The retail industry has experienced a progressive revolution since the late 1990’s due to changing consumer shopping habits and alterations in the competitive landscape. The impact of this shift has been a major upheaval among established store-based retailers who face significant challenges moving forward:
- The number of major retailers going out of business is forecast to increase dramatically
- There will be a significant rise in defensive mergers and consolidations
- Private equity and restructuring players will play an ever increasing role in the sector
What is behind these dramatic developments? Most traditional store-based retailers have become the targets and increasingly the victims of the four “Unstoppable Forces”:
Key Trends
Large Supermarkets & Hypermarkets:
- Supermarkets are exploiting their huge operational advantage to make large in-roads into the non-food sector
- Leverage loyalty card information to create tailored store formats, product ranges, promotions, etc. to adapt to customer segment needs
- As an example, UK supermarkets are expected to control over 30% of the non-food spend by 2010
Hard Discounters:
- Consumers from all social and earning segments have been won over by hard discount retailers, who have invested enormous resource to improve the quality of their food and non-food ranges and thereby appeal to all groups
- German discount giants such as Aldi and Lidl are aggressively expanding their global footprint with their highly successful strategies and are rapidly stealing market share from traditional supermarket competitors
Remote Shopping (Internet & Catalogue):
- Consumers have embraced remote transactions at the expense of physical shopping
- Hardest hit are retailers located in city centres
- The Internet and Catalogues are well on course to control at least 25% of all retail sales by 2010 in many European markets
Electronic Second-hand Market:
- The Internet (in particular E-bay and Amazon Marketplace) has led to the professionalization and democratisation of second-hand selling
- Second-hand markets are now socially ‘acceptable’ and highly valued for their extensive, well priced product ranges
- The markets have reached such a scale that they are displacing large amounts of traditional retail sales
Until recently, the buoyant economy and strong consumer spending has cushioned the impact of these forces. However, current market turbulence and recession means the industry is about to feel their full force.
We forecast that the most exposed retailers will see a 30% – 50% loss of their available market, which would almost certainly trigger a major industry consolidation. In addition, all players will experience significant pressure on their existing pricing structures as customers search for the best value for money.
How can we help?
Lansdowne has world-class retail expertise and wide ranging sector experience. Our focus is on supporting and guiding retailers to face up to the three “Unstoppable Forces”.
Strategic Repositioning
- Support strategic repositioning through a focus on viable niches and unmet consumer needs
- Identify new ways to differentiate
- Develop solid business cases to support innovative and creative strategies
Proposition Optimisation
- Optimise store formats and mix
- Expand and optimise channels
- Evaluate potential brand stretch opportunities for products and services
Productivity & Supply Management
- Implement industry best practice for basic processes, such as the systematic approach of leaders such as Tesco
- Cost reduction via strategic supply management and procurement of direct and indirect goods and services, including transportation
- Logistics and inventory optimisation
Multi-Channel for Real
- Re-wiring the business to become truly multi-channel, involving fundamental changes to the way the stores, the supply-chain and the online and remote businesses operate to create a coherent, integrated experience that provides customers what they want, when they want it
- Returns Optimisation to radically reduce product return costs through our proprietary toolkit
- Consumer goods multi-channel optimisation – seizing the opportunity to dis-intermediate retailers and build a direct relationship with the consumer
- Internationalisation – grasping the radical growth opportunities offered by new countries through both stores and multi-channel optimisation
Lansdowne’s Retail Experience
Lansdowne’s Retail team is composed of deep-rooted retail experts with wide ranging experience right across the spectrum. Our consultants have worked for more than 40 leading retail and consumer companies in the UK and abroad delivering in excess of 120 projects.
Lansdowne’s deep expertise covers the entire retail spectrum
