• Report identifies the need for a complete shift in mindset, operating model, capabilities, processes, tools and KPIs to service today's tech-savvy customers 

BARCELONA, April 25, 2023 – Global consulting firm AlixPartners and World Retail Congress have today published a new report shining a light on actions needed by retailers to profitably evolve in today's world of ever-more tech-savvy consumers.  

The analysis, Digital-First Retail: Turning Profit Destruction into Customer and Shareholder Value, revealed that as online penetration grows, retailers' profits are shrinking – with the cost of serving customers anytime, anywhere, at any speed not bringing in enough topline growth to best monetise even existing investments in technology, systems, infrastructure, and people, let alone new investments. For example, the firm's analysis in the report of 50 public U.S. retailers across several sectors (including apparel, department stores, hardlines and specialty retail) found that while their average online penetration has skyrocketed from 9.4% in 2012 to 25.6% in 2022, their profitability (as measured by average EBITDA percentage) has in that same period declined from 13.8% to just 8.3%. 

As also identified by AlixPartners, customer preference for digital shopping is booming – with 86%1 of consumers researching a product online at least once in their purchase process. Such trends combine to create a major problem for retailers: higher costs (due to needed digital investments) and lower profits. 

“It's clear that retailers can't keep operating the same way and expect different results when it comes to getting true ROI out of their investments,” said?David Bassuk,?global leader of the?retail practice?at AlixPartners. “What we at AlixPartners call ‘Digital-First Retail' isn't a program or initiative, it's a change in mindset – and in a retailer's organization – that places digital at the very core of a retailer's business model. And that's exactly where digital needs to be today.” 

As part of the report analysis, AlixPartners examined why retailers are struggling with digital efficiency and how they can shift from a traditional mindset to becoming a Digital-First Retail (DFR) leader. As such they identified that:  

• Retailers spend big but inefficiently on digital 

Globally, retailers spent $181bn (£145bn) on retail technology and digital improvements in 2022, according to the technological research firm Gartner. Despite this spending, additional AlixPartners research carried out among 150 global retailers has revealed that only 24%2 of retail executives think their company has above-average digital capabilities, and just 36% of executives think their digital teams have the capabilities to meet their companies' digital-strategy needs. 

The research also revealed a growing disconnect in company-capability assessments between the line managers doing the work and the executives making the decisions.  

• Digital profitability is not understood, and there is a lack of transparency and common KPIs  

AlixPartners research has further revealed that 84%3 of retail executives believe online delivers cumulative value, but only 48%4 are measuring the true costs and benefits of an omnichannel approach. Without a robust means of measuring success, many companies are making digital investments that later prove ineffective. Misunderstanding profitability within and across all channels also prevents companies from correctly computing customer lifetime value. 

DFR requires a big shift in investment, says the report, but retailers need to make those shifts if they hope to keep up with their own customers. And, often, it isn't about spending more but rather spending smarter, more holistically and more intentionally. 

• Retailers set to increase digital spending 

AlixPartners identified that more than half (63%) of retailers expect to spend more on digital investments in 2023 compared with 2022. Given consumer preferences for digital, most don't have a choice – without a strong online experience, they stand to lose customers and market share to competitors. 

However, the hope around future investments ignores history. Per AlixPartners' research5, three-quarters (75%) of retail executives are confident they'll get a good return on their digital investments. However, nearly two-thirds (64%) doubt their existing digital tools from past investments can support a modern, DFR business. This raises the question of why, if past investments have not met expectations, there is confidence future investments will perform differently? 

The report firmly states that DFR is the answer to how to profitably evolve -- taking the positive attributes of successful digitally native retailers (including agility and adaptability) and adopting them for traditionally store-led enterprises.  

“Most retailers are data-rich, but insight-poor, and most still have a product-centric mindset rather than a truly customer-centric one,” said Matt Clark, EMEA leader of retail practice at AlixPartners. “Retailers must establish new KPIs with a Digital-First Retail lens to match their new operating model and operate with a DFR mentality, truly placing the customer first -- to turn shrinking profits into customer and shareholder value.” 

Ian McGarrigle, chairman, World Retail Congress, said: “Coming out of three unprecedented years shaped by the pandemic, retail has gone from accommodating a massive acceleration of online sales to the detriment of stores, to a period of resurgence in store-based retailing and a slowing of online growth. But what is clear is that there is no status quo in this new reality.  

“Transformational retail is now a critical pillar that describes today's retail world and as such we are delighted to have AlixPartners on board as a knowledge partner, helping retailers to understand this new balance between on- and offline and more importantly, how they can identify how to deliver not just sales, but bottom-line growth too.” 

-ENDS- 

About AlixPartners 
AlixPartners is a results-driven global consulting firm that specialises in helping businesses successfully address their most complex and critical challenges. Our clients include companies, corporate boards, law firms, investment banks, private equity firms, and others. Founded in 1981, AlixPartners is headquartered in New York and has offices in more than 20 cities around the world. For more information, visit www.alixpartners.com. 

About World Retail Congress? 
Founded in 2007, World Retail Congress provides an unrivalled high-level forum for senior retailers to learn, share insight, form powerful connections, and shape the future of global retail. World Retail Congress is a global platform that connects the retail sector's leaders, stakeholders, advisors, and influencers to connect, create solutions and drive progress within the industry.? 

World Retail Congress is owned by William Reed, the global media and events business with over 150 years of experience providing marketing-leading analysis, intelligence and events to the food, drinks and hospitality industries.  

Media Contacts: 
For WRC - Nikki Alvey, Big Top PR 
Nikki@bigtop-pr.co.uk 
Tel: +44 (0)7973 354 706 

For AlixPartners – Lauren Higgo 
lhiggo@alixpartners.com  
Tel: +44 78 2542 3296 

For AlixPartners - Tim Yost 
tyost@alixpartners.com 
+1.248.227.1694