NEW YORK, July 12, 2011 /PRNewswire/ -- Nearly half of retail executives surveyed will increase spending in information technology (IT) next year, although their assessment of the overall business outlook reflects modest improvements in revenue and hiring in 2012. The executives remain guarded longer term, not seeing a complete economic recovery until 2013-2014 or later, according to a recent survey by KPMG LLP, the audit, tax, and advisory firm.
"Retail executives are more fully understanding the economic picture and are not as confident of an economic rebound as they were a year ago," Mark Larson, KPMG global retail leader. "What they will do to gain a competitive edge is invest in technology to add new customers and grow revenue from existing customers. Data analytics is moving far higher as a leadership agenda item with each passing day."
While waiting for the recovery to take the hold, 47 percent said they intend to increase spending in information technology over the next year, by far the highest priority investment area, according the KPMG survey. Other significant areas of investment for retailers are geographic expansion (29 percent), investment in new products and services (27 percent), and acquisition of a business (22 percent).
The majority of retail executives in the KPMG survey expect the economy, revenue, and employment to improve next year, but just moderately. In fact, three percent expect a significantly improved economy next year, while 56 percent expect only a modest improvement. Furthermore, when asked when they expected a full recovery, the respondents were greatly divided. Only 12 percent believed it would happen within the next year, while 26 percent said the end of 2012, 40 percent the end of 2013 and 22 percent the end of 2014 or later.
Similarly, while 52 percent expect increases in head count in the next year, when asked when head count would return to pre-recession levels, 23 percent of the respondents to the KPMG survey said "never," with 26 percent expecting head count to return by the end of 2012, 16 percent by the end of 2013 and 17 percent saying 2014 or later.
In terms of revenue projections, only four percent expect significant increases next year with the majority, 68 percent, saying moderately higher. According to the executives surveyed, the biggest drivers of that revenue growth will be the retention and addition of customers, innovative merchandising, market expansion and increased consumer spending.
"Retail leaders clearly have their work cut out for them, with high national unemployment and decreased consumer confidence," added Larson. They've indicated to us that pricing pressures, lack of customer demand, and increasing input costs are significant barriers to growth over the next year. The good news, however, is that many retailers have significant cash to invest and they are putting it in play."
Seventy-two percent of the executives said they have a "great deal" of cash on their balance sheets, and 44 percent say they're already investing that money or will do so before the year closes. That capital will be directed toward expansion into new markets and technology, including cloud and data analytics. Sixty-nine percent regarded data analytics as a "core component of strategy and planning."
"With consumer behavior, spending and demographic profiles changing rapidly," Larson said, "a key to success will be investing in technology to harness the vast amount of data that resides in a company. That data can drive the insights that will allow retailers to interact with consumers more effectively and capture more 'wallet-share.' It may also reveal information on new markets, new strategies and new operating models that will ultimately generate growth and profitability."
THE KPMG RETAIL INDUSTRY PULSE SURVEY
The KPMG survey was conducted in May/June 2011 and reflects the responses of 100 senior executives in the retail industry. Based on revenue in the most recent fiscal year, 31 percent of respondents work for institutions with annual revenues exceeding $10 billion, 41 percent with annual revenues in the $1 billion to $10 billion range, and 28 percent with revenues in the $100 million to $1 billion range.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's member firms have 138,000 professionals, including more than 7,900 partners, in 150 countries.
SOURCE KPMG LLP