Retail Market Analysis & Overview

Return to a sense of normal in 2021

MEDIUM RISK for entreprises

Fragmentation
Internationalization
Capital Intensity
Profitability

Fragmentation
Internationalization
Capital Intensity
Profitability

Resilience of household consumption for food and staples through the cycle
Boost to food and staples sales through the sanitary crisis
“Modern retail” still has a lot of room for expansion in Emerging Markets
E-commerce can be a growth catalyzer in Emerging Markets
Changing consumer habits are an opportunity
Expertise of established players on supply-chain issues

Strong price competition and overall limited room for differentiation for food retailers
Cut-throat competition between online and incumbent discretionary retailers
In the face of growing e-commerce penetration, adaptation to new business models proves very challenging for incumbent retailers

What to watch ?

• Easing of the sanitary situation allowing greater continuity in retail activity.
• Consumer confidence and consumer spending in large markets.
• Possible tensions on supply chains for goods imported from Asia.

•Penetration of e-commerce across countries and segments and, more importantly, whether incumbent retailers can secure profitable growth online.
• Penetration of e-commerce in the still untapped food segment in particular. The race between food retailers and e-commerce specialists has accelerated since the beginning of the sanitary crisis.
• Shifts in consumers’ shopping behaviors and preferences. Sustainability, in particular, is having a still modest but growing impact on the industry (demand for shorter supply chains, less plastic packaging, more durable goods, etc.)
• Shifts in business models among e-commerce specialists. Marketplaces, direct-to-consumer websites and so-called “super apps” are gaining traction.
• Trade tensions as additional trade barriers and tariffs can disrupt supply chains and pressure retail margins.

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2020 saw the retail industry go in very different directions across segments and countries. In mature economies, restrictions on non-essential stores gave a substantial boost to e-commerce sales, while the same non-essential stores could not entirely compensate for the lost sales of months under lockdown. Food retailers, on the contrary, benefited from generally higher food spending from households, thanks to restrictions imposed on the food-service industry (restaurants, bars, cafés etc.). Because government support to households has generally been limited, emerging economies experienced a sharper downturn.

Turning to 2021, we anticipate a mirror situation in which food retail sales will hit a plateau after their 2020 highs while discretionary retail sales will bounce back from their 2020 lows. E-commerce, while still growing at a double-digit pace, will experience a slowdown in sales growth but consolidate its position as a major distribution channel across all product lines. Integration of digital technologies, adaptation of store formats to changing consumer preferences and efforts to mitigate price increases will remain high on the agenda of all retailers.

Fast-moving consumer goods (food, personal care, house care, etc.): Traditionally the most resilient segment of the industry with little volatility in consumer spending and high industry concentration. The main challenge for retailers is to adapt their store mix to address changing consumer preferences.
Furniture, electronics, appliances, hobby and leisure: Segments with generally higher profit margins but greater volatility as they sell discretionary consumer goods. Fierce competition from e-commerce specialists. Uncertain transition froma brick-and-mortar to click-and-mortar business model.
Apparel and accessories: Much like other discretionary spending, apparel and accessories see reduced consumer spending when the economy decelerates.
Beauty and cosmetics: Very dynamic sales globally pushed by the retail expansion of luxury companies.
Department stores: Department stores face very strong competition from online stores. The segment is cutting capacities in North America and is starting to adapt in Europe, but still growing in other regions of the world.
E-commerce specialists: Buoyant top line growth but still elusive profitability for the vast majority of players