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Bryan Eshelman
Partner & Managing Director
New York
Last month, we released our fifth annual AlixPartners Disruption Index (ADI), the firm’s signature piece of thought leadership. The ADI surveys more than 3,000 CEOs and senior executives around the world to uncover their most pressing business concerns, while providing insights on how to best navigate these disruptions in the year to come.
Leaders across the 10 industries surveyed expressed uncertainty about the future and concern about evolving issues out of their control. Geopolitical tensions, major international elections, and new technologies—particularly generative AI—present challenges and opportunities that require a shift in mindset, tools, and resources to address.
Digging into the data collected from 300 global retail executives, we found similar themes and anxieties compared to fellow sectors. But we believe the most insightful data points are those that diverge with the overall findings. Here’s what you need to know from the 2024 ADI from a retail perspective:
Retail expects more disruption than any other industry in 2024
50% of retail executives expect significant changes to their business models over the next year due to disruptive forces. This was the highest of the 10 industries; the overall ADI average was just 37%.
This echoes sentiments our team shared in last month’s retail predictions, where we stated that “operating model transformation [will become] the new imperative to align operations, resources, and costs with new consumer expectations and competitive dynamics. Most organizations still have work to do to unlock growth-driving agility and productivity.”
As such, it’s no surprise that 38% of retail execs worry about losing their jobs due to the disruption facing the industry, the second-highest of any industry surveyed. When faced with disruption or uncertainty, only 19% of retail executives prioritize risk assessment—the second-lowest of any industry—while 19% prioritize crisis and reputation management, the highest of any industry. This demonstrates a shift towards survival mode; as 2024 unfolds, retailers must develop a balance between addressing immediate needs and crises with the ability to identify, evaluate, and act on medium- and longer-term risks.
Despite the doom and gloom, 70% of retail executives do hold positive growth expectations for the industry over the next 12 months—lower than the overall ADI average of 77%, but nonetheless reason for hope.
Supply chain concerns are the main reason that retailers believe disruption will heighten
When asked “which of the following aspects of your business do you expect will change the most over the next year due to disruptive forces?”, 45% of retail execs named supply chain. This was eight points higher than the energy sector in second place, and eleven points higher than the overall average of 34%.
While we may be past the severe supply chain disruptions of the pandemic, retailers must learn to navigate newer global disruptions wreaking havoc on an industry that heavily relies on global shipping. ESG regulations, predominantly enforced by Europe and increasing in the U.S., as well as labor shortages are now exacerbated by Houthi Red Sea attacks crippling the passage of container ships through the critical Suez Canal—traffic has dropped 75% since the attacks began. Meanwhile, the Panama Canal is experiencing generational drought as a result of climate change; the Panama Canal Authority (ACP) has responded by restricting daily usage by nearly 40% compared to 2023 figures.
Retail buyers must either accept more expensive or time-intensive shipping routes and transportation options, or rethink supply chains altogether to recoup losses. Alternative sourcing and production methods—dual sourcing, offshoring, and nearshoring—may increasingly be necessary to offset challenges.
Tech innovation is greatly impacting the retail workforce, but the industry is confident in its digital abilities—especially around AI
49% of retail executives say tech advancements are happening at a rate their company cannot keep up with—tied for the highest of any industry, and significantly higher than the overall ADI average of 38%. Yet at the same time, 50% of retail execs believe their company is among the industry’s leaders when it comes to the utilization of digital tools and technologies, which is also tied for the highest of all 10 industries surveyed.
It seems generative AI is behind retailers’ lofty self-evaluations. 57% of execs say their company is leading when it comes to the use of GenAI in the retail industry (vs. 49% average for other industries), 68% are currently investing in GenAI (vs. 59% average), and 78% are confident in the impact GenAI will have on their company (vs. 72% average).
For the above to come true, retailers will need to think more strategically about their tech investments. Only 42% heavily consider ROI when making these investments, and only 22% consider their company’s ability to integrate new tech within existing systems and processes, compared to overall averages of 47% and 26%, respectively. And while 33% of retail execs say it’s crucial to develop a comprehensive plan for digital adoption (the highest of any industry), only 20% believe it’s crucial to implement a formal process to track progress (the lowest of any industry). More alignment, consistency, and decision-making processes must be enacted to justify the near-term belief retailers have in GenAI’s transformative abilities.
Disruption may be the new normal, but savvy retailers will focus on areas they can control in the face of uncertainty. Those that manage unavoidable risks to the best of their abilities—through business model changes, proactive tech planning, and supply chain interruption mitigation—will be in position to seize upon opportunities in time.
