Retailers in U.S., Canada back in growth mode despite economic conditions, fueled by e-commerce and international initiatives, product and price innovations centered on private label and exclusive collections: PwC

TORONTO , November 14, 2011 () – Retailers are back in growth mode, despite economic conditions, fueled by organic strategies including e-commerce and international initiatives, according to a new retail CEO study conducted by PwC Canada Retail Consulting Services.

According to the study, retailers identified e-commerce solutions, international expansion, and product and price innovations centred on private label and exclusive collections as key areas of focus. In fact, 100 percent of the retail CEOs surveyed acknowledged that the real game changer is the industry’s focus on reaching the consumer across multiple channels including e-commerce, brick-and-mortar, m-commerce and social.

The CEO study, conducted to understand steps retailers are taking to manage and fuel growth, surveyed CEOs from 21 U.S. and Canadian national retail chains in the specialty and department store sectors. CEOs were asked to provide insight into five key areas: growth strategies, e-commerce, international sales, industry game changers and economic environment.

"While we saw a flurry of M&A activity prior to the recession, now retailer growth strategies are being driven by organic opportunities like international expansion and e-commerce," said Antony Karabus, PwC Canada Retail Consulting Services Leader. Karabus further commented, "Retailers are increasingly focused on growth strategies that differentiate them and provide new, exclusive and differentiated value, thus providing a more compelling proposition to keep customers coming back."


1. Growth Strategies – Almost without exception, CEOs interviewed were focused on top line growth of their businesses and had invested considerable effort in developing clear growth strategies. E-commerce emerged as the highest priority growth strategy for those surveyed. International market expansion was a priority by over half of participants, while greater use of exclusive merchandise collections was cited as a key tool in increasing differentiation. Increased merchandise value was also a major factor. Findings also showed that:

90 percent will increase their use of e-commerce
76 percent will likely introduce new stores or store concepts and/or undergo extensive store renovations
70 percent will increase their use of private label programs or exclusive collections
62 percent will increase their use of social networks
57 percent will increase penetration of international markets, either directly or through license or franchise partners

Sixty-two percent of CEOs interviewed stated their businesses are growing organically, with less than 20 percent likely to grow by acquisition. Many who are planning to grow by acquisition are doing it opportunistically, by buying groups of stores out of bankruptcy or divestitures from other retailers, but only when the locations make sense for their customers and are available at the right price.

2. E-commerce – E-commerce is the single biggest growth driver for the majority of CEOs interviewed, as is evident from the sharp increase in anticipated e-commerce sales relative to brick-and-mortar stores. CEOs interviewed expect their e-commerce business to grow 5 to 20 times greater than brick-and-mortar, with the most percentage gains coming from retailers whose e-commerce operations were less than five years old. CEOs commented that they are now looking at their different channels (stores, online and catalogue) in a more integrated manner than previously, when the channels had been optimized individually. Forty seven percent of retailers envision e-commerce being 6 to 10 percent of sales in five years.

3. International Sales – While 52 percent of retailers surveyed have no international presence today, 24 percent of retailers surveyed expect that more than 15 percent of their sales will come from international sales in five years. Karabus commented that, "Among retailers expanding internationally, there was a shift towards franchise or licensee models rather than employing their own capital internationally." These exceptions appeared to be in countries where such brand expansion was easier to manage.

4. Industry Game Changers – One hundred percent of CEOs surveyed believed that the retail industry game changer today and in the future is seamless, easy cross-channel integration. There was a strong feeling that mobile smartphones are going to change the dynamic of the retailer and the consumer significantly, with the consumer gaining much more control. Accessibility and understandability will be critical to this seamless cross-channel integration. More personalized, customized two-way dialogues will become important to this digital, mobile customer generation.

5. Economic Environment – While the report found a combination of unemployment, consumer confidence and the housing crisis to have the most severe impact on businesses, the impact was particularly severe in markets where housing and construction were most affected. Higher commodity prices and the weaker US currency, which led to increases in costs of goods sold and hence selling prices in the range of 4 to 10 percent, were reported as having had little impact on sales volumes for most retailers.

53 percent of retailers said general inflation, including gas prices, has had a moderate effect on business, with 42 percent claiming it has little to no effect.
42 percent of participating CEOs said higher prices for products their company sells have had a moderate impact on their business, with 37 percent claiming it has little to no effect.
53 percent said that unemployment had a moderate effect on their business, while 26 percent of retailers noted that unemployment has had a severe effect on their business.

For more information regarding the Retail CEO study, please contact Jessica Liddell of Berns Communications Group at 212-994-4660 or

Notes on Survey Methodology and Analysis

PwC Canada Retail Consulting Services surveyed 21 leading national retail chains in the specialty (90 percent) sectors including apparel, jewelry and footwear, and department store (10 percent) sectors to understand the steps retail CEOs are taking to drive profitable growth given the current economic environment. Of those surveyed, 5 percent identified their typical customer demographic to be the affluent or wealthy, with 23 percent noting their regular customer as the upper middle class or “comfortable”, 67 percent catering to the middle class or “budget conscious”, and only 5 percent with a demographic consisting of the working class or unemployed, with a limited or fixed budget. The study was conducted by Antony Karabus, Retail Consulting Services Leader during October and November 2011.

The findings from these interviews and our comments based on our industry experience are not meant to be representative or projectable for the entire domestic or international retail market. Retailers will have to assess the merits of these findings in the context of their own personal circumstances.

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“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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