By March of this year, nearly every retail business had to scrap their 2020 plans as they were forced to adapt to new policies and an entirely new set of customer needs. The pandemic has had dramatic effects on sales results, but the impact on industry structure may be even more pronounced.
In the short-term of 2020, the pandemic is providing a needed demand boost to stagnant grocery formats (supermarkets, hyper-stores) but a potentially fatal headwind to already struggling channels (department stores, non-food specialists). Changes in our 2020 forecasts highlight these dynamics:
- Ecommerce is now forecasted to account for nearly 90% of global chain retail sales added in 2020
- The supermarket channel saw its forecast for sales added in 2020 nearly double (from $55bn to $105bn) while hyper-stores are now projected to triple the original forecast of sales added (from $17bn to $52bn)
- Globally in 2020, updated forecasts predict department store sales to decline by 13.4%, fashion & apparel to decline by 14.5%, and chain food service to decline by 10.1% (which doesn’t even include independent restaurants)
While these short-term results are likely validated by our personal experiences, they have accelerated shifts in the global retail landscape that we may not fully appreciate for years:
- Our previous ecommerce forecast will now be exceeded two years ahead of schedule, accounting for 33.3% share of global chain retail in 2023
- Non-food channels will recover as societies reopen and economies improve, but volume is projected to permanently shift to channels that are currently thriving
- The top 5 global retailers will further consolidate their leadership position, forecasted to account for 28.2% share of global chain retail in 2025, up from 23.2% share in 2020
In the coming years, ecommerce, both click & collect and home delivery, will play a greater role in how consumers receive their purchases. This has profound implications across the value chain, but perhaps most importantly, it means that future retail winners will be well-positioned to follow that growth online. Brands have adapted their supply chains remarkably well in recent months to the dramatic shifts in demand, and should use this experience to identify where further capabilities need to be built.
The project consolidation also means that the top global leaders, who already have the most advanced digital capabilities in the industry, will exert more pressure on their competitors and brand partners. Reevaluating strategic customers should be a high priority for brands, and exploring complementary partnerships with other retailers and brands has never been more relevant for retailers.
Interested in learning more about how COVID-19 has impacted the retail industry? Download our infographics to understand how the pandemic has influenced forecasting in ecommerce.