Top global retailers sustain year of revenue growth
Digital divide to challenge retail industry according to Deloitte Global
Published: 22 January 2016
The top 250 global retailers generated aggregated revenues of US$4.5 trillion in fiscal year 2014, representing a steady growth of 4.3 percent compared with 4.1 percent in 2013, according to Global Powers of Retailing 2016: Navigating the new digital divide from Deloitte Touche Tohmatsu Limited (Deloitte Global). This is a positive signal for the industry which had not so long ago witnessed revenue declines in 2011. However, the picture is uneven by region with retailers in North America and Africa/Middle East enjoying revenue growth, while those in Asia Pacific, Europe, and Latin America enduring declining growth.
“Slower economic growth in several markets, lower inflation, falling oil prices, and a stronger US dollar, were among dynamics which generated mixed fortunes for retailers across different regions,” explains Dr. Ira Kalish, Deloitte Global Chief Economist. “For US retailers the strength of the US dollar meant increased purchasing power for US consumers, helped also by better economic growth and improving employment conditions in the US. The Chinese economy on the other hand slowed considerably during this time, mainly due to weak exports and weakening investment. Nevertheless, consumer spending held up fairly well, although the luxury sector faltered.”
"Despite economic slowdown in China, 8 of the 14 Top 250 Chinese retailers ranked among the Fastest 50 in 2014, indicative of how they benefit from government policies which seek to build consumption demand as the dominant growth engine for China’s economy, rather than exports and investment demand. The speed at which this transition takes place will depend on the extent to which the government implements reforms for boosting the consumer sector," said Mr. David Lung, Managing Partner of China Consumer Business Industry at Deloitte China.
Bottom-line performance was also uneven across the geographic regions, but the overall direction was down. The report indicates that the top 250 retailers posted a composite net profit margin of 2.8 percent in 2014, compared with 3.4 percent in 2013.
The impact of digital technology
Global Powers of Retailing 2016 also highlights the impact of technology on in-store shopping, indicating the rapidly increasing digital connectivity of shoppers. Digital behaviors and expectations of consumers are evolving faster than retailers are delivering on those expectations, says the report, creating a "digital divide." Three important trends are identified:
- No single path toward digital adoption. While all markets are moving toward widespread digital adoption, some are taking somewhat different routes. Some emerging markets, for example, are entirely skipping adoption stages previously experienced by developed markets.
- One digital "size" does not fit all customers. Digital behavior varies depending on demographic factors such as age and income, and also by the product type being sought.
- Consumers are demanding better digital tools. Digital tools and channels can both extend a retailer's reach and increase revenue, but customers are currently feeling unsatisfied and underserved by many retailers’ current digital offerings.
“There is a gap between what consumers expect and what retailers are currently delivering in terms of the consumer’s evolving desire to incorporate digital into their in-store shopping experience,” says Vicky Eng, Deloitte Global Sector Leader, Retail. “Some retailers may underestimate the digital influence, while others recognize the real opportunity to capitalize on this digital divide.”
"Chinese customers are becoming more and more sophisticated in making shopping decisions, both for online and in-store consumption. As a pre-purchase step, they will look for information and comments from different social media platforms, including web blogs and online discussion groups, which are accessible through their computers, tablets and mobile devices. Understanding digital, including the impact of mobile influence, will assist companies to bridge the ‘digital divide’. Quite simply, it’s leveraging digital to drive business," Mr. Lung added.
About the study
The Global Powers of Retailing 2016. Navigating the new digital divide is a report from Deloitte Touche Tohmatsu Limited (Deloitte Global). It identifies the 250 largest retailers around the world based on revenues through the analysis of publicly available data for fiscal year 2014 (including companies with fiscal years ending June 2015). The report analyzes performance based on geographic region, primary product sector, e-commerce activity, and other factors. It also provides a look at the world’s 50 largest e-retailers, an outlook for the global economy, an analysis of market capitalization in the retail industry, as well as an introduction to key findings of the forthcoming Deloitte report on Navigating the New Digital Divide: A global summary of findings from nine countries on digital influence in retail.