Consumer & Retail CEOs Bet Big on Growth Amid Uncertainty

The KPMG 2024 CEO Outlook, now in its tenth year, reveals a fascinating dichotomy in the mindset of Consumer and Retail (C&R) CEOs. While 82% of C&R leaders are optimistic about their own company’s growth trajectory, only 59% share the same confidence in broader economic growth over the next three years. This marks the lowest confidence level among all industries surveyed, highlighting the unique challenges and opportunities facing the sector.

Despite economic uncertainty, geopolitical complexities, and the rapid adoption of generative AI (Gen AI), Consumer and Retail CEOs remain steadfast in their belief that the sector is on a growth path. This optimism is fueled by the industry’s role in the “real economy,” providing essential goods and services that remain relevant even during turbulent times.

Top Challenges for Consumer and Retail CEOs in 2024

The survey identifies three key challenges for Consumer and Retail CEOs in 2024:

1. Economic Uncertainty (58%): Persistent inflation, muted consumer spending, and global economic volatility remain top concerns.
2. Geopolitical Complexities (53%): Trade tensions, supply chain disruptions, and regulatory changes add layers of complexity to operations.
3. Adoption of Generative AI (48%): While Gen AI offers immense potential, its rapid adoption brings ethical, operational, and regulatory challenges.

Despite these hurdles, 81% of C&R CEOs are confident in the sector’s growth prospects, up from 76% in 2023 and well above the cross-industry average of 74%.

The Race to Embrace Generative AI

Generative AI (Gen AI) has become a top investment priority for Consumer and Retail CEOs, with 81% identifying it as a key area of focus, particularly in sales and marketing. The shift from experimental pilots to achieving tangible ROI is evident, with 67% of CEOs confident they will see returns on their Gen AI investments within three to five years.

Key Applications of Gen AI in Consumer and Retail:

• Personalized Customer Experiences: Leveraging AI to understand customer preferences and deliver tailored recommendations.
• Inventory Management: Using AI-driven analytics to optimize stock levels and reduce waste.
• Marketing and Sales: Automating campaigns and creating hyper-personalized content to drive engagement.

However, the rapid adoption of Gen AI comes with its own set of challenges. 61% of CEOs cite ethical concerns as a significant hurdle, including issues around data privacy, bias, and transparency. Additionally, 84% of C&R leaders—the highest across all industries—believe that Gen AI regulation should mirror the rigor of climate commitments, emphasizing the need for robust governance frameworks.

ESG: Confidence Rises Despite Net-Zero Gaps

Environmental, Social, and Governance (ESG) principles are now deeply embedded in the Consumer and Retail sector, with 74% of CEOs stating that ESG is integral to their operations and strategies. Sustainability is no longer just a buzzword—it’s a business imperative.

Key ESG Insights:

• Customer Relationships and Brand Reputation: 44% of CEOs believe their ESG strategy has the greatest impact in these areas, highlighting the importance of sustainability in building trust.
• Net-Zero Targets: 63% of CEOs are confident in meeting net-zero goals by 2030, significantly higher than the cross-industry average of 51%. However, many acknowledge gaps in their roadmaps, relying on experienced sustainability teams to bridge these challenges.
• Diversity & Inclusion (D&I): Progress on D&I remains slow, with 51% of CEOs admitting that more needs to be done. For an industry that thrives on diverse talent, this signals a need for greater focus on fostering inclusivity.

Expert Insights: Navigating Complexity with Data and AI

Nikhil Sethi, Partner and Head, Consumer Goods, KPMG in India:

“CEOs in the Consumer and Retail sector are navigating a complex and challenging landscape, but their confidence in the industry’s future is reassuring. They need to manage growth in a time of muted spending, inflationary pressures, and increasing regulation. Data and analytics, powered by Gen AI, are key to managing this complexity. Organizations that integrate these technologies into their operations will gain a competitive edge.”

Puneet Mansukhani, Partner – Digital Advisory and Retail Sector Head, KPMG in India:

“Today, Consumer and Retail companies are transforming rapidly due to digitalization and the push to enhance customer experiences. Gen AI is taking center stage, helping retailers understand their customers better and optimize inventory management. CEOs must ensure that these investments align with long-term goals, delivering sustainable value and improving the overall customer journey. Despite slower growth, e-commerce remains resilient, especially in Tier 2 and Tier 3 cities, and with global brands entering India, the outlook is optimistic.”

The Path Forward: Strategic Priorities for 2024 and Beyond

As Consumer and Retail CEOs look ahead, their focus will be on balancing growth, innovation, and sustainability. Here are the key priorities for the sector:

1. Investing in AI and Digital Transformation: Leveraging Gen AI to drive efficiency, personalization, and profitability.
2. Strengthening ESG Commitments: Closing gaps in net-zero roadmaps and embedding sustainability into every aspect of the business.
3. Enhancing Diversity & Inclusion: Building a more inclusive workforce to foster creativity and innovation.
4. Navigating Economic Uncertainty: Adopting data-driven strategies to manage costs and optimize operations in a challenging economic environment.