Retail Industry Analysis: State of Retail, Outlook, Market Growth
It’s tempting to think of the retail industry as an engine that powers the economy. All the sales of products and services to consumers that occur daily in countless establishments—from supermarkets and convenience stores to online and more—keep a legion of workers employed.
During the COVID-19 pandemic, the world witnessed what happens when it all grinds to a halt amidst supply chain woes. Fortunately, retailers have bounced back, rethinking their processes and ultimately driving even more growth.
As the leaders of the retail pack seek to edge out their competition, they must continuously gather information on the trends, challenges, and opportunities in the industry. Key insights can be found below in this comprehensive retail industry analysis, in addition to a deep exploration of the industry’s current state, anticipated market growth, and future outlook.
What Is Retail Business Analysis?
Retail business analysis refers to monitoring, analyzing, and using relevant industry metrics to inform strategic decision-making.
The retail industry is naturally fast-paced and constantly in flux—retail trends certainly don’t stay the same for long. Consumer demand for brands can literally change overnight.
As a result, retailers and investors must remain well-informed so they can adapt quickly and make the best decisions possible. Moreover, to stay ahead of the game, savvy retail executives recognize that their industry analyses must emphasize consumer-driven strategies that put the customer first.
How Do You Analyze the Retail Industry?
Like nearly everything else these days, quality retail industry analyses heavily depend on data. Companies that want to succeed bypass the anecdotal intuition of years past in favor of accurate and timely analytics. Software programs analyze data collected from both online and brick-and-mortar stores, deriving valuable insights into consumer behavior and trends that retailers can use to build customer loyalty and make profitable decisions.
Furthermore, predictive algorithms are often applied to the data so companies can make the right calls regarding inventory, pricing, store layouts, merchandising, marketing, operations, and more. A thorough and data-driven analysis of the industry’s trends, challenges, key players, outlook, and market growth can prove pivotal for ambitious retailers.
State of the Retail Industry
A good place to start is with an overview of the current state of the retail industry. Understanding the trends and challenges impacting the industry as a whole enables businesses to adapt accordingly, avoid mishaps, and drive growth.
Current Trends and Challenges
From the COVID-19 pandemic to the rise of eCommerce, several notable trends and challenges are present in the retail space. In this section, we’ll talk about them in more detail.
Impact of COVID-19 on the Retail Industry
It almost goes without saying that the COVID-19 pandemic dealt a serious blow to the retail industry. But businesses have shown remarkable resilience by quickly adapting to changing consumer behaviors, increased store closures, and reliance on online shopping. They expanded their omnichannel capabilities and implemented new health and safety procedures with speed and precision.
After learning to prioritize online shopping during the pandemic, today’s consumers expect retailers to offer a blend of physical and digital options—essentially, a hybrid shopping experience. It’s crucial that retail companies provide these offerings or potentially lose out in the marketplace.
Rise of eCommerce and Online Retail
Even if the COVID-19 pandemic had never happened, consumers were increasingly making online purchases. In fact, according to market research firm Insider Intelligence, eCommerce retail sales are expected to grow around 56% from $5.211 trillion in 2021 to an expected $8.148 trillion in 2026.
This trend has been significantly disruptive in retail, with slow adopters often going out of business. It has also put more pricing pressure on retailers as online comparison shopping has given consumers the upper hand.
Businesses that embrace digitalization typically benefit in multiple ways. For one, a digital presence can dramatically increase a company’s reach—enabling prospective customers to make purchases even across the world from its brick-and-mortar retail stores. It also makes it easier for retailers to track consumer behavior and preferences, making the shopping experience more comfortable and convenient for their customers. Utilizing a hybrid method that includes both offline and online channels is generally ideal for most retailers.
Changing Consumer Behavior and Preferences
Retailers are constantly trying to stay abreast of changing consumer needs and preferences. In recent years, customers have increasingly indicated they want the companies they buy from to meet certain social and environmental standards.
Sustainability is currently a major concern, especially in the fashion industry. G and Co.'s Fashion & Apparel Industry Index highlights this issue and advises retailers to take heed or potentially lose the support of certain demographics.
More and more, customers are also gravitating towards the convenience they find with online shopping. They’re looking for a seamless experience whereby they might scope a product out in a physical store but then hop online at home or use their mobile devices to buy it after conducting further research. The demand for omnichannel retail is alive and well, and companies would do well to adopt an omnichannel model if they haven’t already.
