Retail Industry

Outlook Survey:
Modest Gains Keep
Cautious Optimism in Style
kpmg.com


KPMG LLP, the audit, tax and advisory firm, surveyed C-suite and
other top-level executives in the retail industry during the second
quarter of 2012.
Participants were asked about business conditions in their sector,
the most significant revenue growth opportunities, and any
barriers to growth that may exist. They were also asked a variety of
questions about the economy, including factors they perceive might
impede or support their sectors recovery, and to assess the impact
advancing technologies may have on their business models.
These responses were compared to the findings of a similar survey
conducted among retail executives in the second quarter of 2011.
KPMGs
Industry Outlook Survey
KPMGs
Industry Outlook Survey















Foreword 2
Key Findings from KPMGs Retail Industry Survey 4
Business Conditions 5
Revenue 6
Headcount 7
Hope for Recovery Remains on the Horizon 8
A Closer Look at Growth and Profits 8
Capital Spending and Investing 10
Realizing the Value of Data Analytics 11
Exploring Digital Marketing Channels 12
Risk and Regulatory Challenges 13
Conclusion 14
KPMG: A Leader in Serving the Retail Industry 15
Contents
2 | Retail Industry Outlook Survey
Foreword































Retail Industry Outlook Survey | 3
I am pleased to present KPMG LLPs 2012 Retail Industry Outlook Survey,
which provides perspectives and insights of 100 CEOs and other C-level executives
in the retail sector. Taking the past year into account, participants were asked to
assess business conditions, identify areas of growth and investment, estimate a
time line for a full economic recovery, and identify factors that may help or hinder
the economy moving forward.
Based on the survey results, its clear that executives believe the sector continues
to move in the right direction. Survey respondents reported both revenue gains and
headcount increases as evidence of the positive sector momentum of the last year.
However, their outlook for the economy to fully recover remains guarded, and they
have pushed back their expectations for a complete U.S. economic recovery until
20142015 or beyond.
Most of the executives surveyed report having significant cash on their balance
sheets and are ready to increase spending in areas such as technology, citing data
analytics as playing a greater role in their strategic decision making. They also
note that digital marketing technologies such as online shopping, social media
platforms, and e-mail campaigns continue to have a significant impact on their
businesses. Additionally, they point out that the utilization of mobile technology for
shopping, promotions, and payments is increasingly making its mark on the sector.
Moving forward with cautious optimism, the majority of survey respondents
foresee continued sector growth over the next year, with revenue increases
being driven largely by the ability to add and retain customers. Meanwhile, they
acknowledge pricing pressures and lower consumer demand as potential growth
barriers and point to discounting prices, volatile input costs, and decreased sales
volumes as the most significant threat to profit margins.
On behalf of KPMG, I would like to thank those who participated in this survey.
I hope the findings are useful to you in addressing market challenges and
opportunities. I also welcome the chance to discuss this study and its implications
for your business in the year ahead.
Mark Larson
Global Sector Leader, Retail
KPMG LLP















4 | Retail Industry Outlook Survey

Key Findings from KPMGs
Retail Industry Survey
Moving Forward in Measured Fashion
According to this years survey, retail executives are cautiously optimistic
about the future business outlook, expecting continued modest
improvements in revenue and hiring over the next year. However,
they remain quite guarded for the longer term, not anticipating a substantial
U.S. economic recovery until 2014 or beyond. While positive momentum
continues to slowly build in the sector, executives plan to increase
spending in areas of priority such as information technology, including
data analytics and digital marketing channels. Online shopping,
social media platforms, e-mail campaigns, and mobile technologies
are clearly on their radar due to the significant impact each is having
on their businesses. Looking ahead, the vast majority of survey
respondents foresee continued sector growth over the next year,
with revenue increases being largely driven by the ability to add and
retain customers.

















































