Artikel Montag 20th Januar 2020

The perils of short-term reward

The blindingly obvious statement that many established retailers have failed to react decisively enough to structural shifts in the industry risks overlooking a more profound question.

Not a single retail executive can have doubted that a structural shift was underway, but the vast majority have failed to steer their businesses on the transformational journey needed to profit from these changes.

There are a number of possible explanations – but the most significant contributory factor seems to be the mismatch between the timescale over which executive pay and bonuses play out and the time taken for digital transformation to pay back.

Put simply in the balance between invest now for success in 5-10 years versus maximise profits to drive bonus in 0-3 years the short-term has consistently won.

The difficulty here is exaggerated by new businesses being held to deliver different metrics to established ones. For one set, driving market share growth and revenue is all that is needed to satisfy shareholders – while established retailers wrestle with the challenge of investing in infrastructure to drive growth into lower profitability channels, often to howls of derision from cash hungry shareholders.

Finally, scale is an important factor here too. A source of great historical advantage – now becomes one of potentially profound disadvantage. In a world where rapid direction change is required then scale = momentum, and without a tremendous collective effort it becomes very difficult to course correct as quickly as needed.

These conditions have added up to a collective failure for much of the retail ‚establishment‘ in the UK. For many this has brought a moment of crisis that can create the conditions to act decisively – but the degrees of freedom to act have narrowed dramatically by this point.

The resolution of this critical dilemma must sit with The Board. As custodians of the long term interests of all Stakeholders they must look to growth over the next decade not the next 3 years. For retailers it has never been more important to have a strategic direction that delivers over the long term and is committed and decisive not myopic and hopeful.

Wichtige Ansprechpartner/-innen

James George

James George

Partner

Vorgeschlagene Artikel

Alle Artikel anzeigen

Dienstag 30th Mai 2023

Next Generation Operating Models

Brands continue to find themselves under pressure from all directions. Cost inflation, staff shortages, and ever-changing customer needs are all contributing to margin compression,...
Artikel lesen

Montag 6th Februar 2023

7 key reflections for the retail sector

Despite a period of undeniable economic and political turbulence, the retail sector has performed resiliently, with spend holding up stronger in Q4 than many had feared. However,...
Artikel lesen

Mittwoch 16th November 2022

Lifelong Loyalty

Loyalty programmes have long been used as a mechanism to secure customer loyalty and many have become significantly more sophisticated in recent years. Our latest...
Artikel lesen

Montag 28th Juni 2021

The luxury of choice: 5 keys to success on multi-brand online platforms

From plucky upstarts to fixtures of the mainstream shopping scene, online retail platforms have become a growing pillar of sales for premium and luxury...
Artikel lesen