Consumers also want a personalized shopping experience—whether online or in-store. They expect retailers to cater to their individual needs and wants, and they frequently switch between various channels and information sources as they research and purchase goods and services. If companies fill their channels with product information, reviews, and shoppable media, they boost the odds a consumer will purchase from them instead of going elsewhere.
Key Players in the Retail Industry
Several leading companies play a big role—taking up a lot of market share—in the highly competitive retail industry. These include big-brand names like Walmart, Amazon, Costco, Schwarz Group, and Kroger. But the space is intense and cutthroat partly because of the sheer number of businesses constantly vying for recognition and sales.
One example is Levi’s. A global leader in apparel, specifically denim jeans, the company has withstood the test of time (founded in 1853) despite the ever-fickle nature of fashion. It has maintained its consistent success in part by offering a wide range of goods and continually identifying and capturing new markets.
Canadian fashion brand Aritzia, on the other hand, is a smaller player that has captivated consumers in its own country since 1984. Over the last two years, its popularity has skyrocketed over the border in the U.S. largely due to viral TikToks. Despite U.S. net revenue during Q3 2023 growing 58% compared to a year earlier for the “everyday luxury” retailer, it remains to be seen if the company can continue to intrigue consumers and avoid overexposure in a mercurial social media landscape.
Retail Industry Outlook
Another area to consider is the future of retail. While it’s impossible to predict exactly what will happen, sharing some well-informed ideas and theories is. Here’s what to keep an eye on.
Emerging Technologies and Their Impact
Like in many other industries, artificial intelligence (AI) continues to become more commonplace in retail—and there are absolutely no signs this will slow down. Consumers and companies benefit from AI’s many applications, including personalized recommendations, chatbots, and inventory management. For instance, AI-driven algorithms and analytics are helping retailers make sense of consumer browsing behavior and purchase history to provide more accurate product recommendations, thereby increasing sales.
Then there’s the Internet of Things, also known as loT. Essentially a network of connected devices that exchange data with one another and the cloud, loT is enabling a smoother and more connected retail experience for consumers.
This technological advancement often plays a role in optimizing the supply chain, enhancing customer engagement, and improving inventory and restocking processes. An example includes smart shelves, which automatically detect when products have been purchased.
Finally, augmented reality (AR) and virtual reality (VR) are also becoming more commonplace in retail. With the introduction of virtual try-ons for clothing and makeup, customers can make more informed decisions before making their purchase.
Furthermore, incorporating AR and VR into store design has proven to increase customer engagement and satisfaction, ultimately leading to higher sales. These advancements have undoubtedly transformed the way consumers shop and have set a new standard for the future of retail.
Sustainability and Ethical Considerations
As time progresses, society is becoming more concerned about the environment and humanity’s impact on it. Consumers demand companies deliver on their promises to manufacture and sell more sustainable products.
Fortunately for retailers, it has become more affordable and mainstream to produce eco-friendly items. They have responded with innovative solutions like eco-friendly packaging, initiatives to reduce their carbon footprints, and increased adoption of renewable energy sources.
Omnichannel Retail and the Integration of Online and Offline Channels
Nowadays, consumers frequently expect an omnichannel shopping experience, which means companies must implement a business strategy that engages their customers through various physical and digital touchpoints. There are many different ways for retailers to successfully integrate these online and offline channels.
For example, they might use consistent branding across all platforms, introduce a mobile app, offer a pick-up-in-store option, use social media to promote offline events, etc. Ultimately, retail shops aim to ensure a seamless customer experience, whether in-person, online, or a mix of both channels.
Market Growth and Opportunities
The final component of a comprehensive retail industry analysis typically examines anticipated market growth and opportunities in the space.
Global Retail Market Size and Growth Projections
As of April 2023, the global retail market was valued at $28.3 billion. It grew from $26.2 billion in 2022 at a CAGR of 8.3%, according to AI research company ReportLinker’s 2023 Retail Global Market Report. The same report indicates that the worldwide retail market is expected to reach $37.7 billion by 2027.
It’s anticipated that the retail industry will keep growing at a healthy clip for a good number of years for several reasons. Online shopping, in particular, is expected to be a major driver of the global market, in addition to growing smartphone usage and other disruptive technological advances like loT and AR/VR.
Regional Analysis of Retail Market Growth
The global retail market can be divided into multiple regions: North America, Europe, Asia-Pacific, Latin America, and the Middle East/Africa. Each has its own retail trends, growth drivers, challenges, emerging opportunities, key players, and regional dynamics to consider.
