What’s Shaping the Future of Retail? Insights from Top Industry CEOs

Over the past several years, the retail industry has weathered unprecedented challenges, ranging from changing consumer behaviors post-pandemic, continued inflation, increased geopolitical and social uncertainty, limited talent availability, and technology developments. These have all created a challenging environment for leaders across all retail segments—from apparel to grocery and even luxury segments.

In fact, Russell Reynolds Associates’ Global Leadership Monitor shows that, while consumer leaders are concerned about a range of external threats—with changes in consumer behavior and uncertain economic growth topping the list—they feel less prepared to address nearly every external organizational threat than they did six months ago (Figure 1).

Figure 1: Top external factors vs leadership preparedness for leaders in the consumer industry (H1 2024)

Leaders ranking the top 5 factors that will most impact their organization’s health across the next 12-18 months, and their preparedness to address them

_{Source: Russell Reynolds Associates H1 2024 Global Leadership Monitor, n=794 Consumer leaders | Note: only showing attributes where n>10}

To help retail leaders address these challenges, we launched our fifth Annual Consumer CEO Perspectives Review series. For this installation of the report, we recently interviewed 14 CEOs of retail companies (please see appendix for full interviewee list).

Via these conversations, we learned that retail CEOs are aiming to bridge these external threats by 1) getting closer to their consumers and 2) fostering cultures that prioritize innovation, while providing a more purposeful and balanced career trajectory for talent. While these goals are easier said than done, our interviewees are achieving them by taking the following steps:

1. Embracing the digital transformation—to an extent: Retail CEOs are getting closer to customers through strategic technology investments, such as advanced analytics and AI. These innovations are streamlining operations, enhancing customer experiences, allowing personalized content and providing insights through advanced analytics. However, our interviewees reiterated that they aren’t implementing “tech for tech’s sake”—they aim to tie every new tech investment to a specific business use case.
2. Focusing on key talent availability: The current talent scarcity in retail requires a renewed focus on employee engagement and development. Additionally, technological innovations are changing the success profile for many roles at every level of the organization. Retail leaders are implementing comprehensive talent management strategies that include competitive compensation and robust training programs, while providing a more purposeful and balanced career trajectory.
3. Modeling the culture of the future: Retail CEOs are working to foster a culture of resiliency and connectivity across a changing work structure, ensuring that their teams are equipped to handle the now-common rapid changes and uncertainties. Transparent communication and fostering an environment of trust and mutual support will be key for long term success.

Embracing the digital transformation—to an extent

As developments across artificial intelligence, data, and analytics accelerate, technology has emerged as a crucial differentiator for retail organizations. Not only does it enable retailers to better connect with customers via social media, digital commerce has overhauled consumer behaviors and expectations. Additionally, recent data and AI advancements are helping retailers become more efficient, optimizing supply chain processes and providing faster customer care. As consumers take a more global view, retail’s competitive environment is becoming more entangled. To keep pace, our interviewees all agreed that retail organizations need to amplify their innovative and technological capabilities.

That said, retail CEOs remain unsure of the best way to approach implementing these new technologies—particularly AI. Our data reinforces this point—according to our Monitor, while 77% of retail leaders agree that a strong understanding of generative AI will be a required skill for future C-suite members, only 40% are confident that they have the right skills to implement AI in their organization today. And while boards are now requesting quarterly updates on AI and other data-related endeavours, only 22% of retail leaders believe they have the right expertise of the board to advise on generative AI implementations.

In response, our interviewees emphasized the need for strong partnership with their boards to develop data and analytics capabilities and capture innovation opportunities. While there’s still many unknowns around these innovations, boards remain committed to challenging CEOs to think big. As such, our interviewees are boosting their data capabilities, gathering customer data from a range of new sources, and ensuring that their dedicated data and analytics teams are empowered to inform strategy and informed data-backed decision-making. These CEOs are recognizing customer data’s transformative effect on operations, which is prompting discussions on data acquisition strategies, investments, and the delineation of responsibilities between the CIO and other departments.

To be successful in any organization, technology innovations to be both top down and bottom up. Particularly in retail, both customer-facing frontline employees and the leadership team will benefit from technology educating and upskilling. Retail CEOs are working to ensure that the C-suite understands what technology’s implications—both positive and negative—so as to generate a culture of agility across the organization.

Focusing on key talent availability

Talent availability has remained an issue for the retail industry post-pandemic. The retail talent pool has continued to shrink, with turnover rates soaring as individuals opt for new opportunities in the gig economy and find freelancing jobs with more flexibility.

