Externally focused, data driven: What the best retailers look like right now

Be externally focused – and be a ‘fast follower’

Australia is in prime position to capitalise on global learnings in R&C. For instance, where we sit in the inflationary cycle, we’re roughly six months out of step with other OECD countries. We should look to these countries to see how consumers have responded to interest rate cuts, what trends have emerged, and what R&C companies have done well in response (and/or wish they’d done better). In the US, for instance, many retailers are investing heavily in customer experiences to encourage consumers back into bricks-and-mortar stores. Australia’s retailers have a chance to see how this plays out, and to learn from the US experience. Given the break-neck speed with which the R&C sector is changing, it could be as beneficial to be a ‘fast follower’ as it is to be an industry leader.

And the learnings aren’t limited to the R&C sector either. Look beyond your peers and/or direct competitors and seek out use cases and best practice in adjacent industries, too.

For example, our recent survey of CEOs found local R&C leaders are less trusting of artificial intelligence (AI) than Australia’s CEOs more broadly. (Only 26% of Australia’s R&C CEOs personally trust having AI embedded into key processes to a large/very large extent versus 31% of Australia’s CEOs more broadly.)

At the same time, 42% of Australia’s CEOs overall reported increased efficiencies in their workers’ time over the past year as a direct result of generative AI (GenAI), and 40% expect their investments in this technology to increase profits in the year ahead.

What we are learning is that R&C companies are leaving value on the table if they don’t foster trust in AI, and embed GenAI to the same extent as other sectors. From managing inventory to forecasting demand to providing personalised recommendation engines, the use cases for AI are unlimited in retail, but note: the landscape is shifting from isolated AI use cases to holistic AI-enabled business models.

Similarly, the threat of climate change is being underestimated by R&C CEOs. Only 3% of retail leaders in Australia identified climate change as a key threat, compared with 8% of Australia’s CEOs more broadly. And yet there are so many ways to create business value if CEOs recognise the size of the threat – and the opportunity – from the energy transition.

Reinvent, or be left behind

Economic uncertainty is driving relative pessimism among R&C CEOs. Our recent survey of CEOs found that R&C leaders are less optimistic about global gross domestic product (GDP) in the coming 12 months than Australia’s CEOs more broadly. Only a third (33%) of R&C CEOs expect an upswing in global GDP in the next 12 months compared with nearly half (47%) of Australia’s CEOs overall.

The temptation for retail and consumer companies is to stick with business-as-usual to try and ride out the consumer spending slump. Case in point: only 36% of surveyed R&C CEOs plan to increase headcount this year (versus 41% of CEOs more broadly). However, companies can’t afford to be stagnant, and reinvention is essential to avoid being left behind.

Already, we’re seeing signs that savvy R&C leaders are taking steps towards rethinking their business models. Over the past five years, one third have targeted a new customer base, 23% have developed innovative products or services, and 23% have collaborated with other organisations. This is comparable with Australia’s CEOs more broadly. But where R&C CEOs are leading the charge is in targeting new routes to market (31% versus 19% of CEOs in general), and extending core businesses added in the past five years (20% versus 14%). And the learnings aren’t limited to the R&C sector either. Look beyond your peers and/or direct competitors and seek out use cases and best practice in adjacent industries, too.

For example, our recent survey of CEOs found local R&C leaders are less trusting of artificial intelligence (AI) than Australia’s CEOs more broadly. (Only 26% of Australia’s R&C CEOs personally trust having AI embedded into key processes to a large/very large extent versus 31% of Australia’s CEOs more broadly.)

At the same time, 42% of Australia’s CEOs overall reported increased efficiencies in their workers’ time over the past year as a direct result of generative AI (GenAI), and 40% expect their investments in this technology to increase profits in the year ahead.

What we are learning is that R&C companies are leaving value on the table if they don’t foster trust in AI, and embed GenAI to the same extent as other sectors. From managing inventory to forecasting demand to providing personalised recommendation engines, the use cases for AI are unlimited in retail, but note: the landscape is shifting from isolated AI use cases to holistic AI-enabled business models.

Similarly, the threat of climate change is being underestimated by R&C CEOs. Only 3% of retail leaders in Australia identified climate change as a key threat, compared with 8% of Australia’s CEOs more broadly. And yet there are so many ways to create business value if CEOs recognise the size of the threat – and the opportunity – from the energy transition.

Foster data-driven decision-making

R&C CEOs must foster a culture of data-driven decision-making within their organisation. We found that retail leaders are slightly behind their peers in other industries when it comes to countering confirmation bias in decision-making and in big picture analysis. However, they’re a step ahead in post-decision evaluation.

Leaders need to ensure quality decision-making by grounding decisions in data – not just gut feel. Practically speaking, R&C CEOs must:

Introduce structured decision-making processes including clear guidelines for how decisions are made, consistent requirements to review data, and documentation of decision rationale.
Encourage diverse viewpoints and foster an environment where employees feel safe to voice dissenting opinions and challenge established ideas. This includes investing in training for employees to build critical thinking and data analysis.
Invest in the talent pipeline so that long-term decision making isn’t compromised by staff turnover. This includes CEO turnover as, globally, CEOs with longer expected tenures are statistically more likely to be taking multiple reinvention actions and reporting profitability gains.

In the face of uncertainty, R&C CEOs need to take an externally focused, data-driven approach to business model reinvention. And be a fast follower when they see another retailer (or someone in an adjacent industry) take reinvention action which could work in their organisation, too.