Executives in retail are upping their use of independent consultants

03 July 2018 Consultancy.uk 6 min. read
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Retailers looking for specific expertise in consulting services are increasingly turning their back to the large consulting firms in favour of independent consultants, according to a new study. As the sector attempts to exit a major slump, which has seen multiple brands liquidated, retail executives are ditching the likes of the Big Four for the more flexible and cheaper option of freelancers.

While last year UK high streets saw the fewest store closures since 2010, the sector has since come crashing back to earth in 2018, in line with a global retail crunch which has claimed multiple casualties so far. The early months of the year saw high profile names including Toys R Us, Maplin and Claire’s enter administration, while a number of stores including House of Fraser are currently attempting to execute emergency store closure plans, as their futures dangle by a thread.

While ecommerce is the most commonly cited culprit for the reported demise of the “bricks-and-mortar” brands collapses, stagnant pay across many of the world’s developed economies including the UK and US have also led to a fall in demand. Consumers are broadly scaling back spending, particularly with numerous uncertainties such as Brexit coming to a head in the next year, prompting many to tighten their belts before possible hard times to come.

For what reasons would you select an independent consultant rather than a traditional firm

As the retail sector comes to face a number of unique challenges, 37% of decision-makers have been found in a study by Odgers Connect to have turned to consultants to help them with their challenges. Interestingly, just 19% of 250 board-level executives surveyed in the UK, Germany, the Netherlands and Switzerland said they would rely on a traditional consultancy firm for such expertise, with a significantly larger share highlighting that they would tap the skills of independent consultants.

When looking at the need for specific expertise, the most in-demand areas across the retail sector are financial management (24%), risk and regulatory work (21%), enhancing existing technology (21%) and sales and marketing (21%). These areas of demand saw the majority of those polled in both the UK and Switzerland admit that they source the same amount of work from independent consultants and traditional market players. While organisations in Germany and the Netherlands retained more of a reliance on traditional consulting firms, the independent scene still makes up a substantial portion of the market there market.

Data from Source Global Research estimates UK's retail consulting market to be worth around £260 million, with around one out of ten projects in the sector going to independent consultants.

The size of the retail consulting industry in the UK

When executives were asked why they would pick an independent consultant over a traditional management consultancy firm, 48% cited flexibility as the primary reason – a factor that chimes with many other sectors. Flexibility was the most frequently cited factor of the executives questioned from the UK, at 47%, followed by price at 38%. Price was the Netherlands’ most commonly cited factor, at 48%, closely followed by Britain and Germany (37%).

According to Adam Gates, Principal at Odgers Connect, “When it comes to large business strategy projects, there’s still an attitude of ‘strength in numbers’ and ‘brand reputation’ associated with the well-established firms. However, key areas such as financial management, risk and digital technology are now falling into the territory of independents, with retailers valuing the in-depth expertise, flexibility and objectivity that an independent professional can bring to the business.”

Brexit boost

After the completion of Brexit, these qualities in particular could add further to the perceived desirability of independent consultancies, meanwhile. The largest minority of 43% of firms in the UK state that they will make the same level of use of independent consultants as before the nation’s withdrawal from the EU, however a number remain unsure, while almost a quarter will up their use of independents to some extent, and a further 7% will drastically increase it.

On the continent, the results are more muted, as it is unclear as to how severely the UK’s exit will impact on other member states. Despite this, other continuing pressures from Spain and Italy may mean firms across the EU will still have to find ways of achieving better value for money amid economic turbulence, and as a result only 39% of the executives polled in the Netherlands, Germany and Switzerland were therefore willing to state definitively that they would not use independent consultants more often post-Brexit.

Are you positive about the work of consulting firms and independent consultants

Independent professionals still face the problem that traditional firms are attractive for the quality control they offer, however. 33% of retailers turn to traditional firms over independent consultants due to this aspect of their offering, as if a company isn’t happy with the work of a management consultancy, the process of escalating the problem ‘up the chain’ seems a lot clearer. This is particularly important for the growing number of retail presences facing restructuring, as while such clients are battling for their existence, the last thing they would want to worry about would be getting left high and dry by an independent firm.

Commenting on this, Gates added, “Using a mainstream firm can often be seen as a safe bet, and if things don’t go well, there’s a fall guy to blame. However, this sentiment is certainly starting to wane, with more and more retailers looking for a more agile and senior level of engagement, especially with the number of household names going into administration and entering into CVAs.”