Competition and Consolidation Leading Risk Factors
The vast majority of major retailers are concerned that adverse community reactions and market saturation are impeding their ability to expand in the United States, according to a recent report by BDO Seidman LLP. The study, The 2007 BDO Seidman RiskFactor Report for Retail Business, examined the risk factors listed in the most recent Securities and Exchange Commission filings of the largest 100 publicly traded U.S. retailers. The factors were analyzed and ranked by order of frequency cited.
“This initial study shows that market saturation and the ‘not-in-my-backyard’ reaction from various communities has resulted in a major impediment to U.S. market expansion for large retailers,” said Doug Hart, a partner in BDO Seidman’s retail and consumer-products practices.
Strong competition and general economic conditions were the most common risk factors, followed by impediments to further U.S. expansion; U.S. and foreign supplier/vendor concerns; and labor.
Other findings in the report:
Concerns with unions and the increasing pressure to provide health insurance were among the most frequently cited labor risks. Pension risks and high turnover were also cited;
Half of the top 100 retailers declared that changes in federal, state and local regulations may impact their bottom lines;
The easy access to capital over the past few years has created debt issues for businesses; and
The highly competitive retail environment has led to high turnover among C-level executives and put high-performing execs at a premium.
Top 10 Risk Factors| Competition and consolidation in retail sector | 91% |
| General economic conditions | 86% |
| Impediments to further U.S. expansion | 84% |
| U.S. and foreign supplier/vendor concerns | 81% |
| Labor (health coverage, union concerns | 56% |
| Changes to federal, state or local regulations | 51% |
| Implementation of IT systems | 50% |
| Dependency on consumer trends | 49% |
| Indebtedness | 44% |
| Natural disasters/terrorism | 44% |