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15 drivers changing the face of global retail
THE FUTURE OF RETAIL:
Policy
Sustainability preferences will challenge existing supply chainsRising awareness of climate change will trigger new consumer preferences for product transparency, sustainability, and traceability
Demand for Sustainabi l ity1
Data collection and utilisation are exploding• Data security costs and regulations will rise as data proliferation continues
• Retailers and manufacturers will use data to better target and personalise offers and messaging to shoppers
Data Security2
Data collection and utilisation are exploding• Trade values between EU and Russia
have constantly been decreasing as a result of mutual sanctions
• Membership talks between Turkey and the EU potentially come to an end
• China is looking to raise its profile as a global economic leader
• Russia is burdened by Western-imposed sanctions
• The US look to curb imports (particularly in context of NAFTA)and become more protectionist.The result would be three high-potential emerging markets (China, Russia, Turkey) more isolated from the West, making trade with them more difficult, particularly for North American and European companies
• All of the events above act as breaks to the free flow of goods and harm global supply chains
Global Disintegrat ion3
• Nearly nine in ten think it is important that their government sets targets to increase the amount of renewable energy used by 2030• Both climate change sentiment and food safety scares intensify pressure on supply chains to boost traceability and transparency.
2%4%
18%
74%
Source: http://ec.europa.eu
€74bn€103bn €72bn
EU Exports2014 2015 2016
€136bn€182bn €119bn
EU Imports2014 2015 2016
Don’t know
‘Not a serious problem’
‘A fairly serious problem’
‘A very serious problem’
European perceptions of climate change in 2017
Source: https://ec.europa.eu
Digital information created worldwide
0.1ZB
163ZB
247%
47ZB
291%
12ZB
500%2ZB
1900%
2005 2010 2015 2020 2025
0
50
75
25
100
125
150
175
ZB = Zettabytes
1 ZB = 1000 Exabytes (EB)1 EB = 1000 Petabytes (PB)1 PB = 1000 Terrabytes (TB)1 TB = 1000 Gigabytes (GB)1 GB = 1000 Megabytes (MB)1 ZB = 1,099,511,627,776 GB
Source: IDC DataAge 2025 Study
Global powers and trade relationships are remixing
Retail is changing fast and how the world shops will be very different in 2022. Here we’ve outlined 15 of the key factors that will drive that change. Brands and retailers should consider these drivers and prioritise according to how they impact their business. For the full set of drivers and their implications read Global STEIP 2017: The Future of Retail or email [email protected]
Economy
The balance of power in consumer spending is shifting• The majority of global consumer spending (64% in
2017) is concen trated in developed markets, making them the primary source of stable, profitable operations despite slow growth.
• Growth in emerging markets, which account for 25% of global consumer spending in 2017, will be faster but require heavier investments challenging short – and mid-term profitability
Consumer Spending1
Addressable population growth will be concentrated in emerging and developing marketsAmong the world’s 10 largest markets by consumer spending, China and India account for 84% of addressable population added over the next five years.
Addressable Populat ions2
Inadequate infrastructure remains a hindrance to retail growthWhile developed markets enjoy reliable national transportation networks, infrastructure in developing and emerging markets is being built in urban areas first, making connections to rural areas difficult.
Infrastructure3
Africa &
Middle East
Asia &
Oceania
Central &
Eastern Europe
Latin Am
erica
North
America
Western
Europe
$20,000 bn
$15,000 bn
$10,000 bn
$5,000 bn
$0
2012
2017
2022e
Source: PlanetRetail RNG
Japan88% of Japan’s total population is expected to addressable in 2022.
ChinaChina’s estimated 2022 addressable population is 876 million people, nearly twice as large as any other country on the planet
IndiaOnly 35% of India’s total population will be addressable in 2022.
35%
88%
61%
Source: PlanetRetail RNG
70%
80%
60%
50%
40%
30%
20%
10%
0%
Developing
20072012 2017
Emerging
20072012 2017
Developed
2007 20122017
16 16 15
49 48
41
66 64
57
15
Developed DevelopingEmerging
41 56
Infrastructure risk in 2017
Infrastructure risk by development stage
Infrastructure risk measures the risk that infrastructure deficiencies may cause losses to businesses operating in the market
Source: Economist Intelligence Unit
Consumer spending by region in 2017
The global population is skewing olderIn 2000, 39% of the world population was younger than 20, and only 10% was older than 60. By 2030, already one in six people (16%) will be older than 60, while only 31% will be younger than 20.
