Mergers and acquisitions expected to drive growth
Retailers look to new technologies and improving customer experience
The overwhelming majority of U.S. chief executive officers (83 percent) in the consumer and retail (C&R) industry say they are very confident about the growth prospects of their companies over the next three years – far more optimistic than their global counterparts (54 percent). U.S. executives also say they expect mergers and acquisitions (M&A) and third-party strategic alliances to drive growth, on-board new digital technologies and innovations and to improve the customer experience, according to the KPMG CEO Outlook 2018 survey.
Nearly all of the U.S. C&R CEOs (98 percent) see technological disruption as an opportunity rather than a threat, and said they are keeping up with innovation (92 percent). However, they do admit that various technology risks, including cyber, may hinder top-line and long-term growth.
Growth through M&A and third-party strategic alliance
When asked about the top growth drivers over the next three years, U.S C&R CEOs most frequently cited M&A (38 percent) followed by strategic alliances (23 percent). M&A is expected to transform retailers' business models faster than organic growth, reduce costs, increase market share and on-board new technologies.
"Although U.S. CEOs are bullish on the business prospects of their companies, the percentage increase in growth over the next three years may still be moderate," said Mark Larson, national leader of KPMG's Consumer & Retail practice. "Retailers that acquire the right technologies, either through M&A or third-party alliances, and successfully personalize the shopping experience for their customers, may see the highest percentage increases in growth."
Cybersecurity and emerging/disruptive technologies are top risks
Despite their bullishness on growth, U.S. C&R CEOs most frequently identified cyber security and emerging/disruptive technology as the greatest threats to their organizations' growth (25percent each), followed by operational risk (21 percent). In fact, 90 percent of U.S. C&R CEOs said that protecting customer data is one of the most important responsibilities for their organizations in order to grow.
"Risks such as cyber security, managing customer data and adoption of new technology can significantly impact retailers' top-line and long-term growth," said Duleep Rodrigo, risk consulting industry leader, consumer & retail, KPMG LLP. "Since the various risks in retail are heavily interconnected, rapidly evolving, and impact each retailer in a unique way, companies need to be creative in taking a balanced approach in managing risk and maintaining consumer trust, particularly as it relates to technology."
Leverage technology and digital transformation to connect with customers
Though there are risks associated with emerging technologies, 94 percent of U.S. C&R CEOs expect to see a significant ROI from digital transformation and AI within the next five years.
To date, the majority of the U.S. C&R CEOs (88 percent) said that technological investments made to personalize the customer experience have delivered the growth benefits expected, but there is more that can be done.
"Personalizing the shopping experience by leveraging technology, customer data and insights is key to delivering an outstanding, individualized experience for consumers," said Julio Hernandez, leader of KPMG's Global Customer Center of Excellence and U.S. Customer Advisory Practice. "Retailers also have an opportunity to engage in conversations with consumers to learn how to better serve them. In others words, asking consumers directly how they would like to be engaged."