In KPMG LLP’s latest CEO 2018 Outlook survey, the chief executive officers of U.S.-based consumer and retail companies said mergers and acquisitions, as well as third-party strategic deals, will drive growth over the next three years. Moreover, 83 percent of the U.S. ceo’s polled said they are “very confident” about the growth prospects of their companies — which compares to 54 percent of European ceo’s.
The bullish outlook by U.S. ceo’s coincides with efforts to “onboard new digital technologies” and step up efforts to improve the overall consumer experience, KPMG said in the report.
Researchers at the firm said 98 percent of the U.S. ceo’s polled “see technological disruption as an opportunity rather than a threat, and said they are keeping up with innovation (92 percent).” Still, respondents acknowledged “that various technology risks, including cyber, may hinder top-line and long-term growth.”
Cybersecurity and “disruptive technology” were identified as the top threats to business (each garnering 25 percent of respondents’ votes), followed by operational risk at 21 percent. And 90 percent of those surveyed said “protecting customer data is one of the most important responsibilities for their organizations in order to grow.”
Duleep Rodrigo, risk consulting industry leader, consumer and retail at KPMG, said risks such as “cybersecurity, managing customer data and adoption of new technology can significantly impact retailers’ top-line and long-term growth.”
“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,” Rodrigo added.
Regarding growth via strategic alliances and M&A activity, mergers were cited as the top driver of business at 38 percent. That was followed by strategic deals at 23 percent. KPMG said M&A activity is expected to “transform retailers’ business models” faster than organic growth, reduce operating costs, increase market share and help investments in the latest technologies.
Some notable M&A and other dealmaking maneuvers include: offers to buy Perry Ellis International; Compagnie Financière Richemont’s offer to buy the remaining shares of Yoox Net-a-porter Group; Alibaba founder Jack Ma’s investment in Rent the Runway; Amazon’s acquisition of PillPack (a pharmacy company); Macy’s strategic partnership with start-up B8ta as well as its acquisition of Story, and Rue La La (via parent company Kynetic)’s deal for Gilt Groupe from the Hudson’s Bay Co., among others.
Mark Larson, national leader of KPMG’s consumer and retail practice, said although U.S. ceo’s are bullish on the business prospects of their companies, “the percentage increase in growth over the next three years may still be moderate. 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.”
Regarding investments in technology, 94 percent of those polled said they expect to see “significant” returns from “digital transformation” as well as artificial intelligence “within the next five years.” And 88 percent of respondents said investments aimed at improving and personalizing the customer experience “have delivered the growth benefits expected, but there is more that can be done.”
Julio Hernandez, leader of KPMG’s global customer center of excellence and U.S. customer advisory practice, said personalizing the shopping experience “by leveraging technology, customer data and insights is key to delivering an outstanding, individualized experience for consumers. Retailers also have an opportunity to engage in conversations with consumers to learn how to better serve them. In other words, asking consumers directly how they would like to be engaged.”