2019 Retail Industry Outlook
The global economy is currently at a turning point. Until early 2018, the global economy displayed strong growth. With inflation accelerating in major markets, governments making shifts in monetary and fiscal policies, and most of the emerging markets experiencing significant currency depreciation, the global economy will slow down in the near future. For retailers, this change will mean slower consumer spending growth, higher consumer prices, and disrupted global supply chains. Deloitte’s Global Powers of Retailing 2019 reviews the global economic scenario and its impact on the retailing industry.
As retail collides with adjacent consumer-focused sectors, it continues to undergo constant disruption. And amid the disruption, one thing remains consistent: Consumers are becoming more powerful, with expectations of “having it all.”
The nonstop disruption taking place in the retail environment is challenging many of the norms of retailing, creating opportunities for new entrants, and making transformation an imperative for incumbents. Retailers should stay ahead of the changes driving the marketplace in 2019.
Consumer. Consumers realize they can have it all. Today’s digital consumer is increasingly connected, has more access to information, and expects businesses to react to all their needs and wants instantly. Many shoppers have an increased desire for personalized services, and they are starting to think more about privacy in the wake of high-profile corporate and social data breaches.
Competition. The retail market is negotiating a change in the competitive structure of the industry. A myriad of newer, smaller, and tech-enabled competitors are stealing share while players from other sectors are developing their own retail platforms. The result? A marketplace in which more brands have exposure.
Climate. The 2018 economy of strong growth, high consumer confidence, and low unemployment may be showing some cracks in the foundation. The United States is facing a flattening yield curve, rising asset prices (and possible market corrections), and tightening monetary policy—all common indicators prior to a recession.2 Combined with geopolitical uncertainty,3 the changing business and economic climate means retailers should plan for a variety of scenarios.
Configuration. The value chain across retail is becoming increasingly compressed. Many companies are accelerating their merchandise cycles, moving supply chains closer to the consumer, and deploying advanced technologies that can better connect them with consumers.
Convergence. The lines demarcating industries and sectors have often blurred or disappeared. Retailers are increasingly bleeding into other consumer sectors, while those offering retail experiences are growing. It is becoming difficult to tell retail and technology companies apart. Media and advertising are no longer a one-way street.4 And, like retail, health care is becoming more consumer-facing.
To stay competitive, many retailers have shifted their investment strategy over the last 10 to 20 years. They have moved from growth via new stores to growth via big investments in all areas of the business—for example, launching new digital sales models, acquiring other businesses, or transforming their fulfillment processes. As a result, the cost to increase market share continues to grow, and many retailers find themselves in a precarious position.