The Crunch: Businesses looking into the future can be easily distracted by all of the new technologies and strategies that seem to promise immediate and lasting results. But the advisory arm of KPMG investigates which of those products and paths will allow a business to realize long-term growth potential. KPMG works with retailers to capitalize on trends, like loyalty programs, and optimize promotions in a way that enhances their value to consumers. Retailers also consult with KPMG on the best ways to streamline their operations without sacrificing the customer experience. And KPMG continues to research the newest innovations and hottest topics to determine if they’re worth a company’s investment.
As we walked around three floors full of exhibitor booths at the 2017 National Retail Federation Big Show in New York, one thing stood out: future innovations were increasingly tangible.
The retailers in attendance were like kids in a candy store as they scouted out all of the latest technology, software, and customer engagement solutions packed into every corner of Manhattan’s enormous Javits Center. There were robots built to scan store shelves for inventory management, wireless beacons to track where customers spend their time in stores, virtual reality programs to create the perfect retail layout, and a wide range of artificial intelligence products.
All of the big names in retail innovation were there — Microsoft, Intel, IBM, Oracle, HP — as well as plenty of startups that garnered excitement with fantastic new ideas. Another big name in retail was also there, but not to introduce any new products. Instead, KPMG attended to help retailers stay focused on what matters, their customers and their growth.
KPMG employs 189,000 people across the three service lines of its company — audits, tax, and advisory. It is a sought after consultant for enterprise-level businesses looking to solidify their place in the market or move their operations forward in the midst of the massive shifts in technology and consumer behavior.
Katherine Black, KPMG’s Principal of Consumer and Retail Strategy, is tasked with helping those companies see the value in technological or strategic investments before they sign a deal to implement either company-wide.
“It’s easy to be impressed by a cool, sleek, sexy idea, but to think about how that works with the financials of the business to sustain it in the long-term is important,” Katherine told us as we sat not far from some of those cool, sleek, sexy products. “That is what is different about a firm like KPMG, all we do is research and think about those things.”
Consumer expectations are changing, and many retailers are frantically trying to figure out what the next expectation will be. KPMG takes a steady-handed approach so that its clients can move forward deliberately and with confidence. With so many products touted for their ability to build customer relationships and increase revenue, KPMG works with businesses to incorporate ideas that have staying power. To discern the difference, KPMG does its homework.
Deep Research Helps Advise Companies on Sustainable Growth
As a relationship-oriented firm, KPMG takes a very personalized approach to each client. Research is the cornerstone of any good prospectus, and KPMG’s first task is to help a retailer understand what the numbers say.
“We sit down to have conversations with a client and share our perspective on an area that we’ve done a great deal of research on,” Katherine said. “And maybe they have some knowledge, but haven’t researched it as deeply as we have.”
In-depth research makes retailers feel comfortable and sets the foundation for working toward the future. KPMG looks well beyond the short term, as many temporary solutions are floating around that may have an immediate impact but aren’t sustainable. The companies are studied, too, including pricing structure, value proposition, supply chain, hardware, software, and any other aspects that could hinder growth.
KPMG also produces comprehensive insights from a variety of stakeholders in retail, from surveying generational e-commerce preferences to studying how businesses perceive the demands of their customers. Gleaning information from both sides can assist a company in choosing the best route forward.
“Because KPMG has such a strong heritage as a financial firm, we have great discipline in helping retailers develop a financially relevant business model,” Katherine told us. “Retailers don’t always have that discipline, and need to differentiate between a shiny object and something worth changing their business model for.”
And consumers should always be considered in any growth plan, so KPMG advises retailers to invest in solutions that enhance that relationship.
Planning Long-Term Success For Loyalty Programs & New Technology
Sometimes, promotions and sales can seem like the best way to attract customers to a store, but the short-term effect of promotions aren’t always sustainable. Katherine told us about working with a mid-market grocery retailer that may have been engaging in too many promotions.
“We looked at how they could pull back on promotions to improve their pricing and invest in their core value proposition,” she said. “We expect it to save a substantial amount for that retailer.”
Loyalty programs have been a go-to strategy in retail for a while, but as Katherine explained, companies have to differentiate themselves even in the loyalty space.