Retail Industry Outlook Survey | 5
KPMGs survey reflects the responses of 100 retail sector executives
from large ($100 million+ annual revenue), U.S.-based companies.
Thirty-five percent of respondents work for companies with annual
revenue of more than $10 billion, while 41 percent represent
companies with annual revenue between $1 billion and $10 billion,
and 24 percent with revenue in the $100 million to $1 billion range.
Seventy-four percent of these companies are publicly held, and 26
percent are privately held.
Key findings from the retail sector included:
Sixty-fivepercentofretailexecutivessurveyedsaid
their companys revenue has increased over the last year,
while 77 percent predict continued revenue growth a
year from now.
Fifty-fourpercentofsurveyrespondentsreportedadding
U.S. employees in 2011 and expect to add more over the
next year. Meanwhile, 22 percent noted that their companys
U.S. headcount has returned to pre-recession levels.
Whileover50percentoftheexecutivesplantoadd
headcount in the next year, the increases are planned to
be modest, and consistent with last years survey, one in
five do not expect their companys headcount to ever
return to pre-recession levels.
WhenaskedabouttheirexpectationsfortheU.S.economy
a year from now, 65 percent of sector executives expect
some improvement while 30 percent believe it will
essentially remain the same. However, 61 percent believe
a substantial economic recovery will not occur until
20142015 or later.
Business Conditions
Sixty-five percent of retail executives surveyed believe that the
economy will improve over the next year, representing a slight
increase in enthusiasm from the 2011 survey, when 59 percent
anticipated the economy to improve in a years time.
Meanwhile, 30 percent of respondents expect the economy
to remain flat over the next year, compared to 33 percent the
previous year.
Seventy-sevenpercentofsurveyrespondentsreport
having significant cash on their balance sheet, and
34 percent acknowledge investment is already significantly
underway.
Surveyrespondentsbelieveaddingcustomers
(46 percent), market expansion (32 percent), and retaining
customers (29 percent) will serve as the top drivers of
revenue growth over the next three years.
Morethanhalf(51percent)ofsurveyrespondentscited
information technology, including data analytics and digital
marketing channels, as a top investment priority over the
next year.
Retailexecutivessurveyedindicatethatonlineshopping
(59 percent), social media platforms (58 percent),
and e-mail campaigns (49 percent) are having the most
significant impact on their businesses.
100
80
60
40
20
0
30%
5%
8%
33%
65%
59%
2012 (Q2) 2011 (Q2)
Key
Better next year About the same Worse next year





Does not add to 100% due to rounding














6 | Retail Industry Outlook Survey
Revenue
Revenue continues on an upward climb, according to
retail sector executives. Nearly two-thirds (65 percent) of
respondents reported an increase in revenue over the last year,
up from 47 percent the previous year.
100
80
60
40
20
65%
23%
12%
47%
36%
17%
Revenue Growth Focused on Customers
0
Customers are at the heart of driving revenue growth in
2012 (Q2) 2011 (Q2)
Key
the retail sector. Survey respondents cited adding customers
Increase in revenue About the same Decrease in revenue
(46 percent) and retaining customers (29 percent) as top
revenue growth drivers during the next three years, along
with market expansion.
When asked to describe their revenue expectations a year
from now, 77 percent of executives predict that revenue Biggest Drivers of Companys Revenue Growth:
will increase, while 16 percent believe revenue will stay Next 1-3 years
flat. This mirrors the expectations of the prior year, when
50
72 percent and 24 percent, respectively, answered the 46%
same question.
40
100
7%
24%
4%
16%
77%
72%
32%
29%
30
80
26%
23%
21%
20
18%
60
15%
14%
10%
10
40
6%
0
20
Key
Adding customers Expansion in core/new markets
0
Retaining customers Improving economic conditions
2012 (Q2) 2011 (Q2)
Increasing consumer spending Focus on emerging markets
Key
Changed pricing strategies Innovative merchandising strategies
Better next year Same Worse next year Merger and acquisition activity Product innovations
Growth of green
1
products/services
Multiple responses allowed.
1
Environmentally friendly
Multiple responses allowed.







