Said like this, predictions for retail 2021 seem just like a bookmaker thing: endless bets on timings, models, successes and downsides of global distribution, justified, moreover, by recent history, where there were no lack of traumatic events, surprises and hasty statements. The nefarious virus that has been affecting the lives of billions of individuals for a year has however been and will still be a test of the capacity for innovation necessary to compete or survive. Without forgetting the many that, on this, have already won or lost the game.
The ‘new normal’ risks remaining a banal and abstract concept that is of any use for orienting among supposed and real changes. Also because, it is worth recalling, the emergency induced by COVID-19 will undeniably have encouraged original solutions and choices but, in large part, has accelerated processes already underway.
For retail in 2021, let’s try to identify and, above all, hope for some trends stronger than others in the areas in which we are directly engaged. Without preaching to the choir, if possible, like in the case of the e-commerce boom which, however, highlights a curious dual interpretation: in a COOP Italia survey of last month, for 40% of food top executives it represents a threat, while for 55% it represents an opportunity.
Let’s take a look out the window, then, and try to look a little further than the tip of our nose to which the digital delay of our country risks to get us accustomed to.
2021 begins with a very awkward comparison with 2020, in which large-scale distribution saw the highest sales growth of the last decade (up 4.3%, i.e. 4 billion Euros)¹. From the emotional response to the lockdown and the sharp decline in demand in the catering industry, retail shops, mostly discount stores and supermarkets, are the ones that benefited the most.
Consumption indicators for the new year are more encouraging (up 5.0% with respect to 8.7% in 2020)², but to benefit from it will be only the most innovative retail businesses. The rapidly expanding international development of omnichannel retailing has, for now, only been met in Italy with tentative replicas and there is an increasing need for a radical reform of the store with adequate technologies, aimed at the continuity and homogeneity of the relationship with the customer.
There is certainly no shortage of models to be inspired by. The large American – food and non-food – retailers of which some doubted the restructuring capabilities, have instead marked the way. A case in point is Target (almost 2,000 stores) which in recent years has undergone a major digital restructuring of its network. In the third quarter, the company increased its sales online and at stores open for at least a year by 20.7%, while sales in longer established stores climbed by 9.9%.
The growth of 2021 will not return to pre-COVID levels and it will be a question of defending, as far as possible, the positions gained and see if and how this may be capitalized to redesign the large-scale distribution of the immediate future. Integration of the sales cycle, restructuring of formats, customization of the e-grocery offer and services must be made the points of the reform action of retail 2021. This is not new as we have been talking about it for some time, but what changes and increases every day is the degree of urgency.
¹Nielsen data ²ISTAT data
FASHION & LUXURY
If the closure of stores, due to the need for social distancing, were to continue in the coming months, for ‘The Business of Fashion’, one of the most authoritative media voices in the industry, there will be more or less marked financial difficulties for 80% of the fashion companies listed in Europe and North America. In estimates for the year just ended, profits will decline by 93% after rising by 4% in 2019 and a considerable number of global players face a serious risk of bankruptcy.
Also for fashion, however, some new trends had begun to emerge even before the pandemic, which were then highlighted during the year in the decisions, sometimes traumatic, taken by companies in the sector such as, for example, the sharp reduction of Zara’s physical network. The business model being consolidated favours ‘experiential’ retail which is mutually dependent on e-commerce, with large spill-over effects on stock management and services such as the pickup of goods and delivery of returns at the store. The need to focus attention on sustainability will become even more important, and circular economy is already a topic of discussion among producers at all levels.
For the luxury goods market, according to Bain/Altagamma forecasts, in 2021 the possible growth will have wide fluctuation margins of between 10% and 19%, where decisive factors will be the evolution of COVID-19 and the possible and longed-for return to global travel. Whilethe final 2020 operating result of brands will be 60% lower than in 2019, in contrast – and this is perhaps not surprising – China is the only country to end the year with a positive balance up 45%. Of strategic importance is local consumption across all channels, price ranges and generations of Chinese consumers.
FOOD & BEVERAGE
Catering is paying a heavy price to COVID-19 all over the world. According to Bain & Company, in our country, bars and restaurants will close the year with a net loss in value of 37% on an annual basis, equivalent to 27 billion Euros. A clearer idea of the storm that hit the sector is given by the comparison with the worst previous fall: it was during the 2009 crisis when the market recorded a downturn of -5%.
The contraction in out-of-home spending, which in the catering sector was an indicator of constant growth until 2019, was worsened by the smart working phenomenon which took away entire urban areas of activity from operators. The upswing in home consumption will increase the innovation effort of external consumption points, which will have to improve the attractiveness of their offer at the table, from the menu to the payments, enriching it with their own home delivery service or through food delivery carriers, which are rapidly growing all over the world. The hybridization of the large-scale distribution and the outsourcing of kitchens will consequently be among the key players of 2021.
THE 2021 THAT WILL BE AND THE 2021 THAT WE WANT
Current projections fluctuate between a post-COVID state reachable in the summer and a feared third wave of the virus. The probability of a first retail semester of 2021 consistent with what we are experiencing is however strong. We don’t know yet when the supposed return to ‘normality’ will take place, but this will not certainly be as we remember it. It is thus worthwhile hoping that it will be marked by a few key words of our way of being: innovation, sustainability, technology. And we add diversity and inclusion for those who have not yet noticed that these are strategic levers for business transformation. As well as, above all, for a decent living.