KPMG: Not so happy holidays for many Canadian retailers

Shopping in Canada going through a radical change

TORONTO, Dec. 14, 2017 /CNW/ - Changing consumer expectations and habits threaten to see even more Canadian retailers close in 2018, says KPMG's Willy Kruh, Global Chairman, Consumer and Retail National Leader, High Growth Markets Canada.

"Retail is not in disruption but is disrupted," says Kruh. "Consumer behavior is changing rapidly and many Canadian retailers are not keeping pace with the fact that consumers and their shopping habits are undergoing fundamental change. But this is not just a Canadian phenomenon. Retailers in the U.S. are grappling with the same issues. A record 8,600 stores are expected to close up shop stateside this year. Previously, the worst year for closures was the 6,163 stores in 2008 - and that was at the height of the financial recession."

Kruh notes that the fundamental changes that are impacting domestic retailers have been somewhat masked by a couple of key factors that they likely won't continue into 2018 - a robust economy and low interest rates. "With the economy expected to slow next year and interest rates already up twice this fall, consumers are going to be hard-pressed to keep on spending. Debt is at record levels and the Bank of Canada has made the cost of carrying that debt even higher. So as consumers feel the squeeze so will retailers - especially those who need to do more to optimize the shopping experience."

In addition to the expected drop in retail spending next year, Kruh says we are also currently witnesses to the collision of three revolutions that are disruptive and industry-defining – creating a perfect storm that will hit retailers head-on.  

Demographic revolution

• Powering this next revolution is the rise of the millennial generation, which in two years will be the world's largest single demographic grouping, as well as the largest demographic in the workplace.
• Merging demographics are also reshaping retailing in Canada. Close to 4 in 10 millennials live with their parents and these parents are closer to their kids than any generation before. As a result, both generations are having a profound effect on the way the other shops. As millennials tend to be very tech savvy that is rubbing off on their parents which is accelerating the shift to online and experience-based shopping.

Technological revolution

• As the proliferation of connected devices continues to pervade all corners of society, from how we communicate to how we transact to how we operate our homes or manage our health and wellbeing, the next decade-or-so will see another billion or more humans connected to the internet.
• We'll see game-changing automation developments in robotics, machine learning and artificial intelligence, as well as virtual and augmented reality that will have profound impact on how we shop.

Geographic and geopolitical revolution

• Population growth in Canada is driven by immigration so it is critical that domestic retailers understand and adapt to the shopping habits of new Canadians.
• A growing wave of populism and nationalism is affecting retailing in the U.S. and Europe with spill-over affects in Canada.

Six Critical Steps

Kruh says there are six critical steps retailers need to understand and improve upon if they want to navigate the storm and avoid the same fate as the host of Canadian brick and mortar retailers who've closed their doors for good in recent years.

1. Unify data and analytics. Break down organizational silos that isolate consumer data. Create a culture and business structure that provides a unified view of the customer.
2. Go beyond the sale. Don't just focus on the holiday sales transaction. Improve the consumer's experience before and after. Let them discover and research merchandise. Make sure orders are accurate and delivered quickly. And offer convenient, speedy returns and refunds.
3. Upgrade technology.  Update and rethink legacy systems for more advanced and agile technology. Integrate commerce and mobile technology to support automation of routine interactions with retailers and customers. We see game-changing automation developments in robotics, machine learning and artificial intelligence, as well as virtual and augmented reality
4. Tackle supply chain issues. Brands often struggle with inventory and supply chain issues. Come up with a better way of anticipating supply chain disruptions, and make sure partners and suppliers are aligned with your customer strategy.
5. Improve ties between brands and retailers. Although brands are increasingly exploring direct-to-consumer selling, they still rely on retailers for the bulk of their revenue. Brands need to invest in digital technologies to improve the performance with existing retail outlets.
6. Expand partnerships. Go beyond the traditional retail outlets and work with fulfillment centers. Integrate your e-commerce operation with social media, and provide digital content to all your partners.

"Investing in these areas is only part of the equation," notes Kruh. "Retailers also must have a clear understanding of where and how they're investing so they can fully benefit from the connected-customer approach. Only then will they be able to deliver what consumers want."

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KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG member firms around the world have 189,000 professionals, in 152 countries.

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SOURCE KPMG LLP

For further information: Kevin Dove, Director, Corporate Communications, KPMG in Canada, 416.777.8026, [email protected]

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