In the last five years, our retail sector has faced tremendous disruption. There was as much change in the last five years as in the last 25 years. We saw a real acceleration of change on multiple dimensions. If you go a little bit into that, we see a couple of forces happening at the same time.
First of all, consumers have fundamentally changed their behavior and are changing their behavior as we speak. Now, what we call the so-called “zero consumer” is emerging. And zero means they want to see zero boundaries between online and offline channels.
Zero consumers also have zero tolerance for delays. They’re not focused on whether or not a product is mainstream. They either splurge and “premium-ize,” or they scrimp to face the current economic reality. They also are high on what we call “zero loyalty.”
So, there is lot of experimentation going on, originally driven by the onset of the pandemic. They need to try new products and brands. And then finally, we see the zero consumer from a sustainability perspective, both wanting affordability but sustainable products.
Second shift: suppliers. Suppliers are also becoming customers. They are using retailers as a way to go directly to the consumers in terms of advertising, and there’s a whole business emerging on the back end of that.
Thirdly, we see change in the employees in this sector. There is an unprecedented amount of turnaround and people leaving. And how you evolve that model in the retail sector is actually quite fundamentally different.
Last but not least, investors spurred by initial increase in profits during COVID, particularly for the food retailers, are demanding higher growth returns as well. So, you see this onset of sector shifts, consumer, supplier, employees, colleagues, and investors changing the sector at large.
I think it’s important for retailers to understand where they are. Roughly 10 percent of retailers were responsible for 70 percent of the economic profit in the sector. And so, understanding where you are is a start point of how you’re making yourself indispensable in this changing world to consumers, both in terms of online offers and in terms of your offline experience - your stores, your loyalty, and the partnerships you’re building. And truly think back, “What’s my distinctive consumer experience that I’m going to provide?”
So, I think that’s one big pillar. I think the second pillar is around this notion of your suppliers becoming your customers and how new ecosystems evolve. And we see because of all the blurring of sectors, new business is currently already providing up to 10 percent of a retailer’s profit.
And it could be even higher if we fast forward to the next five, ten years. So, as a retailer, after you’ve taken care of your primary consumer needs, how do you now capitalize on this evolving ecosystem? What is your role? Where do you play? Where do you not play and how do you extract the extra money from it?
And then I think finally, as a conscious corporation, you need to think about, “How do I grow and how do I provide affordability while being sustainable?” You can’t say, “I’m just going to do whatever I want to the environment and to heck with the consequences.”
At the same time, you also can’t say, “I’m just going to be sustainable and environmentally-conscious. But I’m not going to be affordable.” So, how you treat that balance and where you invest to do responsible growth, inclusive growth, is a key priority going forward for retailers.
