In the retail industry, the gap between winners and losers is still widening. Just 25 front-runners have captured more than 90 % of global growth in market capitalisation, as financial markets are rewarding retailers who are best armed for the post-corona era. Who are they?
Unbeatable lead?
The temporary effects of lockdowns, such as hoarding and unsold fashion stocks, are giving way to new consumer behaviour and enduring trends that are disrupting the retail sector. The retail landscape is changing drastically: some players got a huge boost, others were left behind. The gap between the winners and losers of the corona crisis will continue to widen, McKinsey concludes after reviewing the stock market performance of leading retailers. The winners of the corona crisis have seen their market value increase dramatically.
This should be a wake-up call for those lagging behind: the past year has shown that the recipe for success in retail is changing, and those who wait too long to adapt may never catch up. The trends exacerbated by the pandemic are accelerating a reshuffle in the sector that had already begun some years earlier. And it is quite possible that the big winners will now take an unbeatable lead.
Americans and Chinese
The impact of the corona crisis has become clear: despite loss of income for part of the population – especially in countries where support measures were limited – many consumers started renovating their homes, discovered new hobbies, cared for their families and pets and spent their budgets on products, services and experiences delivered online. Retailers that met these needs while maintaining a strong digital footprint emerged as winners.
Interestingly, American and Chinese retailers together accounted for as much as three quarters of the growth in market capitalisation in the retail sector. This is due to the fact that they operate in very large markets with more advanced digital business models. More specifically, McKinsey identifies a leading group of 25 ‘super-retailers’ that are significantly outperforming the industry average.
Four categories
More than 80 % of all value creation in the US retail industry went to just five companies – Amazon alone accounted for 60 % of the growth. In China, only four players accounted for as much as 98 % of the growth in market capitalisation. These super winners can be broadly divided into four categories: home-economy players, value retailers, online specialists, and platform players. They are surfing along on trends that have been reinforced by corona and that are likely to continue for some time.
The leading group of 25 (the full list can be found below) includes DIY giants like Home Depot and Lowe’s, discounters like Costco and Dollar General, online players like Zalando, Etsy and Chewy (an American pet food webshop) and Chinese platforms like Alibaba, JD.com and Pinduoduo. But also, for example, Mercado Libre, the largest retail ecosystem in Latin America. And completely out of category, of course: Amazon…
Agility and speed
Can the big retail pack still catch up? McKinsey outlines some implications. In any case, all retailers will have to step up their game: those who show agility and fast decision-making have better chances. In order to compete with the mega-platforms that have enormous financial resources at their disposal, it is recommended to make sharp choices: choose very specific consumer needs and consumption moments to excel in.
A major challenge is to make both online activities and physical stores – which are seeing a decline in footfall – more profitable at the same time. Thinking in terms of ecosystems and platforms with the right partners is essential. Some retailers will have no choice but to drastically change course. Those who succeed in this exercise may be on the right track for a decade.
(Source: McKinsey)
