A new competitive landscape is emerging in retailing. Restrictive regulations and relative market saturation in developed countries have led to a growing number of local consolidations-a trend most likely to continue. At the same time, major players are now seeking additional growth beyond their borders, looking in particularly to developing countries, where regulatory restraints are less formidable.
For retailers, the next challenge will be dealing with either the emergence of new retail business models or the resurgence of prior ones. These include aggressive discounters, high-end retailers, players adding value through enhanced service or broadened offers, and retailers choosing to “hang in there” and strengthen their local market share.
Challenges for Retail and Consumer product (R&C) companies are many in today’s business environment as a confluence of market forces have created an extremely difficult climate.
In mature markets, R&C sector companies are constrained in their ability to grow and maintain profit margins as a result of a deflationary operating environment, market saturation, slowing population growth, and more discerning but less loyal consumers. There are also the immediate concerns of growing competitive pressures, an increase in the number of alternative sales channels, a blurring of roles between suppliers and retailers, and – particularly for consumer product manufacturers – a shift in the balance of power to the retailers.
As a consequence, the strategic focus of the sector is moving towards the emerging economies and expanding consumer markets of Asia, Central and Eastern Europe, China and India. This focus offers new opportunities for growth through global sourcing, off-shoring and the development of modern retailing.
In addition, due to stakeholder demands and the Sarbanes – Oxley legislation, the retail & consumer industry is also experiencing heightened regulatory pressures. These imply greater accountability and accuracy in the reporting of financial results under IFRS and US GAAP. Increased levels of corporate governance and board involvement, with stronger internal control documentation, have created a greater need for stronger risk management practices across the enterprise.