Retailers Focus Growth Strategies on Omnichannel

E-commerce and mobile sales are expected to remain the primary growth drivers as retailers look to the year ahead. Our 2014 Retail Compass Survey of CFOs found that most (64 percent) believe they will see an increase in online sales, projecting 8.2 percent growth for 2014. A little over one-third say online sales will be comparable to last year’s, suggesting e-commerce is becoming an industry mainstay, though some CFOs expect its growth to stabilize.

As more business shifts online, retailers are refining their omnichannel strategies to streamline the customer experience across multiple channels and compete with major online retailers like Amazon. E-commerce and mobile commerce are the primary focus for achieving growth this year for 34 percent of respondents, and many are investing substantial capital in these areas: 18 percent say they will invest the most in e-commerce channels, in addition to 12 percent who will direct it to mobile application development. Mobile will be a big source for spending overall, with a full 40 percent planning to increase investments in this area.

Security concerns are rising alongside the popularity of online and mobile channels, as data breaches— similar to those experienced by Target and Neiman Marcus late last year—are becoming more common. Retailers are taking these events very seriously, and are funding the necessary technologies to prevent data theft and the breach of consumer privacy. Twenty-seven percent of CFOs will invest the most capital in IT systems and technology in the year ahead.

Retailers have also had their share of struggles over the past couple of years with international expansion. Wal-Mart, Target and others have experienced first-hand issues with entering new markets abroad, including difficulties with customer loyalty, pricing concerns and effectively scaling inventory. As a result, only 29 percent of CFOs say their companies plan to expand internationally in 2014. Meanwhile, retailers are also increasingly turning to the U.S. for sourcing opportunities. Thirty percent cite domestic sourcing opportunities as being most attractive, inching closer to the 39 percent that cite Asia. This trend may continue as manufacturing costs in Asia rise, eating away at its primary competitive advantage.

Domestically, CFOs also continue to keep a watchful eye on potential changes to the tax and regulatory environment. According to our survey, the corporate federal income tax, which continues to pressure earnings, weighs most heavily on the minds of industry executives. Of less concern, however, is the Marketplace Fairness Act: More than half say it would have minimal impact on their business if it were to pass, with 19 percent anticipating an increase in the cost of systems used to track and report sales.

What trends do you expect to see in the retail industry this year? Stay tuned to the blog for the full survey report and infographic, available later this month.