How the consumer sector can thrive and survive in challenging times

With the impact of tariffs, geopolitical disruption and mounting inflationary pressures beginning to bite, success will increasingly hinge on leveraging technology, expanding into international markets and strengthening customer relationships.  According to the latest figures from global retail organisations, such as the US National Retail Federation (NRF)⁽¹⁾, while growth is still on the table, consumer spending is slowing.

As consumers become more cautious, they often become more value-conscious and selective in their purchasing choices. Companies that have the ability to adapt products and services quickly and incorporate supply chain diversification to meet these new demands will be better positioned to capture shifting, evolving consumer spending habits. 

Alongside emerging technology tools, having a flexible pricing strategy and precise key performance data can be used to adjust to market changes and improve margins quickly. Additionally, understanding how to leverage brands effectively delivers a competitive edge. 

Harnessing emerging technology for competitive advantage

IT transformation is the top priority for retail and consumer C-suite executives, according to our C-suite barometer survey. In addition to improving efficiency and productivity, as identified by 66% of executives, using IT transformation to support growth and manage risk is also ranked among the top five priorities. Emerging technologies, such as artificial intelligence (AI), can be effectively employed to improve inventory management and supply chain logistics, reducing costs and improving the bottom line — a must for companies targeting consumers who still value human interaction but expect AI-driven pricing. According to the C-suite barometer, reviewing supply chains, operations and procurement processes was the second highest priority, chosen by 30% of retail and consumer executives.

However, it is important to ensure that IT transformation strategies deliver clear, tangible benefits and remain aligned with the desired end-goals. Start by identifying what the solution is intended to achieve. For example, is a supply chain management system required to reduce complex systems and improve warehouse handling times? Or are smarter product forecasting decisions the target? Taking the time to plan and research will ensure that the technology employed is fit for purpose and that return on investment (ROI) is achieved. 

Of course, any increased use of technology puts companies at risk of cybersecurity breaches that can harm brand reputation. Indeed, retail and consumer C-suite leaders identify new software and data architecture as a primary cybersecurity concern, particularly in light of recent high-profile incidents. With many breaches linked to human interaction, it is paramount that staff receive the right levels of training and education. Ensuring that new systems are fully integrated and that regulatory compliance with data protection regulations is adhered to is paramount.

Strengthening brand loyalty to drive growth

Identifying core strengths provides a platform to refresh brand loyalty and recognition strategies. 

Cautious consumers will be more selective in their purchasing decisions, which can translate into a preference for quality and premium brands. A focus on building strong customer relationships can help maintain higher engagement levels.

Claire Cowen Partner - International Tax

A focus on building strong customer relationships can help maintain higher engagement levels. 

As online research tools and purchasing techniques become more sophisticated, ensuring you have online visibility to reach the right demographics and target market is also key. For example, the ability to target and attract younger customers who are looking to spend both online and in-store on brands with a reputation for authenticity and sustainability will help inform and direct growth strategies to regenerate an ageing customer base. 

The ability to leverage brand awareness ensures you stand out from the competition when purchasing choices are limited.

Matthew Dalton Head of Consumer

Empowering teams through training and education

With many growth opportunities relying on the use of new and emerging technologies, it is essential that plans are strengthened through training and education. This is particularly significant in relation to the increased cybersecurity threats that technology brings.

Further, training to use new digital tools and educating all employees on their impact on future roles is critical to ensure that job security fears are allayed and everyone understands what the company is trying to accomplish. It is vital that team and board members buy into the strategy and give support so that opportunities are maximised from a cost perspective.

Diversifying and expanding into high-potential markets

Diversifying product and service lines to meet evolving consumer demands can be an effective strategy to manage risk. For example, growth opportunities in sectors such as activewear, health, sustainable products and clothing ranges are buoyant despite the economic backdrop⁽²⁾. This approach can be complemented by expansion into new markets, whether organically, through strategic partnerships or via acquisitions. According to the C-suite barometer, 80% of retail and consumer businesses plan to expand internationally over the next five years, with the US being the top market earmarked for growth opportunities. 

Assessing new market opportunities and exploring available business incentives can offer companies additional revenue streams when domestic economies are struggling. However, with the ability to understand local regulations and requirements being the top concern for C-suite executives looking to expand internationally, it is crucial to stay informed about regulatory changes that may impact plans. International groups must be aware of the evolving environmental, social and governance (ESG) regulations being implemented in many territories and, in the US, on a state-by-state basis. There are also specific safety laws that apply to products entering the market. 

Building local presence to unlock incentives

Developing a local presence can offer several opportunities. While currently an evolving topic, the generous tax incentives instigated by President Trump to encourage trade in the US may warrant further cost-benefit analysis. Equally, recent developments on the Pillar Two Global Anti-Base Erosion (GloBE) approach, which is aimed at exempting US companies from top-up taxes, will be welcomed in the US. 

From a tax perspective, having demonstrable economic substance in a territory is essential to take advantage of the incentives available. In addition, employment laws must be fully understood to avoid falling foul of local rules. Companies also need to consider whether a local workforce and relevant expertise are available or face the expense of staff relocation. Again, a concern highlighted in the C-suite barometer was that sourcing a local workforce was a top three challenge.

Turning sustainability into growth

With consumers increasingly attracted to more sustainable purchases, compliance with ESG issues is imperative to support growth and protect brand reputation. However, while the retail and consumer sectors have seen an increase in ESG reporting and readiness compared to last year's C-suite barometer, 56% still consider ESG reporting requirements to be more of a necessary cost than an opportunity for growth.

As higher taxes on carbon emissions and evolving rules on packaging and labelling take effect, changing the narrative to highlight sustainability compliance will help engage existing and potential customers to support growth. Equally, as geopolitical pressures impact price and access to fuel and raw materials, more sustainable solutions will help reduce costs.

Ultimately, whether in response to unforeseen events, such as the covid-19 pandemic, or changing business and economic cycles, consumer demand will persist. As spending patterns evolve and volatility becomes the new norm, retail companies that embrace agility, flexibility and innovation will be able to adapt and capture growth opportunities, regardless of the challenges they face. 

(1) NRF | CNBC/NRF Retail Monitor Shows Continued Sales Growth But Less Stocking Up Ahead of Tariffs

(2) The Sunday Times reveals Britain’s 100 fastest-growing private companies - News UK