Retail: the key consulting market in 2014?

By Fiona Czerniawska

The consulting industry has long been dominated by behemoths, at least in sector terms.  Just under a quarter of all consulting, we estimate, is done in the financial services sector.  The public sector, though its relative importance to consultants varies from geography to geography, accounts for another 16% or so.  Retail, by contrast, absorbs just 0.5% of the global consulting budget.  Retailers haven’t always been the most open-minded of clients where consulting is concerned, and they’ve certainly been among the stingiest payers (a pile-it-high-sell-it-cheap mentality applies to suppliers as well as customers).  So consulting firms could generally be forgiven for putting their eggs in other baskets – but not this year.  In 2014, our new report suggests, retailing could be the consulting industry’s most important market.

There are three reasons for this.

The first is growth.  At its simplest, demand for consulting services increases when two factors coincide: when organisations are doing a lot and when they’re predisposed to use consultants to help them do it.  Have either one of these factors by itself, and you get either a lot of internal activity or a lot of managers who want to use consultants but can’t – but you don’t get growth in the consulting market.  In a survey we carried out at the end of last year, we asked organisations to give us an idea of what the next 12 months will hold: 80% of respondents (all senior executives in multinational corporations) said they were carrying out, or planning to carry out, the different types of initiatives we asked about (cost-cutting, productivity improvement, responding to regulation, etc).  That compares to 72% in 2013 – so people are planning to do more.  The proportion who said that they expected this activity to increase their use of consultants also rose, from 45% to 48%.  In the retail sector, these proportions are even higher: 85% of organisations are carrying out/planning the activities we listed and 65% of those organisations say that this will raise their expenditure on consulting services.

The second reason is innovation.  Retailers have been the first companies to have to deal with the exhilarating but often terrifying implications of the shift in consumer behaviour from an offline to an online world.  The experience gained here is a valuable commodity in other sectors – and organisations elsewhere are, not only trying to apply the lessons learned to their own businesses, but are constantly looking ahead to see what happens next.  Consultants working in the retail sector are going to find themselves among the most sought after in all consulting.

Does that mean that retail clients will be any easier to deal with? Sadly not: they may recognise that they need the external input from consultants as never before, but decades of putting their suppliers under pressure to do more for less aren’t going to evaporate.  And that’s the third reason why retail is going to be an important market for consulting firms: with little margin to play with, they, like their clients, are going to have to be innovative.