Retail Industry Outlook Survey | 7
Headcount
Retail executives added more U.S. employees over
the last year, with 54 percent of respondents reporting an
increase in headcount, up from 40 percent the previous year.
Current headcount
100
80
60
40
20
0
54%
22%
24%
40%
29%
31%
2012 (Q2) 2011 (Q2)
Key
Increase About the same Decrease
Retailers expect the hiring momentum to continue with
53 percent of sector executives expecting to add employees
over the next year and only 10 percent anticipating a decline
during this time. These results are in line with the previous year.
Future headcount expected
2%
0%
100
80
60
40
20
0
10%
15%
35%
33%
53%
52%
2012 (Q2) 2011 (Q2)
Key
Increase About the same Decrease Unsure/dont know
Headcount: Return to pre-recession levels
30
22% 22%
20
10
0
5%
14%
16%
21%
Key
Already at, or greater than, pre-recession level Second half of 2012
2013 2014
2015 or later Never
Interestingly, 22 percent of survey respondents said that their
U.S. headcount has already reached or is greater than
pre-recession levels, but 21 percent believe it will never return
to those levels.
















8 | Retail Industry Outlook Survey
Hope for Recovery Remains
on the Horizon
Hopes for a full U.S. economic recovery seem to have been
pushed back a few years, according to the retail executives
surveyed. The majority (61 percent) believe that it will not
actually occur until 2014 or beyond. Notably, last years results
revealed that 36 percent of respondents expected a full
recovery in 2012, while 62 percent anticipated it would happen
in 2013 or later.
100
80
60
37%
40
32%
29%
20
2%
0
Key
2012 2013 or later
2014 2015 or later
A Closer Look at Growth
and Profits
Eighty-eight percent of survey respondents expect the retail
industry to continue to experience growth increases over
the next year. Of that amount, 63 percent predict only modest
gains of about 5 percent or less.
Retail industry growth rate
88%
90
80
70
60
50
40
30
20
10
0
6% 6%
Key
Increase over next year No change Decrease over next year
Retail executives cite pricing pressures and a lack of consumer
demand as the most significant barriers to growth over
the next year.
Barriers to growth
30%
30
20%
20
19%
18%
16%
15% 15%
13%
12% 12%
10
8%
7% 7% 7%
5%
3%
0
Key
Pricing pressures Lack of customer demand
U.S. dollar strength Energy prices
Lack of qualified workforce Regulatory and legislative pressures
Staying on top of emerging technologies Increased taxation
Labor costs Volatile commodity/input prices
Inflation Risk management issues
Access to and managing capital Foreign competition
Exchange rate fluctuations Other
Multiple responses allowed.













Retail Industry Outlook Survey | 9
Retail factors hindering recovery
More than half of survey respondents view decreased
consumer confidence (57 percent) and the continued high
national unemployment rate (55 percent) as the two top factors
hindering the retail sectors recovery. Other top factors cited
include limited access to credit for consumers (23 percent) and
the distressed real estate market (22 percent).
60
57%
0
10
20
30
40
50
55%
23%
22%
16%
13%
16%
13%
7% 8%
Key
Decreased consumer confidence Continued high national
Limited access to credit for consumers unemployment
Distressed real estate market Increased government regulation
Decreased investor confidence Uncertainty in the credit markets
Threats to U.S. business from Limited access to credit for
Asia and abroad businesses
Turmoil in the Middle East/North Africa
Multiple responses allowed.
Greatest threats to profits
Merchandise costs (39 percent), discounting and other
sales incentives (36 percent), and decreasing sales volumes
(32 percent) were widely seen by sector executives as posing
the greatest threats to profit margins over the next 12 months.
50
39%
36%
32%
40
30
20%
20
15%
14% 14%
12%
10
6%
0
Key
Costs of inputs or merchandise Discounting and other sales incentives
Decreased sales volumes Administrative costs
Regulatory compliance Foreign exchange variability
Marketing costs Inventory carrying costs
Other
Multiple responses allowed.
Strategies to combat costs
Volatile input costs continue to challenge retailers. To help
combat these costs, 62 percent of executives report optimizing
sales, general and administrative (SG&A), and supply chain
costs, and 52 percent are implementing customer-centric
pricing strategies.
70
62%
60
52%
50
40
29%
30
21%
20
10
0
Key
Optimizing SG&A and supply chain costs Customer-centric pricing strategies
Revisiting service delivery models Hedging strategies for commodities
(offshoring/shared services)
Multiple responses allowed.








