CEOs in the retail sector focused on 'growth'

The PwC Global CEO survey is a barometer of the mind-set of global corporate leaders as they strive for growth in priority markets - of the total sample survey, interviews were conducted with 114 CEOs from retail companies in 33 countries and 245 consumer goods CEOs in 45 countries.

Results from the survey suggest that CEOs believed they had learned to manage their businesses through difficult and volatile economic times.

Furthermore, CEOs in the retail & consumer sector were changing their strategies in response to evolving consumer needs and keeping a tight rein on costs and risks.

"This is welcome news, since nearly half of CEOs across all sectors believe that the global economy will decline even further in the next 12 months, and the good news is that nearly three times as many CEOs are more confident in their own companies' growth prospects for the next year than they are in their outlook for the global economy," said John Wilkinson, PwC retail & consumer leader in South Africa.

According to the survey, only 8% of retail CEOs and 14% of consumer goods CEOs think the global economy will improve in 2012. In fact, nearly half of retail and consumer goods CEOs expect the global economy to worsen.

Interestingly, the survey pointed out that buying power in the emerging markets was growing.

"The income disparity between the middle classes in the emerging and developed economies is rapidly shrinking - the ranks of the middle class in the emerging markets are simultaneously exploding, while in developed markets, the middle class is shrinking.

"Global consumer goods companies need the opportunities inherent in the emerging markets," PwC said.

But while 60% of respondents said emerging markets were more important to growth prospects than developed markets, both retail and consumer goods CEOs said they were wary about setting up overseas operations given that different markets also had different needs.

Retail CEOs, in particular, were still placing most of their bets on their existing markets, with 43% planning to concentrate on the areas in which they already do business, while only 16% plan to head abroad.

"That's probably because it's especially tough for retailers to break into new territories.

"The most successful retailers forge a personal bond with customers - and it's hard to make that connection in a totally different culture", said Wilkinson, adding that regulation was another hurdle.

However, entering a new market by acquiring a local competitor provides immediate access to local facilities and distribution networks. Wilkinson said this had been demonstrated in South Africa by Wal-Mart's R16.5 billion acquisition of a 51% stake in Massmart.

"The Wal-Mart transaction has definitely helped to create a significant amount of interest in the Africa continent as an emerging market for retail and consumer companies, and it is inevitable that other foreign retailers will follow," he said.

One of the key points in PwC's research was that consumers in both the developed and emerging markets were becoming more digitally empowered.

"Consumers have more information and more choices than ever before as a result of the internet and a proliferating array of personal devices. They're also more vocal-and what they say carries more weight; sales can surge or slump in response to a campaign on Facebook or Twitter," PwC said.