Retail fastest growing segment in consulting industry

16 March 2015

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.

Size of the Global Consulting Industry

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.

Top priorities for retail executives in 2015

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.


Debenhams administrator handed legal threat from Sports Direct

24 April 2019

Earlier in April 2019, the long-suffering high street entity of Debenhams finally collapsed into a pre-pack administration, wiping out equity for shareholders including Sports Direct. Now, Mike Ashley, the controversial owner of Sports Direct, has threatened legal action to remove FTI Consulting from its role as Debenhams’ administrators, following the obliteration of his stock in the company.

As the retail sector in the UK continues to endure a torrid period, British retail stalwart Debenhams endured a spectacular fall from grace. The high street ever-present was founded in the early 19th century, with a single store in London, before expanding to 178 locations across the UK, Ireland and Denmark. However, following a string of profit warnings and several rounds of lay-offs, the company engaged advisors from Big Four firm KPMG to consider its options in the Autumn of 2018.

At the time, Debenhams Chairman Sir Ian Cheshire insisted that the chain was not heading for insolvency, or that it was actively embarking on a company voluntary agreement (CVA). Nevertheless, Debenhams fell into administration in Spring 2019. The news saw Chad Griffin, Simon Kirkhope and Andrew Johnson of FTI Consulting appointed as joint administrators, immediately selling the retailer to a newly incorporated company controlled by secured lenders.

Debenhams administrator handed legal threat from Sports Direct

The pre-pack administration deal meant Debenhams was able to access significant additional funding, preserving 165 of its stores, though plans to close around 50 under-performing stores in the next three to five years remain in place. At the same time, the deal maintained its commercial relationships with suppliers, employees and pension holders. However, it also effectively led all of Debenhams’ previous shareholders – including the retail magnate Mike Ashley – to lose their equity.

Ashley’s Sports Direct firm had increased its stake in the department store chain in 2018, but stopped just short of the 30% stake which would require it to put in a formal offer to fully acquire the business. The transaction fuelled speculation that Ashley was waiting for the opportune time to acquire Debenhams, particularly in the wake of his swoop for House of Fraser. Ashley’s deal there enabled Sports Direct to buy the firm out of administration in a pre-pack deal, allowing the new ownership to controversially wash its hands of the company’s pension scheme in the process.

While some believed this was Ashley’s intent for Debenhams, FTI’s decision to sell the store to its creditors has instead resulted in a sizeable loss for Ashley. The hit of around £150 million from his loss in Debenhams comes after an analysis by The Sunday Telegraph suggested the tycoon had accrued “a sprawling web of stakes” in rival companies, and that he may be nursing losses of more than £500 million.

Bad press

Ashley – who recently lost a complaint ruling by British press regulator Ipso allowing the Times to note that he shared many characteristics with North Korean dictator Kim Jong-un – has been outspoken in his contempt for FTI since the news broke of Debenhams’ sale. The Sports Direct CEO has called for the resignation of FTI from its role as administrator, after his stake in the department store chain was wiped out. The Guardian stated that a letter to FTI saw Sports Direct’s lawyers even threaten legal action to remove the advisory firm as administrators because of a conflict of interests.

According to the reports, the document claimed, “[Sports Direct] will do everything available to it to unwind the damage caused to the company and other stakeholders (including large and small shareholders) by the events of today including but not limited to challenging the appointment [of FTI as administrators] and all consequences of it.”

The letter allegedly claims that FTI had been involved with Debenhams since the second week of February, and had engaged with the group’s lenders. The legal team reportedly suggested that this would consistute a conflict of interest, because FTI sold the retailer’s operating companies to the same lenders via a pre-pack administration.

This comes weeks after Sports Direct was itself accused of becoming overly cosy with a professional services firm, which has seen its auditor Grant Thornton placed under scrutiny for its continued role with the firm. In 2018, it was reported that Grant Thornton was set to stand aside from the role due to competition rules. It had held the role since before Sports Direct floated on the London Stock Exchange in 2007, while Phil Westerman, the Partner at Grant Thornton responsible for signing off Sports Direct's accounts, had himself undertaken the work for five years. 

Neither situation is understood to have changed, leading to the questioning of the independence of Grant Thornton’s auditing work with Sports Direct. Such is the level of bad press surrounding the retailer, that the Big Four of the accounting and advisory world – wary of incurring a new scandal of their own – are said to have ruled out taking the contract over.