Five key issues for retailers in 2020

Retail in mature Western economies will continue to suffer challenges, with further casualties, as the sector evolves to meet the fast changing demands of the 2020’s consumer. Despite these challenges, technology allows even the smallest business with a relevant offer the opportunity to reach a global audience, and over the next decade Maureen Hinton, Group Retail Research Director at GlobalData, expects to see the emergence of new major retail brands replacing unevolved legacy brands.

The five key issues retailers need to address in 2020 and beyond are:

1) Saturation – the deadly combination of both consumer saturation and retail sector saturation

Both retail demand and supply are saturated in mature retail economies. On the demand side, consumers have a saturation of choice and access due to technology and the online channel but are becoming less inclined to buy. Meanwhile on the supply side, there are not just legacy retailers that have over-expanded and now have costly physical store portfolios draining their profits, but a multitude of small businesses that can sell to anyone, anywhere, anytime online. The result is retail spending growth is contracting and being spread more thinly across a wider range of suppliers.

2) Maintaining relevance – the shortening lifecycle of retail brands

The shelf life of retailers is shortening. Communication is so fast and universal, trends change far more rapidly, and growth is limited. Retailers must always be looking ahead to ensure their brands and propositions remain relevant. Fashion brands, such as Abercrombie & Fitch and Jack Wills, that have a brief spell in the sun, are doomed unless they can constantly adapt to new consumer trends – as the major sports brands have done. Long-standing legacy brands must adapt or face an inevitable death. However, the digital world is creating opportunities for even the smallest businesses to reach a global audience with the relevant offer – for instance Glossier.

3) New disruptors – the unpredictability of retail

German discounters have upset the grocery landscape; Amazon has introduced a whole new level of convenience; Alibaba is creating a new model for grocery retail in China with its Hema supermarkets; and the health and beauty sector has been completely disrupted by both new online and celebrity brands that did not exist a decade ago. Technology is moving fast and creating unpredictable opportunities for new businesses. If a retailer is not creating these opportunities it must be constantly aware of the changing retail landscape so it can defend and exploit competitive threats.

4) Sustainability & ethics – new values taking precedence

The focus on sustainability and ethics is growing fast and retailers cannot afford to ignore these trends. Consumers are becoming far more aware of the impact they are having on the world around them and that is beginning to inform their choices. Resources are becoming more limited and retailers have to adapt their supply chains to incorporate new procedures and systems. Renting and recycling is becoming a major trend that is disrupting the traditional retail model.

5) Synchronisation of online and offline growth – the need for new business opportunities

Online growth is slowing and multichannel retailers with an established online business (such as John Lewis & Partners) can no longer rely on the online element to compensate for declining physical store sales. These retailers need to find the optimum balance between the physical and digital elements to maintain a profitable business and sustain growth – which is extremely difficult in a sector where growth is limited.

Source: GlobalData Plc