Costs, Cash and the Customer Remain Top of the Agenda

Michelle Remo, “Big 4″ observer
March 15, 2012 /

Costs, cash and the customer remain at the top of retailers’ agendas for 2012, according to KPMG’s Succeeding in a Changing World Business Leaders Survey.

The survey asked 3,000 business leaders from 31 countries across Europe to identify the challenges facing their business in 2012. A total of 136 retail business leaders responded, saying the need to change business operations to realise cost efficiencies (57 per cent), improve cash and working capital management (40 per cent) and adapt to take into account changing customer and stakeholder behaviour (31 per cent) were the most important issues they were facing in 2012.

In each of the three instances retailers ascribed greater importance to the issue than was seen across the survey as a whole. This was particularly the case for the need to adapt to customer behaviour, which appeared to be a challenge specific to the retail sector: it was further down the other sector leaders’ agenda, with only 18 per cent highlighting it as one of the top three issues they were facing.

The scale of the challenges ahead is highlighted by the statistic that 90 per cent of retailers surveyed saying they will have to fundamentally adapt their business models in order to survive in the current low growth environment.

Helen Dickinson, Head of Retail at KPMG said: “We will see ongoing structural change in the sector. The challenges facing retailers are so great that in order to overcome them they will have to undertake a major overhaul of their business. This is the only way they will successfully re engineer costs, manage their cash and adapt to meet changing customers’ needs.”

The survey shows that understanding customer behaviour remains a major challenge for retailers. 73 per cent believe that significant investment in Customer Relationship Management (CRM) will be required as retailers move towards a more personalised and customised offering.

Dickinson commented: “Many retailers are in the process of attempting to improve their CRM. However, we are dealing with the challenge of information versus insight. The technology has enabled retailers to gain access to more and more data, but understanding what the data tells them and being able to respond quickly is the challenge they are now struggling to deal with. Understanding the customer journey isn’t straight forward. Multi-channel retail has made it more difficult because each journey is very personal to the individual. It is difficult for retailers to analyse these journeys fast enough and decide on the best way for their organisation to respond. They are tackling this issue but there is no quick fix.”

With the decision to invest in CRM comes increased cost and risk. Dickinson explained: “The more data you hold about consumers, the more open to abuse you are. However, it is a necessary evil. Without the data, retailers are unable to understand consumer trends and to customise their offerings. They now need to market not to groups of people with similar needs, but to individuals. Effective CRM is a cost and risk worth taking.”

Dickinson also warns that industry analysis needs to adapt to better reflect the new consumer and their changing purchasing behaviour. She said: “Increased convergence is rendering the traditional way of assigning sales to just one channel obsolete. Many different channels are now involved in the customer’s decision making process and so it becomes near impossible to allocate a sale to just one channel because it dismisses the role that the others play in this journey.

So, measuring store based like-for-like sales or determining online sales percentages for example will soon be redundant. We are playing catch up and need to find new ways of analysing behaviour to give retailers the insight they need to respond to their customers.”

 

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