Verdict Retail Q&A Part 2: Challenges & Trends

Verdict Retail Q&A Part 2: Challenges & Trends

The second part of this week’s Analyst Q&A with Verdict Retail takes a look at what consumer trends are having the biggest impact on the global retail market. Click here for Part 1, in which we discuss the retail market sectors experiencing the biggest growth in 2016.


Q2. What are the biggest challenges facing the global food and grocery retail market today? How are market participants responding to these challenges?

Food and grocery is an important part of everyday lives and this part of retail is extremely price sensitive. Major retailers around the world have tried and tested various methods to attract and retain customer footfall. However, some have proven to be successful while some are mimicked by the others. As a result, new strategies have emerged, which has led to increased competition.

Across the retailer community, obstacles such as cost of labor, inventory management, inefficient processes, increased competition, customer demand, and other operational issues have created various challenges. Moreover, with the rise of online retail in food and grocery, both new challenges and new opportunities are emerging.

Major retailers are continuously upgrading their processes in order to counter these challenges. Technology means things are becoming simpler for some, which without implementation would result in the opposite. As customers grow more tech savvy, retailers must continuously upgrade their processes in order to make shopping a seamless experience. Furthermore, with the aid of technology and smartphones, larger retailers are able to exercise innovative methods at reduced costs but smaller retailers and independent players have taken a major hit.

New retail methods are booming, which is resulting in a more sophisticated shopping experience. Smartphone-enabled self-scanning methods have reduced waiting lines for consumers and reduced labor costs for retailers. Major retailers such as Carrefour, Shoprite, Tesco, and Coop in Middle East have already implemented these methods. On the other hand, augmented reality stores are emerging in Asia. Yihaodian, which is China’s largest food e-commerce retailer, is planning virtual stores that require no space and almost no extra cost. This is a transformational technology that integrates online and offline channels in food and grocery. Here, virtual stores can be seen using a smartphone while everything remains the same as in a physical store, but without any queues or checkout counters. Finally, these products would be delivered to the customer’s home on the same day. This method has proven successful in South Korea’s Tesco’s QR-based supermarkets and, as a result, online sales have been boosted by 130%. However, government policies remain an important challenge to creating this new breed of virtual retail stores.

Online versus offline competition is increasing day by day and independent and small retailers have been significantly hit by concepts such as same day delivery from online retailers. Amazon Prime and AmazonFresh have proven successful for the global online leader; however, this has eaten away the share of smaller retailers, which is resulting in increased agitations in some parts of the world. This means the social barriers also exist with certain limitations in some parts of the world.

Across the world, food and grocery is a major part of retail and this is a highly fragmented market. As physical stores compete for better margins, consumers are demanding competitive pricing. However, it is not only the offline channel facing obstacles; online retailers are also facing logistical challenges. Furthermore, finding the delivery addresses in some parts of the world, such as the Middle East where the pin codes and addresses do not exist, can be a herculean task. However, with the aid of geopositioning and tracking technology, companies such as Fetcher are delivering products in most locations in the Arab world.

That said, new methods and the integration of existing branches of logistics and technology mean that food and grocery retail is constantly evolving across the world. Although the fundamental key elements of discounts, delivery, and inventory management remain key challenges for some retailers, opportunities are emerging for others.


Q3. What consumer trends are having the biggest impact on the global retail market? What factors are influencing these trends?

The following are the trends that have a significant impact on the global retail market and the factors influencing these trends:

  • Consumers continue to be value conscious

The recession has not only changed the economic landscapes but also altered the behavior of consumers globally. Consumers are less willing to pay more than necessary; they plan to decrease spending but not consumption. This particular behavior has led to a major dip in the sales of premium brands. Despite growth in some economies, many consumers continue to embrace savings tactics such as retailer loyalty cards, store brands, shopping lists, and coupons. Shoppers are becoming more savvy and better than ever at finding value, although this does not always mean the lowest price possible. Customers increasingly expect the right choices in product quality and right value for the purchase, and want to know upfront about any hidden costs or drawbacks. Consumers are looking for service with true transparency.

  • Influence of social media is increasing

Social media is playing a bigger role in consumers’ decision making and is continuously shaping the way consumers shop. The majority of online shoppers are influenced by social networking sites and retailers’ social media updates. Recommendations and additional information are often used on the social media channels of major brands, which can significantly change consumers’ purchase decisions. For retailers, this platform will no longer be restricted to just connecting with and gaining feedback from customers but will act as decisive tools for creating new products, understanding fashion trends and interests, consumer experiences, tracking brand and product reviews, and launching marketing campaigns. Social media platforms are also acting as important channels to redirect customers to shop through online stores; the success of these platforms can often be measured by the revenue arising from each platform. The success of online retailers will depend on how well they integrate their platforms with various social media sites.

  • Consumers are opting for healthy and environmentally safe options.

It is estimated that products available at stores are not in their freshest state when they reach the consumer, regardless of whether they are organic or not. In recent years, consumers have become health conscious and most of their food is purchased locally without compromising on quality or quantity. Consumers are also willing to pay a premium for locally grown produce as they can visit the source of their food and ensure its freshness. This particular consumer behavior has led to imports being substituted by locally produced goods and resulted in the positive growth of the local economy. There is huge potential for the growth for locally produced food. Selling locally produced items would benefit retailers in many ways as they would not only save on logistical expenses but would also earn more from customers who are willing to pay a premium.

CONCLUSION

As we can see from Heena Sharma’s answers, recent technological developments have dramatically altered the retail landscape. Online retailers are introducing innovative concepts every day to make online shopping a more pleasurable experience. From virtual stores to smartphone-enabled self-scanning, technology is creating huge opportunities for retailers moving forward.

Remember to check back tomorrow for part 3 of our Q&A with Verdict Retail. We will be looking in-depth at some of the key technological developments that will drive growth in the e-commerce market in the coming years.

Stay up-to-date with the latest market developments, trending news stories and industry advances with the Research and Markets blog. Don’t forget to join our mailing list to receive alerts for the latest blog plus information about new products.

Published by Research and Markets

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