HRC Advisory's latest study says the recipe for retailers is to implement a seamless, fully integrated and thoughtful blueprint
The following article originally appeared on Women's Wear Daily. The source can be found below the article.
When it comes to clicks and bricks, most retailers are failing to carefully integrate the two. Moreover, they’re lacking a balance between each channel — often investing in online at the expense of the physical store, which can repel shoppers who are more than willing to spend their money elsewhere in a market cluttered with choice.
In today’s market, the recipe for success is to strategically implement a seamless, fully integrated and thoughtful omnichannel approach.
That’s the latest analysis from HRC Advisory’s annual chief executive officer and chief financial officer study and survey, which found that “only 20 percent of retailers surveyed are investing in the right combination of growth strategies, while connecting their stores, e-commerce and fulfillment centers with new capital to fund their growth.”
Antony Karabus, ceo of HRC Advisory, said amid a retail landscape that is being redefined by e-commerce, there is a “significant disconnect” between retail growth, capital expenditures and operational strategies across the market.
“In fact, 80 percent of the retailers surveyed are spending approximately the same total amount of capital as in prior years, using internally generated cash flow,” Karabus said. “Of the 80 percent of retailers that are spending approximately the same capital as in prior years, the vast majority of their total sales and profits are generated from brick-and-mortar stores, yet 40 percent are prioritizing e-commerce and omnichannel investments as their top capital spend.”
Karabus said access to capital and its allocation along with a clear — and specific — growth strategy is key. The ceo noted, for example, that retailers who neglect their physical stores by not allocating spending on complete refurbishments as well as building new stores are in danger of losing market share.
“The distortion of capital allocated to the channel that almost always contributes much less than 15 percent of total sales and a much smaller percentage of total profits is likely to have a meaningful impact in the mid- to longer-term on profitability and competitiveness,” Karabus said. “This is particularly the case as retailers defer maintenance of their profit-generating store fleet, which we expect will result in the physical store shopping experience to start falling behind the e-commerce experience.”
But what about the 20 percent of retail executives polled who are “doing it right?” The 20 percent consist of big, publicly traded companies with more than $1 billion in annual sales. “These retailers are spending on the right combination of growth strategies, including new stores, e-commerce, m-commerce, omnichannel and remodeling,” the report noted. “This same group of retailers are increasing capital spend by up to 50 percent in 2015/2016 to fund their growth and operating strategies, enabled by greater access to external capital.”
And when it comes to physical units, these retailers are tending to build new units instead of remodeling existing stores.
Also noteworthy was that the survey respondents were generally concerned over how to prioritize e-commerce investments. Karabus said they expressed concern over the speed of new technology launches and, as a result, “were not sure which digital investments would bring the most effective [return on investment], and which would resonate most with their target customers,” the reported stated.
The survey found that 40 percent of respondents are making e-commerce and omnichannel investments their top priority while another 40 percent earmarked these investments as their number-two capital spend. The remaining 20 percent said it was their third priority.
Another key revelation in the survey was a shift in global expansion. In HRC Advisory’s 2011 survey, international expansion was a top priority. But this current report found that only 20 percent of respondents are considering global expansion. “The remaining 80 percent of the retailers surveyed had no international expansion plans at all, and believe they need to stay focused on their North American business,” the report said.
Concerns in China and emerging markets might have something to do with caution on the international front. More likely, though, is that retailers are becoming strategically savvy and have other tools at their disposal beyond slashing prices and mindlessly flooding the market with new stores.
“Many surveyed retailers were increasingly focused on growth strategies that are separating them from the ‘pack’ and allowing them to drive the top line without the need for continual and aggressive price discounting,” Karabus said. “This was particularly true for the surveyed retailers that have created a uniquely differentiated proposition and thus are able to add numerous new store locations with little competitive risk.”
By Arthur Zaczkiewicz
Source: Women's Wear Daily