Asia-Pacific, for example, is expected to witness a surge in sales growth, especially when compared to other regions. This can be attributed to the rise in disposable income in China, policy changes in India that are likely to boost competition in the retail sector, and an increase in tourism, in addition to transportation infrastructure upgrades in Thailand and Indonesia.
Meanwhile, advancements in technology, enabling personalized shopping experiences and streamlined supply chains, are key growth drivers for the retail sector in North America. The U.S. has led the market because of its tech-savvy population and large consumer base. Canada has also experienced steady growth with a focus on sustainable practices and expanding online sales.
In Europe, eCommerce has been experiencing robust growth, with omnichannel strategies becoming increasingly popular. Sustainability and ethical concerns have been gaining prominence, prompting retailers to adopt more eco-friendly practices and offer sustainable products. Furthermore, emerging technologies like AI, AR, and blockchain are being integrated into the retail ecosystem to enhance efficiency and customer engagement.
Latin America has a growing consumer base driven by a burgeoning middle class and increasing urbanization. However, the region has also faced challenges, including economic fluctuations, political instability, and infrastructure limitations that have hindered logistics and distribution for retailers. Despite these obstacles, potential growth areas in the Latin American retail sector exist in digital transformation, omnichannel strategies, and innovative payment solutions that cater to evolving consumer preferences.
Lastly, the Middle East/Africa (MEA) retail industry has been experiencing steady expansion, driven by a growing population, increasing urbanization, and a rising middle class with higher disposable incomes. The region has seen a notable shift towards modern retail formats like malls and shopping centers. Meanwhile, eCommerce is also gaining traction, driven by a surge in internet and smartphone usage.
Key Growth Drivers in the Retail Industry
Various factors are propelling the continued growth of global retail sales. As emerging markets in certain countries undergo urbanization, gaining more consistent access to electricity, the Internet, and more boosts the demand for goods and services. Similarly, as the middle classes grow, their purchasing power increases and higher disposable incomes enable them to spend more on discretionary and luxury items.
Furthermore, innovation in retail technology, including AI, loT, and personalized experiences, has revolutionized the retail industry. Put simply, these advancements drive market growth and enhance customer satisfaction.
AI-powered solutions allow companies to analyze vast amounts of customer data to improve their demand forecasting, optimize their inventory management, and personalize product recommendations for their customers. Plus, the integration of loT devices facilitates real-time monitoring of products, supply chains, and customer behavior. All of these factors play a role in increasing retail sales growth, boosting profit margins, and reducing operational costs.
The Retail Industry Is Strong and Growing
Despite all the negatives of the COVID-19 pandemic, one silver lining is that it dramatically sped up the adoption and integration of technology in retail. This public acceptance of eCommerce has only increased since and continues to be one of the major drivers of growth in the retail industry. Other technological advancements, including AI, AR/VR, and loT, drive retail sales as they improve and personalize the customer experience.
Retailers are also impacted by changing consumer preferences. Sustainability and other ethical concerns have become more prominent and sometimes influence buying decisions. Customers have also shown they want convenience when they shop and expect a sales journey that caters to them at various touchpoints—both online and offline. Retailers must respond in kind or risk being left in the dust.
Importance of Ongoing Retail Industry Analysis
To stay ahead of the competition, businesses and their stakeholders must continuously monitor, analyze, and take advantage of new trends, technological developments, and business opportunities. Moreover, an awareness of the industry’s key players and growth drivers is integral to achieving and maintaining success in this highly competitive sector.
How G & Co. Can Help
It can be a real challenge for even the most enterprising retail company to stay ahead of the curve in this ever-evolving industry. At every turn, there’s a new trend to follow, technology to decipher, obstacles to overcome, or opportunities to seize.
At G & Co., we strive to make a positive impact on our clients and their industries by developing customized strategies and implementation plans centered around the needs of their consumers and informed by our research. Our process involves working closely with clients to gain a thorough understanding of their strengths, weaknesses, ongoing projects, and future plans.
By doing so, we are able to identify the most effective path to achieving their short-term goals, which in turn helps them achieve their long-term objectives. Before we propose any solutions, we take the time to diagnose the problem.
This requires a deep understanding of a client's current situation, goals, past efforts to address any issues, and the methods they have used. Our consulting approach is akin to solving a puzzle, where every action we take is carefully considered and contributes to the ultimate goal.
We know it isn’t easy to secure and maintain a competitive edge in the retail industry. However, it’s possible with G & Co.’s expert guidance. Contact us today to learn more.