Retail is being reinvented.
New business models, expanding channels and shopper expectations continue to change the landscape. These three areas are redefining industry rules and relationships, transforming the path to purchase in the process.
A new report from Euromonitor International, published in collaboration with the National Retail Federation (NRF), explores how retail is being reinvented.
New Business Models
Rapid digitalization has given rise to new business models such as marketplaces, direct-to-consumer and social commerce.
Companies that didn't start out in retail are now competing for shoppers' attention and spend. Examples include social media networks, streaming services, and gaming platforms. These platforms weren't originally built for commerce, but they continue to expand their capabilities with shoppable content, marketplaces, and their own product sites.
TikTok and Douyin owner ByteDance are taking full advantage of the apps' reach to audiences and their influence on the buying process. In 2020, Chinese platform Douyin added commerce features and made big profits. According to Euromonitor data, online sales of beauty and personal care products on Douyin's marketplace surged 50% in Q1 2024 compared to Q1 2023, and the company's share increased by 10 percentage points. Douyin became China's largest online retailer in this space as of Q1 2024.
Expanding channels
As retailers continue to shift their business models from single-channel to multi-channel to omni-channel, these additional touchpoints present opportunities to engage shoppers and potentially lead to further growth.
The challenge: harmonizing these channels to create a unified experience that puts the customer at the center of the transaction.
Because food is such an essential part of our lives, the category is a key battleground to watch as the retail industry evolves. There used to be a clear line between buying food at a grocery store and buying it at a restaurant. But changing consumer habits and advances in technology mean that distinction is no longer so clear.
The majority of food spending still occurs in brick-and-mortar stores.
In 2023, 72% of global food sales will come from local grocery stores, supermarkets, and hypermarkets.
Source: Euromonitor International
According to Euromonitor data, dine-in orders account for half of all dining out spending.
However, these four channels have lost market share to discounters, warehouse stores, food e-commerce, and takeaway foodservice (delivery, takeaway, drive-thru) over the past decade. Euromonitor expects food e-commerce and takeaway foodservice to continue losing market share through 2028.
The bottom line is that channels that offer greater value (discounters and warehouse stores) or convenience (e-commerce and grab-and-go food services, including buy online, pick up in store) are thriving.
Shopper expectations
Consumers expect more during their shopping journey: unique offers, enhanced recommendations, better service, easier checkout, faster delivery, etc. Consumer standards are high and will continue to rise.
Economic conditions, technological advancements, shifting channels, and personal values all influence customer preferences. Retailers and brands must continually innovate to meet greater demand. To stay competitive, retailers and brands need to thoroughly understand their target audience.
The shift towards values-based purchasing is one example.
Finding a bargain is the best part of shopping
Source: Euromonitor Voice of the Consumer: Lifestyles Survey, January-February 2024
But this sentiment has fallen by 16 percentage points over the past decade, with the trend slowing somewhat in recent years due to rising costs of living.
Price is important, but it's not the only consideration: quality, sustainability, convenience, reliability, etc. are examples of additional inputs into gauging the value of a purchase.
Charting a path forward
Retailers and brands are being forced to adapt. The rate of change is accelerating as new technologies are introduced at shorter intervals. What's more, many of today's trends can seem to contradict each other.
Price and value is one of the 12 tensions Euromonitor International has identified as most impactful for the future of retail, and retailers, brands, and other businesses serving the retail ecosystem will need to balance this and other tensions to stay relevant in the eyes of their customers now, as well as in the future.
To help you navigate these changes and protect your bottom line, download our new white paper, “Reinventing Retail: A Framework for Future Growth.”