The need for in-person presence in retail field roles poses an additional challenge, as the industry grapples with the loss of experienced merchants who once thrived in department store programs. While advancements in analytics and technology offer valuable insights, there is a recognition that they cannot fully replace the intuition and expertise of seasoned retail professionals or in-store human oversight.

To address this, our interviewees noted a few different solutions to reinvigorate their talent pipelines. Some are offering better compensation or more benefits. Others are trialing more flexible work arrangements when possible. Many are also establishing internal programs to develop frontline talent faster, encouraging training and capability developments—sometimes even in tandem with other retail organizations. While approaches vary, it’s clear that every retail CEO is grappling with new talent strategies in the current work environment.

From a skills perspective, retail leaders are focusing on sales skills, as they are inherent to enticing an inflation-weary consumer base. They are also prioritizing deeper analytical and data acumen, due to the tech changes noted in the section prior. Additionally, much like their CPG counterparts, they are prioritizing leaders who bring curiosity, agility, and empathy, as these skills are required to navigate the complexities of the modern business landscape.

Modeling a culture for the future of retail

To best leverage these digital transformations and attract and retain top talent, retailers need to create a work environment in which their people can innovate and flourish. Much of this comes down to a healthy organizational culture. However, many interviewees noted that a cultural divide is emerging between their frontline employees (who have to be in stores when on the clock) and those at headquarters (who have more flexibility when it comes to their work arrangement.) This is leaving many CEOs wondering how to foster creativity and collaboration across this dichotomy.

While some retail CEOs are calling their entire workforce back to the office, it’s well-established that workers at every level appreciate flexibility, and that offering flexible work arrangements can be a key differentiator when retaining top talent.

As such, the CEOs whose organizations adopt a flexible arrangement are spending three to four days a week in the office, as they see this as essential for driving innovation.  To motivate in-office time, leaders need to frame their organization’s culture as an asset that people have access to if they’re spending more time together. Perhaps even more important than number of days spent in office, leaders with flexible arrangements must recognize that remote work has thinned people’s ability to develop intimate emotional connections with their colleagues. With that in mind, leaders should challenge themselves to design spaces and construct group meetings/events that preserve human connections and collaboration over the weeks when their people don’t run into each other in the hallway. What emotional experiences that employees have when they’re together can also be recreated in a flexible or hybrid work setting?

While there is no singular solution to retail’s working structure, leaders who commit to being meaningfully present when they ask people to come into the office to collaborate—and equally conscientious of the fact that privilege of flexible work is not available to everyone in the industry—will be best equipped to bridge the gap between these two segments of the retail workforce. This can be accomplished via transparent communication regarding challenges and strategic decisions, fostering an environment of trust and mutual support. By addressing these issues head-on and demonstrating strong, adaptive leadership, retail executives can guide their organizations through these turbulent times and position them for long-term success.

What’s next for retail CEOs?

As the retail industry continues to change and evolve, retail leaders should consider the following:

1. Align technology investments with your organization’s overall strategy: As media platforms change consumers’ behaviors and expectations, retail needs to keep pace with innovation. Ensure that tech investments and implementations are in line with your organization’s growth and talent strategies, and that you’re able to invest in associated up/reskilling as needed. The rise of AI isn’t just about implementing a new tool—we are in the realm of full business model transformation. As such, it’s key to have a clear-eyed view on which capabilities your organization has in-house, where any gaps may occur, and how your talent strategy needs to adapt to your future-state goals.
   
   
2. Develop comprehensive talent management strategies: According to our Monitor, 60% of retail leaders are willing to make a move beyond their industry.  With that in mind, retail organizations need to work to retain top talent, using motivators like competitive compensation, flexible working conditions, and robust training programs. Investing in leaders’ development plans via targeted accelerators, mentorship and sponsorship programs, and targeted accelerators will help retain top performers.
   
   
3. Frame your organization’s culture as an asset that people have access to if they’re spending more time together: Leaders who double down on facilitating connection will have better luck in bringing their teams together—and maintaining the same level of collaboration when those teams are apart. Design spaces and construct group meetings/events that preserve human connection, and encourage senior leaders to commit to a consistent, engaged presence for employees across every work arrangement.

Authors

Claus Fischer leads Russell Reynolds Associates’ Retail and Luxury practice. He is based in Hamburg.
David Torres leads Russell Reynolds Associates’ Consumer Knowledge team. He is based in London.

Appendix