Urban
Rural
2012
2017
2022
e
NORTH AMERICA
CENTRAL & EASTERN EUROPE
2012
2017
2022
e
LATIN AMERICA
2012
2017
2022
e
WESTERN EUROPE
2012
2017
2022
e
ASIA & OCEANIA
2012
2017
2022
e
AFRICA & MIDDLE EAST
2012
2017
2022
e
Urban vs rural population by region
Source: United Nations
36%
27%
82%
71%
In 1997, retail sales in the UK accounted for 36% of total consumer spend. In the 25 years to 2022, this will be reduced to 27%.
In 1997, retail sales in China represented 82% of total consumer spend. In the 25 years to 2022, this will be reduced to 71%.
Source: PlanetRetail RNG
Society
Age Structure1
Urbanisation2
Experience vs Things3
0 20 40 60 80 100
2000
2010
2015
2020
2025
2030
0-19 20-59 60+
Age Range:
2000
2030
Source: United Nations
Global Population by Age Groups
Urban shoppers will drive growth for retailers and brandsRetailers and brands can capitalise on the higher spending power and more diverse retail demands of urban shoppers.
The world’s top 150 emerging markets cities will account for nearly a quarter of global retail sales by 2022.
Consumers are shifting spend from products to experiences
Technology
Mobile is changing commerce as adoption rises• More than 1 billion new internet
users will be added by 2021
• The vast majority of new users will gain access through mobile devices
Mobile & Internet usage1
Payment Methods2
2012
2014
2015
2016
2013
$589mn
$1,039mn76.4%
$2,677mn157.7%$3,125mn16.7%
$5,021mn60.7%
YOY
YOYYOY
YOY
Funding & investment in ai companies 2012–16
Worldwide
China
Others
UK
South Korea
Japan
USA
Source: CB Insights, via statista.com
Source: Economist Intelligence Unit
Mobile Subscriptions (per 100 people)
Personal Computers (per 100 people)
Mobile is at the centre of payments innovationCash and credit cards still rule, but mobile has emerged as the key to future payments development.
Art if ic ia l Intel l igence3AI will transform retail analytics, planning and executionIt will optimise buying, merchandising, inventory management, and fulfilment processes
Infrastructure and consumer behaviour distinctions are creating wide international differences in payments innovation. These are the markets with the highest mobile transaction value:
Source: IMF, World Bank, UN, Eurostat
Highest mobile transaction values in 2017
0
100
75
150
50
25
175
125
Developed2012 2017 2021e
Emerging2012 2017 2021e
Developing2012 2017 2021e
Mobile vs. PC Adoption
Industry
Retai l Structure1
Small and convenient formats are winning• E-grocery sales will see strong
growth albeit from very low levels
• Hypermarkets are declining globally, while smaller stores grow
• Discounters continue to gain share globally, with 5% share of sales in 2022
• Supermarkets remain the largest food-selling channel globally, with 46% share in 2022
• Convenience is now the fastest-growing store-based channel worldwide
Channel Composit ion2
E-commerce is taking share away from physical stores• Ecommerce will account for 25% of all global modern chain retail sales by 2022, up from 8% in 2012
• The majority of retail sales will still go through physical stores – and will continue to do so for the forseeable future
• Stored-based sales will continue to see incremental growth, especially in emerging markets.
E-Commerce3
2022
2017
2012
8%18%25%
75%82%92%
Share of formal food retail is rapidly increasing in developing and emerging markets
Formal food sales will account for 49% of total food sales in 2022
49%Informal retail will still account for 74% of food retail in developing markets in 2022
74%
Source: PlanetRetail RNG
Hypermarkets / Superstores
Others
Discounters
Supermarkets / Local Stores
Global food retail sales by channel (%)
Global e-commerce vs store based chain retail sales
Source: PlanetRetail RNG
E-commerce Retail Sales
Store-Based Chain Retail Sales
Note: Based on PlanetRetail RNG modern chain retailer universe
Source: PlanetRetail RNG
100%
80%
60%
40%
20%
0%202220122007 2017
