Retail is being reinvented.
New business models, channel expansion and shopper expectations continue to change the landscape. These three areas redefine industry rules and relationships – transforming the path to purchase in the process.
Euromonitor International explores the ways in which retail is being reinvented in a new report published in partnership with the National Retail Federation (NRF).
New business models
Rapid digitalisation paved the way for new business models like marketplaces, direct to consumer and social commerce.
Companies that didn’t start in retail are now competing for shoppers’ attention and their spend too. Examples include social media networks, streaming services and gaming platforms. These platforms weren’t originally built for commerce but continue to expand such capabilities with shoppable content, marketplaces or their own merchandise sites.
ByteDance, the owner of TikTok and Douyin, is capitalising on the audience reach and influence of its apps in the buying journey. In 2020, its Chinese platform, Douyin, added commerce functionalities and is reaping massive gains. Online sales of beauty and personal care products on Douyin’s marketplace surged by 50% in Q1 2024 vs Q1 2023, and the company gained 10 percentage points in share, according to Euromonitor data. Douyin became the largest online retailer in China for this category as of Q1 2024.
Channel expansion
Retailers continue to move from single channel to multichannel to omnichannel business models. These additional touchpoints serve as opportunities to engage shoppers, which could lead to incremental growth.
The challenge: harmonising these channels to create a unified experience that puts the customer at the centre of the transaction.
Given that food is a necessity in our lives, it means this category is a prime battleground for observing wider retail industry developments. There were once clear lines of demarcation between food purchases in grocery stores vs restaurants. But that distinction isn’t as clear cut anymore due to evolving consumer habits and tech advancements.
Physical channels still capture most food spend.
In 2023, 72% of global grocery sales came from local grocers, supermarkets and hypermarkets
Source: Euromonitor International
Eat-in orders accounted for half of foodservice spend, according to Euromonitor data.
But those four channels lost share over the last decade to discounters, warehouse clubs, food products e-commerce and on-the-go foodservice (delivery, takeaway and drive-through). Euromonitor expects food products e-commerce and on-the-go foodservice to keep stealing share through to 2028.
The bottom line: channels that deliver greater value (discounters and warehouse clubs) or convenience (e-commerce – including buy online, pick up in store – and on-the-go foodservice) are thriving.
Shopper expectations
Consumers expect more of the shopping journey – unique offers, enhanced recommendations, better service, easier checkouts, and faster delivery, for example. Their standards are high and will only continue to rise.
Economic conditions, tech advancements, channel shifts and personal values all influence their preferences. Retailers and brands need to continuously transform to deliver on greater demands. To remain competitive, retailers and brands must know their target audience inside out.
The shift towards values-based buying is one example.
Finding bargains is the top shopping preference
Source: Euromonitor’s Voice of the Consumer: Lifestyles Survey, fielded January to February 2024
But this sentiment declined by 16 percentage points over the last decade, with the trajectory slowing slightly in recent years due to the cost-of-living crisis.
Price is important, but not the only consideration. Quality, sustainability, convenience or authenticity are examples of additional inputs for measuring the value of a purchase.
Charting a path forward
Retailers and brands are forced to adapt. The rate of change is accelerating as new tech is introduced at smaller intervals. In addition, many of the trends of the day can appear to be at odds with one another.
Price vs values is one of 12 tensions that Euromonitor International identified as most impacting the future of retail. Retailers, brands and others servicing the retail ecosystem need to balance this tension and the others to stay relevant in the eyes of their customers today – let alone in the future.
Download our new white paper, Retail Reinvention: A Framework for Future Growth, to help you navigate these shifts to protect your bottom line.