Chicago, IL – Despite recent headlines trumpeting retailers' entry into Canadian and overseas markets, U.S. expansion remains a key growth strategy. According to a new survey of 100 retail chief financial officers by BDO USA, LLP, 30 percent of CFOs say U.S. expansion will be their priority growth tactic in 2013. Expanding retailers like Apple and H&M will continue to look for Class-A store locations in high-traffic spots to afford better access and convenience for customers. In addition to store expansion, CFOs also say improving merchandise assortment (24 percent) and e-commerce and mobile commerce (22 percent) will be top growth tactics this year.
Amid plans to open new stores, fine-tune merchandise and expand online channels, many retailers will be looking to add staff in stores and their corporate offices. According to the NRF, the retail industry already supports one in four U.S. jobs, and over one-third of CFOs (34 percent) say the number of employees at their company will increase this year. Another 57 percent say the number of employees will stay about the same.
"The retail storefront isn't going anywhere just yet," says Ted Vaughan, partner in the Retail and Consumer Products practice at BDO USA, LLP. "The opportunities abroad and online are clear, but retail executives still believe that U.S. stores are a core part of the business. In addition to investing in existing stores, we're also seeing several online brands introduce storefronts for the first time as they look to appeal to shoppers who want to see and try on merchandise in person."
These findings are from the seventh-annual BDO Retail Compass Survey of CFOs, which examined the opinions of 100 chief financial officers at leading retailers located throughout the country. The retailers in the study were among the largest in the country. The survey was conducted in January and February of 2013.
Other major findings of the 2013 BDO Retail Compass Survey of CFOs:
Retailers' investments are proof of omni-channel push. When asked where they plan to invest the most capital this year, CFOs are split. While 32 percent say overall advertising and promotions will be their biggest investment, it's clear they will be looking to entice consumers both online and in-stores. Twenty-nine percent of CFOs say they will invest the most capital in their e-commerce channel, and 26 percent say redesigning/remodeling stores will be their top investment. As more and more shopping is done online, retailers want to ensure they have a modern, attractive and integrated e-commerce and store presence.
Executive compensation may rise, but performance metrics important. Attracting and retaining strong leaders is paramount to success as retailers reshape strategy and launch growth initiatives. As a result, 30 percent of CFOs expect their management's compensation to increase this year, and only 5 percent forecast a decrease, despite continued scrutiny around pay packages. Still, a majority of retailers (66 percent) say their company's leaders have an incentive plan to tie pay to performance, and 71 percent say that a profitability-based metric is the primary measure.
"As companies try to recruit and retain top leaders, compensation will likely grow through more leveraged opportunities," says Randy Ramirez, senior director with the Compensation and Benefits practice at BDO USA, LLP. "A number of retail companies are either going very narrow in their market approach, or are opting for a broad market approach, and they're doing it with an incredible sense of urgency to capture evolving consumer preferences. Pay-for-performance plans easily reinforce company goals and lets leaders feel confident in their business strategy."
Regulation and industry competition among top risks. Amid potential tax increases, spending cuts and ongoing fiscal policy debates, it's no surprise that a plurality of CFOs (34 percent) cite federal, state and local regulations as the top risk to their business in the next year. In addition, 32 percent of CFOs say competition and consolidation is their most concerning risk as they look to differentiate offerings and attract consumers in a crowded marketplace. Retailers also point to U.S. and foreign supplier and vendor issues (16 percent), data breaches (12 percent) and geopolitical events and natural disasters (6 percent) as top risks in the year ahead.
The BDO Retail Compass Survey of CFOs is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to chief financial officers using a telephone survey conducted within a scientifically-developed, pure random sample of the nation's retailers.
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