In the retail sector, the divide between “winners” and “losers” continues to widen. The top 25 players alone accounted for more than 90% of the growth in terms of capitalization as financial markets are rewarding retailers best prepared for the post-Covid era.
According to McKinsey, the year 2020 demonstrated that the recipe for successful retailing has changed and that companies that take a long time to adapt to changes in consumer behavior may not be able to recover. The trends exacerbated by the pandemic are accelerating the restructuring in the sector, which began some years ago.
The impact of the coronavirus crisis is clear, but despite the loss of income by the population, especially in countries where support measures have been limited, many consumers have started to renovate their homes, discover new hobbies, take care of their families. and pets and spending their budget on products, services and experiences delivered online. Retailers who were able to satisfy these needs while maintaining a strong digital footprint emerged as winners.
In this regard, US and Chinese retailers together accounted for three quarters of the growth in market capitalization in the retail sector. According to McKinsey, this is because they operate in very large markets, with much more advanced digital business models. More specifically, the consultant identifies 25 “super retailers” who are significantly outperforming the average.
More than 80% of US retail value creation was due to five companies, with Amazon alone representing 60%. In China, just four operators accounted for 98% of capitalization growth.
These super winners can be divided into four categories: home economics operators, value retailers, online experts and platform operators.
The group of 25 leaders includes DIY giants like Home Depot and Lowe’s, discount operators like Costco and Dollar General, online retailers like Zalando, Etsy and Chewy (an American online pet food store) and Chinese platforms such as Alibaba, JD.com and Pinduoduo, but also Mercado Libre, the largest in Latin America, and Amazon.
Agility and speed
McKinsey maintains that, in order to compete with these large platforms, which have enormous financial resources at their disposal, it is necessary to make strategic decisions and choose very specific consumption needs and moments to overcome them.
One of the big challenges that other operators face is making the online business, as well as physical stores, which are experiencing declining traffic, profitable at the same time. To do this, it is essential to think in terms of the ecosystem and establish the right partnerships.
The consultant argues that some retailers will have no choice but to drastically change course. Those who succeed in this exercise can get back on track for at least a decade.