Despite a fast-evolving and competitive international market, leading Canadian retailers are thriving. Ten Canadian companies ranked among the top 250 retailers around the world in Deloitte's 2007 Global Powers of Retailing report. But Canada's retailers must stay ahead of their competitors, both global and domestic, if they are to protect their markets and foster sustainable growth.
The holy grail for Canadian retailers is sustainable growth strategies. Companies large and small are battling for market share on a global scale, and there will be increasing polarization between retailers of all sizes struggling to boost profit margins throughout 2007. In this climate, the ability to predict and act on growth opportunities is the key to survival.
Deloitte's Canadian practitioners have identified six key issues facing today's retailers. Understanding how to respond to these trends will be critical to making the strategic decisions that will drive future growth.
1. New market entrants will force increased productivity.
Canada is a diamond mine for foreign retailers. Where new entrants can't buy, they will build more stores to capitalize on their strong economies of scale, branding and technologies. More U.S. companies are expected to cross the border in 2007. And let's not forget the competition between Wal-Mart's new Supercenters and the superstores of the Loblaw chain. Because Canadian retail productivity growth has significantly lagged its U.S. counterparts for the past 15 years, capital investments, process change and innovation are imperative if homegrown retailers are to survive the competition.
2. Technology will be at the epicentre of retail success.
Technology will be critical to helping Canadian retailers manage costs and inventories. Continuous improvements in supply chain management (improving shorter cycle times) and technologies, such as radio frequency identification (RFID), will be faced by all CIOs in retail. In addition to back-end technology support, a focus on innovative technology to support the storefront is on the rise. Self-checkouts, customer relationship management tools and marketing technologies all support and track target customers, providing retailers with vital information about the consumer.
3. E-commerce is a huge missed opportunity.
Canadian retailers are lagging behind their U.S. counterparts in Internet sales. Recently, Canada's e-commerce readiness
| "Canadians are far more complex for retailers to serve than U.S. shoppers, due to demographic factors, such as high levels of cultural diversity and changing family dynamics. This means a one-size-fits-all shopping experience no longer applies." |
dropped to the lowest ranking of developed countries, according to the Economist Intelligence Unit. Surprisingly, the largest impediment to developing e-commerce capability is inertia. Many retailers, including clothing, food and beverage, and electronics and furniture operators, believe they are not well suited to the Internet. This is simply untrue. A number of successful models — Future Shop, La Senza, and even food retailer Grocery Gateway — offer proof that there is opportunity for growth online.
4. The Canadian shopper is more complex.
The Canadian consumer is older, time pressured, connected to the Internet, discerning, and focused on his or her well-being. Canadians are far more complex for retailers to serve than U.S. shoppers; this is due to demographic factors, such as high levels of cultural diversity and changing family dynamics. What does all this mean? A one-size-fits-all shopping experience no longer applies. Plus, Canadians' expectations about quality for the price paid are rising. Retailers will need to respond with sophisticated product lifecycle management.
5. Improved customer service and personalized marketing represent growth opportunities.
Canadians value good customer service. Unfortunately, up to 26% of Canadians say they've noticed a slight decline in the quality of service they've received, according to an AC Nielsen survey. Savvy Canadian retailers should differentiate themselves with strong experiential branding. For instance, retailers could provide a compelling shopping experience with improved customer service or with effective use of personalized direct marketing. It is anticipated that consumers will expect further personalization of marketing campaign management and communication.
6. Green retailers will add green to the bottom line.
In late 2005, Wal-Mart unveiled a plan to boost energy efficiency, cut down on waste and reduce greenhouse gas emissions, signifying an important trend. Long-term, sustainable green strategies can actually result in savings for companies over the long run, net more sales from scrupulous consumers, and prevent consumer backlash by activists. Shoppers increasingly want clean, energy-efficient products, and they will respond positively to companies that are good stewards of the environment.
The competitive retail environment will force retailers to consistently focus on driving growth, whether through organic growth, new distribution channels, or acquisitions. Ultimately, the retailers that achieve sustainable growth will be those that pinpoint new opportunities to boost profit margins, develop feasible business strategies and act on them in a timely manner.