40
10 | Retail Industry Outlook Survey
Capital Spending and Investing
Retailers have significant cash on their balance sheets and are
ready to invest. In fact, 77 percent of survey respondents report
that their company has significant cash on its balance sheet,
of which 34 percent acknowledge that investment is already
significantly underway.
Investment timeframe
34%
30
19%
20
21%
13%
12%
10
0
Key
Investment is significantly under way Second half of 2012
First half of 2013 Second half 2013
2014 and beyond
Ready to spend
Moreover, 58 percent of survey respondents expect their
companys capital spending will increase over the next year,
while 34 percent anticipate that it will stay the same. Much of
this spending will be in the areas of information technology,
(51 percent) new products and services (43 percent), and
geographic expansion (33 percent).
0
10
20
30
40
50
51%
43%
33%
24%
23%
18% 18%
8%
7% 7%
4%
Key
Information technology New products or services
Geographic expansion Advertising and marketing
Expanding facilities Business model transformation
Acquisition of a business Employee compensation and training
Regulation/control environment Research and development
Green/sustainability initiatives
Multiple responses allowed.
When asked about the top initiatives on the mind of
management, more than a quarter (28 percent) of survey
respondents cited the need to improve operational processes
and related technology.
Top initiatives on the mind of management
30
28%
20
10
0
19%
14%
12%
11%
6%
5%
3%
1%
Key
Significant improvement of operational processes and related technology
Significant investment in organic growth
2
Significant cost reduction initiatives
Significant changes in business model
Merger/acquisition
Strategic divestiture of current assets
Navigating significant changes in the regulatory environment
Significant changes to financial processes and related technology
Improve enterprise risk management programs/processes
2
i.e., new product development, pricing strategies, geographic expansion












Retail Industry Outlook Survey | 11
Realizing the Value of
Data Analytics
For retailers, data analytic capabilities are becoming
increasingly important in helping support strategic decision
making throughout the organization. In fact, more than
two-thirds (68 percent) of survey respondents say that data
analytics plays a key role in helping provide customer insight
as well as in the areas of brand and product management
(64 percent) and in pricing decisions (50 percent).
Key areas using data analytics to support
strategic decisions
68%
70
64%
60
50%
50
45%
40
37%
30
23%
20
10
0
When asked to describe the organizational maturity regarding
usage of data analytics, forty percent of executives rate their
companys data analytics literacy as average.
Data analytics maturity of company
40%
40
30
24%
22%
20
10
7%
5%
2%
0
Key
Average when it comes to utilizing analytics
3
Rapidly moving toward high analytical literacy
High data analytics literacy
Average to low analytical literacy
4
No formal data analytics capabilities
5
Dont know
3
Our management team and workforce have an average analytical literacy.
Key
4
At the moment we are behind our competitors when it comes to utilizing
Customer insight Brand and product management
analytics, and our management team and workforce have average to low
Pricing decisions Market expansion
analytical literacy.
Operating model optimization Portfolio rationalization
5
Our management team and workforce have low analytical literacy.
Multiple responses allowed.
















12 | Retail Industry Outlook Survey
Exploring Digital Marketing Channels
Not surprisingly, retailers are increasing their use of digital
marketing channels to explore new ways of doing business and
reaching more customers. When asked which digital marketing
channels are having the greatest impact on their businesses,
online shopping (59 percent), social media (58 percent), and e-mail
campaigns (49 percent) rounded out the top three responses.
Digital marketing channels having greatest impact
60 59%
58%
49%
50
40
36%
30 28%
21%
20
10
2%
0
Key
Online shopping Social media (Facebook, Twitter, etc.)
E-mail campaigns Mobile shopping
Mobile promotions Mobile payments
Other
Multiple responses allowed.
Retail executives plan to use digital, social, and mobile
technologies in a variety of ways over the next 12 months.
In fact, 57 percent have plans to use social media for external
brand promotion.
Digital marketing strategies planned for year ahead
60
57%
51%
50
45%
44%
40
36%
33%
30
28%
25%
24%
22%
19% 19%
20 18% 18%
17%
9% 10
5%
0
Key
Social media for external brand promotion
Social media for customer insight
Social media for two-way customer engagement
Social media for recruiting
Customer-facing mobile applications
Mobile-specific customer-facing websites
Social media for enterprise collaboration/knowledge sharing
Location-based marketing using mobile technology
Social media for customer crowdsourcing
Creation and distribution of digital media internal messages using video
Mobile-specific enterprise websites (i.e., mobile intranets)
Enterprise mobile applications
Creation and distribution of digital media marketing messages using video
6
Social media for enterprise crowdsourcing
Mobile-commerce technologies (NFC-enabled payments, mobile wallets, etc.)
Social media for enterprise risk management
Dont know
Multiple responses allowed.
6
including company-specific external video channels








