainty.
To that extent, most retail executives say their organizations are most focused on regulatory issues around healthcare reform (54 percent) and labor/immigration laws (41 percent). Despite these challenges, 89 percent of respondents believe their company is somewhat (60 percent) or very (29 percent) prepared to manage the impact of public policy and regulatory change. When asked to identify existing challenges preventing the adoption of a formal risk policy, 39 percent of respondents indicate culture and behavior as significant obstacles, process integration/efficiency of operations (24 percent), clearly defined roles and responsibilities (23 percent), and shared resources across the organization (21 percent).
Revenue and industry outlook
In the 2013 survey, nearly three-quarters of executives (74 percent) report increased revenue over 2012, up nine points from the previous year. Additionally, 85 percent of retail executives indicate the retail industry will see growth in the coming year, however, of those, 74 percent point to only modest gains of 5 percent or less.
Additionally, nearly three-quarters of respondents expect retaining (37 percent) and adding customers (35 percent) as key growth drivers, followed by improving economic conditions (29 percent) and innovative merchandising strategies (26 percent). Conversely, more than half (58 percent) identify decreased consumer confidence as the highest factor hindering growth, followed by high national unemployment rates (45 percent), and increased government regulation (30 percent).
THE KPMG RETAIL INDUSTRY OUTLOOK SURVEY
The KPMG survey was conducted in February-March 2013 and reflects the viewpoints of 101 senior executives in the United States. Based on revenue in the most recent fiscal year, 34 percent of respondents work for institutions with annual revenues exceeding $10 billion, 15 percent with annual revenues between $5 billion to $10 billion, and 34 percent with revenues in the $1 billion to $4.9 billion range.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.
Contact: Megan Dubrowski