3 disruptive forces shaping retail’s future and 5 bold predictions

The acceleration of key disruptive forces in retail is causing the rapid transformation of the industry. KPMG’s new report, “Revive to Survive,” outlines three disruptive forces shaping retail’s future, and makes five bold predictions on the future of the industry.  

“Success in retail today is driven by a number of disruptive forces,” said Scott Rankin, national Advisory leader, Consumer and Retail, KPMG LLP. “In order to compete and survive, retailers need to understand rapidly evolving consumer behaviors, use data and analytics to inform strategy and build new business models that will help them succeed in a challenging environment.”

There are three disruptive forces shaping retail’s future:

•     Fundamental changes: With COVID-19, many retailers experienced sales declines, driven by consumer wage loss, economic uncertainty and a reduction in in-store shopping. However, the impact was uneven with nonessential categories seeing significant declines and consumer staple categories, such as grocery and food delivery, experiencing significant increases. In the future, trends will change, propelling greater segmentation of the retail sector, with uneven and erratic recovery.
•     Demand-side disruption: Retailers need to keep up with rapidly changing consumer preferences, requirements and demands, as they directly impact sales, channels and operational performance. The greatest shift in demand has been from physical to digital, with legacy brick-and-mortar retailers facing unprecedented revenue challenges.
•     Supply-side disruption: Digital technologies are enabling businesses to get much closer to the consumer, easing the entry of new brands, products, and services in the market. As consumers have increasing numbers of products and channel options available to them, retailers need to accurately forecast demand to maximize profitability.

“Retail’s future is evolving rapidly with the acceleration of digital sales, the increasing number of competitors, the progressive use of technology and the evolving consumer behavior,” said Matt Kramer, national sector leader, Consumer and Retail, KPMG LLP. “To navigate this changing marketplace, retailers need to develop targeted strategies to evolve their business model and remain meaningfully differentiated to meet the new reality and increased customer expectations.”

Based on industry trends and KPMG’s knowledge of the industry, here are five bold predictions about the future of retail:

•     Expect at least 50% of sales to be made online in this decade, since neither cost, size nor complexity will impede the growth of online purchasing.
•     Incumbent retailers will face potential for failure at an accelerating pace. Many legacy retailers  will potentially be out of business or have a need to significantly downsize in the next five years. With so much competition, there is simply not enough growth to go around for everyone to survive.
•     Technology will influence absolutely everything. By 2025, artificial intelligence and other capabilities will play a significant role in product recommendations, visualizations, and transactions.
•     The only middlemen will be those that add significant value. The direct-to-consumer commerce model is making waves for its ability to connect so closely to customers, build loyal communities, and maintain control of brand image. To compete in the future, conventional retail businesses will need to offer benefits beyond simply serving as a connection point between manufacturers and consumers.
•     Everyone is a competitor. With new entrants and historical incumbents, blurring industry lines and innovative business models, retailers’ competitors will soon number in the hundreds. And many will look vastly different and threaten traditional retail profits.