Retail Executives Expect Online Sales to Grow 10 Percent in 2015

Click, swipe, tap and repeat. On the heels of another banner year for e-commerce, retail CFOs expect U.S. consumers’ feverish appetite for online buying to continue its strong upward trajectory in 2015.

According to a recent BDO USA, LLP survey, nearly four out of five (78 percent) retail CFOs anticipate their online sales to grow. Overall, CFOs forecast an impressive 9.9 percent boost to e-commerce sales this year. This projected increase comes after the Commerce Department’s estimate of a record-breaking $304.9 billion in U.S. online sales in 2014.

To capture more of consumers’ dollars across digital platforms, a plurality (37 percent) of CFOs say their primary growth tactic for 2015 is expanding their e-commerce and mobile offerings. At the same time, when asked where CFOs plan to spend the most capital this year, 22 percent point to e-commerce and mobile channels. Meanwhile, mobile commerce is growing at nearly three times the rate of overall e-commerce, according to PayPal and Ipsos, and retailers are steadily realizing the need to enhance each touchpoint on their customers’ path to purchase. To keep up with the surge in mobile shopping, 68 percent of CFOs plan to increase their investment in mobile technologies in 2015, a leap from the 40 percent who planned to do so last year.

With more digital growth and more cyber threats on their radar, retailers are committed to both strengthening and securing their platforms, and a plurality (28 percent) of CFOs anticipate investing the most capital into their IT systems and technology this year. Following the wave of high profile breaches at major retailers in 2014, including Michaels, Supervalu and Home Depot, it comes as little surprise that more than half (56 percent) of CFOs have increased their spending on cybersecurity in the last 12 months. Among these retailers, 89 percent have begun using new software security tools and 81 percent have created a security breach response plan. At the same time, 40 percent have hired an external security consultant and 11 percent have brought in a Chief Security Officer.

“Consumers crave speed, selection and the convenience of shopping anywhere and anytime at the touch of a button,” says Natalie Kotlyar, partner in the Consumer Business practice at BDO USA, LLP. “But investing in online and mobile systems is a difficult balancing act. Staying competitive requires retailers to deliver a seamless, engaging experience across channels, while at the same time investing to protect their consumers’ from the growing threat of cyber attacks.”

These findings are from the ninth annual BDO Retail Compass Survey of CFOs, which examined the opinions of 100 chief financial officers at leading retailers located throughout the country. The survey was conducted in January 2015.

Other major findings of the 2015 BDO Retail Compass Survey of CFOs:

Tax concerns vary across the board. Amid ongoing debates about tax reform, as well as greater government scrutiny around tax inversion deals, a plurality of CFOs (34 percent) are most concerned about corporate federal income tax, directly in line with last year’s numbers. As retailers continue to implement Affordable Care Act provisions, payroll-related tax ranks second among their top tax challenges this year, with 25 percent of CFOs citing it as such.

Concerns associated with internet sales tax remain hushed. Despite retailers’ heightened focus on all things digital in the year ahead, internet sales tax is of little concern, as only 12 percent of CFOs cite it as their top tax worry this year, down from 17 percent in 2014. After the Marketplace Fairness Act was shelved in the House during December, most CFOs (69 percent) say they expect minimal impact on their business from the potential legislation. Still, for those CFOs who do foresee challenges were the bill to be enacted, 15 percent cite an increase in the cost of systems to track and report sales, and four percent anticipate a decline in e-commerce sales.

Revenue recognition standard not yet on retailers’ radar. On May 28, 2014, the Financial Accounting Standards Board and the International Accounting Standards Board announced a new revenue recognition standard that takes effect in 2017, replacing existing U.S. generally accepted accounting principles (GAAP). Although, the new standards may significantly impact the way retailers recognize revenue, BDO’s survey found that more than half of retail finance chiefs (59 percent) have not yet familiarized themselves with the changes.