Retail Industry Outlook Survey | 13
Risk and Regulatory Challenges
Evolving regulation and changing marketplace dynamics have
added to the need for companies to implement a strong risk
framework within their organization. When asked to identify
any existing challenges preventing the adoption of a formal risk
policy, nearly half (45 percent) of survey respondents believe
culture and behavior pose significant obstacles.
Despite obvious challenges, 76 percent of the retail executives
surveyed believe their company is at least somewhat prepared to
seize opportunities as a result of public policy and regulatory reform.
Ability to seize opportunities from regulatory change
60
Challenges preventing the adoption of a formal risk policy
54%
50
50
45%
40
40
30
30%
22% 29%
30
28%
20
16%
20 8%
18%
10
12%
0
10
Key
Somewhat prepared Very prepared 0
Dont know Not prepared
Key
Culture and behavior
Shared resources across the organization
Clearly defined roles and responsibilities
Process integration/efficiency of operations
Governance framework
Dont know
Multiple responses allowed.











14 | Retail Industry Outlook Survey
Maintaining cautious optimism, retail executives expect the industry to proceed
on a path of gradual growth over the next year, supported by continued modest
gains in revenue and hiring. Concerns over the U.S. economy are evident, as many
executives have pushed back their expectations for a substantial recovery until
20142015 or later. While waiting for the recovery to take hold, sector executives are
focusing on spending the cash built up on their balance sheets by investing more
over the next year in information technology, including data analytics and digital
marketing channels. They acknowledge the increasing importance of data analytics
in their strategic decision making and recognize the significant impact digital
marketing channels such as online shopping, social media, and mobile technologies
are having on their businesses.
Conclusion



Retail Industry Outlook Survey | 15
The retail sector continues to face a demanding market environment that requires
companies to adjust and actively manage change that may impact sales and
performance.
Having the right professional services firmone with the industry depth, knowledge,
and insight to help clients address their most pressing issues and achieve their
goalsis critical. KPMGs Retail practice includes professionals with the knowledge,
experience, and skills to help our clients address their most pressing challenges,
sort through todays complex business problems, and achieve their goals.
Working with our international network of member firms, we serve clients worldwide,
developing insights into major business trends and helping to enhance future plans.
Our long-term experience in retail enables us to offer the company-specific guidance
needed to help our clients become or remain market leaders.
KPMG: A Leader in Serving
the Retail Industry
16 | Retail Industry Outlook Survey
Retail Industry Outlook Survey | 17
SECTORS AND THEMES
Title here
Additional information in Univers
45 Light 12pt on 16pt leading
kpmg.com
Credits and authors in Univers
45 light 12pt on 16pt leading









Key Contacts
Mark Larson
Global Sector Leader, Retail
T: 502-562-5680
E: mlarson@kpmg.com
Patrick Dolan
National Line of Business Leader
Consumer Markets
T: 312-665-2311
E: patrickdolan@kpmg.com
John Atkinson
National Audit Leader, Retail
T: 612-305-5459
E: jwatkinson@kpmg.com
Brian Campbell
National Tax Leader, Retail
T: 614-249-1879
E: bcampbell@kpmg.com
Ray Kansal
National Line of Business Director
Consumer Markets
T: 312-665-3623
E: rkansal@kpmg.com
Anne Giometti
National Marketing Director
Consumer Markets
T: 312-665-2922
E: agiometti@kpmg.com
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