Succeeding in a changing world
The continuing tough trading conditions for retail mean that we are seeing the sector hit the headlines with worrying regularity, unfortunately often for all the wrong reasons. By Helen Dickinson, Head of Retail, KPMG.
As a result, I find myself increasingly drawn to indicators of how businesses in the sector are feeling and how they believe their prospects are currently looking.
This week, the findings of a KPMG survey – called Succeeding in a Changing World – landed in my inbox and the findings make for interesting reading.
The survey, which questioned CEOs and finance directors, a number of whom hail from the retail sector, asked businesses about where they feel their priorities lie in the next six months.
Within the retail sector I presented a series of hypotheses to those we surveyed, asking questions around a range of themes affecting the sector, such as growth prospects, multichannel retailing, supply chains and pricing.
For me, the most startling figure in the survey was that 34 percent do not believe there is over-capacity in the retail market. Maybe I should be encouraged that so many businesses remain optimistic, believing there is the opportunity to secure significant value and volume growth, in the current low growth environment – a backdrop which is certainly here to stay for some time to come. But with UK retail vacancy rates currently running at 15 percent – although admittedly concentrated in secondary locations, while primary sites remain in high demand – the situation doesn’t really appear to be easing.
Another hypothesis posed looked at multichannel retailing. I suggested to the retail businesses we surveyed that online would account for 50 percent of total sales within ten years, a statement which just over half of the respondents agreed with. That would be a huge leap forward, as online sales currently account for under ten percent of the total, although ongoing growth at the current rate would just about get us there. Admittedly trying to accurately predict the percentage of total sales this channel will generate is an increasingly futile task, with the continued blurring of the multi-channel boundaries set to make the question redundant as technology continues to facilitate the ability to interact with consumers at multiple touch points.
What it does mean though is that making investment decisions will become more difficult as identifying the point where a customer made their purchasing decision becomes less and less obvious or straightforward.
On the issue of pricing, 31 percent did not agree with the suggestion that retailers are now locked into a period of promotions and discounting. This may be admirable optimism, or maybe the 31 percent believe that they absolutely understand their customers’ decision-making at different price points – but this is an issue vexing plenty of retailers, so the response was somewhat surprising. Setting and executing pricing policy, consistent with the value proposition, is critical to drive profitable growth as input prices remain under pressure and as buying behaviour evolves.
Elsewhere within the survey findings, I was slightly bemused to see the muted retail support for the theme of sustainability. I feel that the need to evolve to more sustainable business models will be the primary driver shaping the future of retail over the next 20 years – just as technology has been for the previous 20 years.
To see further discussion of the survey, please go to: http://www.youtube.com/watch?v=-VuE-0O-xuI
