The global retail consulting sector is from an industry perspective the fastest growing industry segment of the consulting industry. According to a new report, consulting spend in retail will increase by 12% over the coming year, driven by several massive trends that are shaping the sector, such as digital, omni-channel and future proof supply chains.
Ever year Source Information Services (Source) conducts research into the state of the consulting industry, and its latest study reveals that, from an industry viewpoint, retail consultancy is booming. The analysts surveyed more than 2,500 (senior) buyers of consulting services in major consulting markets, including executives in retail and FMCG, and concludes that the sector will increase its use of management consultants faster than any other industry in 2015. With a forecasted growth of 12%, the retail sector by a margin outperforms others segments, such as the technology, media, and telecoms sector (+7%) and financial services (+6%), which accounts for a quarter of the globe’s advisory landscape.
Retail executives have provided several reasons for their strong demand for external consultants, and not surprisingly digital and business model transformation rank high on the list. In mature markets, retailers are facing increasing competition from discount chains, and are struggling to stay on par with the digital revolution sweeping through the industry, as well as adapting their offerings to meet the needs of the rising Generation Y consumer. Recent research from Kurt Salmon shows that, in the UK for instance, only 5% of retailers are truly omni-channel proof, implying that a massive 95% of the market still faces the challenge of transitioning to a better end-state. As part of their venture, they typically turn to management and IT consultants to develop business models, redesign sales, marketing, customer service and supply chain processes, and support with the build and implementation phases.
Other areas that belong to key priorities for 2015 in the retail industry include boosting the customer experience, optimisation of product portfolios and investing in IT systems. Similar to the omni-channel case, such strategic transformations generally welcome external advice and support, with a large chunk being tendered to management consultants. “Retail is a hotbed of activity for consultants. In mature consumer markets, retailers face increasingly tough competition at a time when they’re still trying to ensure reasonable margins in their online businesses. Outside of this, regulation is a rising concern”, comments Fiona Czerniawska, co-founder of Source. As a result, nearly three quarters of global retailers (68%) will spend more on business advisory, with a significant minority – almost one in ten – expected to spend less.
For retail consultancies, the bright outlook does not necessarily provide them carte blanche – competition in the segment is strong, with several large players in the industry investing in boosting both the depth and breadth of their offerings, whilst the traditional strategy firms are moving slightly down the value-chain to better integrate operations into their home base strategy consulting portfolio. In addition, large IT players have taken major steps in bundling their business expertise with IT services, to capitalise on the flourishing outlook in the digital domain. Against this backdrop, maintaining competitive fees will be key, as well as demonstrating leadership in expertise and execution.
* Note that the growth forecasts for the energy and healthcare markets are estimates. See the article ‘Energy consulting market grows to 11.1 billion’ and ‘Healthcare consulting market grows to 6.3 billion’ for more detailed information on the market development and outlook for 2015.