Covid-19: Six retail models will prevail in wake of crisis, says think tank

Nearly all retailers will require some form of structural change as a result of the coronavirus pandemic, according to an industry think tank.

The latest KPMG/Ipsos Retail Think Tank (RTT) white paper, which assesses the state of the sector and was released this week, indicated that Covid-19 has acted as a change accelerator for many of the industry’s long-term structural issues.

The think tank predicted that a “more balanced retail market will emerge”, as some legacy operators in overpopulated categories exit while making room for those that survive to grow and for new concepts and brands to materialise.

In addition, the experts – a group of analysts, consultants, and long-term industry observers – said they expect a shift to “more immersive and experiential online shopping services”, while more opportunities for physical retail will appear as costs are reduced.

Nearly every operator will require some level of structural change, the think tank said, with as many as 50% of retailers needing to adopt a new model if they are to prevail.

Paul Martin, UK head of retail at KPMG, listed six types of retail business he believes will succeed. They are international platform ecosystems; multinational retailers evolving into platform businesses; large-scale domestic retailers that will seek “buying” alliances or partnerships; value-based retailers; brands going direct to consumer; and category specialists.

“Businesses that do not fit into these classifications could find it extremely difficult to survive and thrive in the future, therefore we believe the urgency and pace of change to increase fundamentally in the next months and years,” he explained.

“Many of the underlying trends have not changed but Covid-19 has functioned as an accelerator. Times of crisis have historically represented an opportunity to speed up decision making and acted as a catalyst to do things differently.”

Martin added that the think tank increasingly foresees retailers being replaced by “consumer commerce businesses” over the next five to ten years.

“These organisations will, in some cases, have originated as technology, data or supply chain businesses who now sell products and services to the consumer.”

Joining Martin as part of the RTT are Ruth Gregory from Capital Economics, James Sawley of HSBC, Jonathan De Mello of Harper Dennis Hobbs, Maureen Hinton of GlobalData, Martin Newman of The Customer First Group, Mike Watkins of Nielsen UK, James Knightley from ING, Dr Tim Denison from Ipsos Retail Performance, Martin Hayward of Hayward Strategy and Futures, and independent consultant Nick Bubb.