Challenging yet positive outlook for Ireland’s leading retailers

Pictured at the launch of PwC's survey of Ireland's key retailers are (l-r): Ken Scully (Finance Director, Marks & Spencer), Jean Delaney (Leader PwC Retail and Consumer Practice) and PJ Timmins (President, Dublin Chamber of Commerce and CEO, Clerys)

The changed spending patterns of a more price-focused consumer have impinged dramatically on the retail sector over the past number of months.

A recent poll carried out by PricewaterhouseCoopers representing the views of Ireland’s key retailers provides a glimmer of some long-awaited positive sentiment with over 57% rating their outlook for the sector as either neutral or positive. In addition, 54% are planning store expansions in the year ahead and 15% are seeking a merger/acquisition opportunity. However, with overall consumer confidence levels remaining weak, the sector still has some way to go to recovery.

Speaking at PwC’s first Retail Executive Retreat, Jean Delaney, Leader, PwC Retail and Consumer practice, said: “A better understanding of what the customer wants and is prepared to pay for, is now a necessity. Retailers have traditionally focused on what’s selling rather than the gap between their current offering and what a potential customer might have purchased. The ability to respond to this gap is now critical.”

With an overwhelming majority (86%) saying the overall costs of doing business in Ireland is too high, obviously, cost reduction is a continued focus. We are seeing retailers extract the most inefficiency and cost through re-examination of every aspect of their supply chain – working with all of their supply partners to understand the components of cost that may in the past have simply been assumed. In addition, understanding the dynamics of customers and product margins is also important.

Other key initiatives being planned as revealed by participating retailers include realigning product ranges (77%) and planning promotional /price discount campaigns (62%). Unfortunately, we see many retailers continuing to make key decisions on such product ranges and promotional activities based on poor quality information. Taking decisive action based on the right information is crucial in the current environment. Although difficulties in accessing finance and upward-only rent reviews continue to present challenges, we’re seeing retailers tackle many of the broader challenges facing the sector head-on.

PwC suggests the following ‘must-haves’ on this season’s ‘shopping list for retail success’ - a six step approach to riding out the recession:

  • Know your customer: Focus on giving your customers what they want at the right price. Take advantage of every opportunity to capture customer feedback – walk the shop floor, consider new media challenges and social networking sites, involve employees. Make customer service a renewed focus area.
  • Focus on the ‘needs-offer’ gap: Understand what your potential customers are looking for and honestly assess how this compares to your current offering. It is easy in the good times to keep selling to your loyal customers – respond to the downturn by adapting your offering to meet this needs-offer gap of potential new customers.
  • Understand your margin: Understand the dynamics of customer, product and basket level margin analysis. Ensure all key decisions including promotional activity are supported by sufficient and accurate data. Be decisive when taking action on unprofitable products and ranges.
  • Use key performance indicators: Focus on a small number of key metrics to drive performance and savings and enable you to take timely corrective action as required.
  • Examine your supply chain: Be ultra-efficient. Deconstruct and critically challenge every link in your supply footprint to unlock hidden opportunities and cost. Ensure your working capital cycle is equally efficient.
  • Cut ‘bad’ cost categories: Understand what elements of your offering and product range customers’ value and for which they will happily pay a premium. Cut bad cost categories which will not support such a purchase premium. Cutting ‘good’ cost categories may also impact negatively on your customer’s overall shopping experience.

Ends

Notes to the Editor:

1.Key findings in our poll of attendees at this event are as follows:







2.PwC’s Retail Executive Retreats are aimed at key executives from the fashion and general merchandise retailers.

3.Our next event in this series aimed at the consumer goods sector will take place on Wednesday, 25 November 2009.

4.PwC’s Retail & Consumer Group provides practical, industry-focused advisory, tax and assurance services to many of Ireland’s leading retail and consumer companies. For more information, visit us at www.pwc.com/ie/retailandconsumer

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