New York City -- An overwhelming majority (72%) of retailers report having a “great deal” of cash on their balance sheets and nearly half of them plan to invest some of it on information technology going forward, according to a survey by KPMG. At the same time, the executives’ assessment of the overall business outlook reflects only modest improvements in revenue and hiring in 2012.
According to the survey, 47% of the retailers said they intend to increase spending in information technology over the next year, by far the highest priority investment area. Other significant areas of investment for retailers are geographic expansion (29%), investment in new products and services (27%), and acquisition of a business (22%).
“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."
Seventy-two percent of the executives said they have a "great deal" of cash on their balance sheets, and 44% say they are 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 majority (56%) of retail executives in the KPMG survey expect the economy, revenue, and employment to moderately improve next year. Respondents were greatly divided on the timing of a full recovery. Only 12% believed it would happen within the next year, while 26% said the end of 2012, 40% the end of 2013 and 22% the end of 2014 or later.
In terms of revenue projections, 68% expect moderately higher increased. 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," Larson said. 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."