“Consumers are starting to expect more from loyalty programs, they are bombarded with them anywhere they go, so they are looking for retailers to go beyond personalization,” she said. “We look at loyalty programs to understand the financial components so it can be a sustainable, financially viable strategy. It won’t always pay for itself within a few months as promotion optimization can, but it pays huge dividends in the long run.”
Personalization is viewed differently today, especially by millennials, but many retailers still don’t go much further than knowing a customer’s purchase history. Consumers are bored of getting the same offers over and over — they want to be surprised and delighted. Many want retailers to curate new items they might be interested in and trends they may not know about. This is where niche retailers are filling voids, so it becomes essential for businesses to make the right choices to compete.
“Retailers are trying to find ways to stand out from new competitors,” said Katherine. “The market is starting to fragment, and new consumer propositions are pouring in.”
Retailers are also looking at new technologies, like those debuted at NRF’s Big Show, to provide that differentiation. KPMG takes the same careful approach to tech as it does to loyalty programs. Making sure that the new innovations will mesh well with the goals of a company is KPMG’s primary concern.
“We talk with our clients about making sure technology investments are tied to an overall business strategy,” Katherine told us. “It is too easy for tech to be an interesting investment that never pays off because a business isn’t committed to it for the long-term.”
KPMG analyzes innovations and consults with retailers on which ones are ready for implementation and which ones may be a few years away from being feasible. This strategy, along with most others, comes back to building a business around the consumer experience, and KPMG takes special care not to let retailers lose sight of that.
Ways to Cut Costs Without Diminishing the Customer Experience
No matter what strategies or technologies are employed, everything comes down to the business’ bottom line, which is why cutting costs and streamlining processes are constantly on a retailer’s mind. But even cost-cutting needs to be deliberate and well thought out, or it can lead to unintended consequences.
“Retailers look at the current landscape and think, ‘I’ve got to take cost out of my business to survive because we’re not selling as much,’” Katherine said about a typical mindset in the corporate world. “But sometimes the cost comes out in a way that impacts the consumer experience; therefore consumers don’t want to go there and shop.”
“Being smart about cutting costs is critical because it is too easy to take out overhead, change the supply chain, or outsource without addressing what you are doing for your consumer.” — Katherine Black, KPMG’s Principal of Consumer and Retail Strategy.
Companies trying to reduce costs to compete can’t afford to lose out on customers, which is why consulting with KPMG before consolidating assets can prove invaluable. Ignoring consumer sentiment for the sake of efficiency will only lead to more of the same, Katherine told us.
“Being smart about cutting costs is critical because it is too easy to take out overhead, change the supply chain, or outsource without addressing what you are doing for your consumer,” she said. “Then, two years later you are doing the same thing because you can’t grow your business.”
KPMG is studying ways for retailers to cut costs without sacrificing experience, like artificial intelligence. While it is still early to get a complete picture of how it will be utilized in the future, it could ease some of the cost burden companies are feeling by automating expensive tasks.
But no matter what innovations the future holds, KPMG will be analyzing and assessing how to integrate new ideas into a lasting strategy.
KPMG’s Time-Tested Strategies Go Beyond the Next Big Thing
At the Big Show, we were dazzled by technology, wowed by software, and impressed with some of the thought leadership that was introduced. Some of those products and strategies could be implemented now, but many others were still in developmental stages. Even the ones that were ready for immediate deployment haven’t been adopted by a large enough base to get a clear picture of how they will improve business, especially in the long run.
KPMG sees this phenomenon quite often and cautions retailers to take their time. Some of the hot strategies from years past — like big data — are only now starting to be fully understood, long after businesses have made a significant investment in analytics. Katherine sees 2017 as a turning point for big data — for better or for worse.
“Big data has been a hot topic for a few years now, and I think this is the year retailers have to get it scaled, industrialized, and make it a strategic asset or companies are going to start pulling back from it,” she said. “A lot of our clients have gotten excited about analytics, and many of them have invested a lot, but they aren’t sure how to make the juice worth the squeeze.”
By taking a measured approach to every new idea — from big data to autonomous shelf scanners — KPMG is there to help retailers innovate with confidence while keeping an eye on the future.