Dynamic Disruptions
Underneath the shifting retail terrain
The global retail landscape continues its dynamic evolution in 2023, compelling consumers and businesses alike to adapt their navigational strategies. Amidst the swirl of inflation, the discounters, led by titans Aldi and Lidl, have emerged as lifeboats for value-seeking shoppers. Their stores, once a small presence on the retail seascape, now command an unprecedented degree of consumer attention, recording a growth of +10.3% — making it the fastest growing in 2022.
Amidst the swirl of inflation, the discounters, led by titans Aldi and Lidl, have emerged as lifeboats for value-seeking shoppers.
Such a surge in discounters’ popularity has inevitably stirred the waters of e-commerce. A previous beacon of growth, online shopping saw its growth decelerate to +5.6% from 15.2% in 2021, making it the third fastest-growing channel but still ahead of the overall market.
This ebb in the online wave was primarily driven by Western Europe, especially Great Britain, where the channel suffered a loss in share. Despite this, e-commerce continued to make gains in Asia and the US, albeit at a more modest pace.
And older consumers, who had initially migrated online during the pandemic, are returning to brick-and-mortar stores in pursuit of value, they are gravitating towards these discounters. This shift has placed discounters in an unprecedented position of growth, fuelled further by their aggressive store expansion strategies.
Amidst this flux of retail trends, traditional trade emerged as a robust contender. Though perhaps less glamorous, traditional trade — still a significant driver of sales in markets like India (86%) and Indonesia (90%) — experienced a value growth of 7.2% globally in 2022.
Retail hype
With almost half of the industry’s value still commanded by hyper and supermarkets, the importance of understanding and adapting to regional nuances and consumer preferences cannot be overstated. Brands that can successfully navigate this retail landscape, particularly with hyper and supermarkets, to mitigate inflationary pressures while delivering value and meeting consumer demands are poised to thrive.
As noted earlier, discounters, rebounded after a few challenging years with a 0.5% share gain in 2022, climbing to become the third biggest channel, while traditional trade also saw a share increase but was surpassed in importance by discounters. Notably, hyper and supermarkets, despite being the largest channel, reversed their flat growth trajectory to achieve growth of +3.8%.
Discounters versus e-commerce
Interestingly, while discounters remain almost non-existent in Asia and represent only 3.2% in the US, they gained over 1% share in Western Europe and over 2% share in Eastern Europe. For e-commerce, the slowdown was mainly due to a loss of share in Western Europe, but the channel continued to gain in Asia and the US, where it was strongest.
In terms of market performance, the discount channel saw gains across most European markets and some in Latin America, like Mexico. However, e-commerce experienced a significant loss in Great Britain, losing over 1% share, and suffered losses in other markets. On the bright side, the online channel continued to make gains in the three biggest markets—US, Mainland China, and Germany — alongside established markets like South Korea and Taiwan, and emerging markets like India.
We fully expect 2023 will be a year of continued evolution in the retail channel landscape, with significant opportunities for those brands and retailers that can successfully adapt to shifting consumer demands. Discounters will continue to over-perform in line with ongoing pressures on consumer wallets.
