Retailers Ready To Spend On Expansion, Tech

Press enter to search
Close search
Open Menu

Retailers Ready To Spend On Expansion, Tech


Amid an environment challenged by rapidly changing consumer confidence levels and high national unemployment rates, retail executives are nevertheless prioritizing capital investment expenditures to spur growth, with an emphasis on expansion and enhanced technology, so finds the recent 2013 Retail Outlook Survey by KPMG LLP, the U.S. audit, tax and advisory firm.

Most executives (85 percent) expect their cap-ex purses to 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 (40 percent) and advertising and marketing/branding (24 percent).

"Technology is paramount to driving growth and enhancing customer engagement for retailers," notes Mark Larson, KPMG’s 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."

In fact, when asked which technology-related trends are having the most 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 also portend tremendous opportunities for retailers, so says the KPMG survey. When asked about how their companies are leveraging data, executives most frequently cited data analytics as playing 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). Data is also relied upon heavily 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.

On the other hand….

Despite the sunny outlook on technology-related industry trends, retail execs polled in KMPG’s survey said they are increasingly concerned with the impact of government on their businesses. In fact, 30 percent of respondents cited increased government regulation as a major factor hindering industry growth – nearly double from the 16 percent reported in the 2012 survey. Further, in addressing barriers to company growth, 22 percent of respondents indicated regulatory and legislative pressures and increased taxation as top-of-mind concerns. Additionally, 42 percent cited political/regulatory uncertainty as posing a major threat to their business model.

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).

Other critical issues not cited in KMPG’s survey that factor heavily on our radar here at PG is the overstored, hyper-competitive landscape, the evolutionary expansion of online grocery retailers and rising gas prices.

Which of the above issues, or any others, are tracking most heavily on your retail operations hit list?