According to Bain & Company, global digital native retailers will more than double their revenue share by 2030. Since investors expect profitability the fastest phase of growth for digital-first retailers is likely to be over. And traditional retailers have raised their game to gain an omnichannel advantage, thereby leveling the playing field.
Bain’s report ‘The Future of Retail: The Age of Convergence’, states that to drive a growing convergence between old and new retail players there has been a focus shift on profitability, scale and new revenue sources.
Big retailers such as Amazon, and other online marketplaces have gained a considerable momentum over the last decade and have captured about 60 per cent of global retail growth between 2013 and 2021.
This trend is here to stay and continue with digital native retailers, who are set to more than double their revenue share from 15 percent to 35 percent by 2030. The study also found that competition for an omnichannel advantage is driving a convergence in both talent and strategy between traditional retailers and digital insurgents.
By 2030, Bain & Company has predicted that more than fifty percent of retail profits will come from new ‘beyond trade’ revenue sources. These also include third-party marketplace activities, businesses to business services and consumer financial services. On the other hand, traditional retail activities which include the sale of goods, by comparison, are unlikely to drive even modest profit growth in the upcoming years.
Therefore, retailers are increasing their investment in digital, just as digital retailers are looking to acquire bricks and mortar stores. As retailers are looking to scale rapidly, the capital required for these transformations will encourage a new wave of deals.
Key Strategies for Traditional and Digital Retailers
The Bain & Company report has come up with four key strategies for retail businesses to succeed in the new age of convergence:
- Undergoing a customer epiphany
Where customers, rather than the channel, will shape decisions as retailers build a comprehensive ecosystem centered around deeply understanding their customers
- Excelling at omnichannel 3.0
Where retailers will have to invest carefully and make trade-offs as they look to stand out amid a world of omnichannel competitors
- Growing beyond trade
For which retailers will have to find new sources of value creation
- Playing talent Tetris
Where retailers must play a tricky game of “talent Tetris” to become the employer of choice
Marc-André Kamel, a Bain & Company partner and leader of the firm’s global retail practice, said, “Pre-pandemic, the momentum was with digital natives. Amid store overcapacity, many traditional retailers were struggling to adapt to the rise of e-commerce, competition from discounters, and waves of innovation. At the same time, ecosystem players such as Amazon were gaining share, partly by supporting their retail offering with profit generated by their extensive non-retail activities.”
“There are early signs, however, that traditional and digital retailers are converging towards a similar strategy. The two-way flow of talent between some of the youngest and oldest names in the industry is a clear sign of the convergence that will be one of the defining characteristics of retail over the next decade.”
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