Headline Verdana Bold Global Powers of Retailing 2017 Highlights
Headline Verdana BoldGlobal Powers of Retailing 2017
Highlights
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Global Powers of Retailing 2017
3Copyright © 2016 Deloitte Development LLC. All rights reserved.
Wal-Mart continued its long-held position as the world’s largest retailer
Top 10 retailers
e: Estimate
#1
#2
#3
#4
#5
#6
#7
Costco Wholesale Corporation
The Kroger Co.
Schwarz Unternehmenstreuhand KG
Walgreens Boots Alliance, Inc. (formerly Walgreen Co.)
The Home Depot, Inc.
Carrefour S.A.
Wal-Mart Stores Inc.
Aldi Einkauf GmbH & Co. oHG
Tesco PLC
Amazon.com, Inc.
#8
#9
#10
US
US
US
Germany
US
US
France
Germany
UK
US
$ 482.1
$ 116.2
$ 109.8
$ 94.4
$ 89.6
$ 88.5
$ 84.9
$ 82.2 e
$ 81.0
$ 79.3
+5
+3
-1
-1
-4
+2
Key highlights
The top 4 retailers maintained their
positions on the leader board
Acquisitions, divestitures and exchange
rate volatility shuffled the rest of the top
10
Walgreens moves up leader board and
Amazon joins top 10
Germany’s Metro Group fell out of the top
10 as the company’s transformation
process accelerated
FY2015 Retail revenue (US$ billions)Country of origin Change in rank#: FY2015 Top 250 rank
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Percentage share of top 250 revenue by region and by top countries
Geographic breakdown
North America
47.6%
Europe
35.0%
Latin America
1.6%
Asia Pacific
14.4%
Africa/Middle East
1.4%
US
45.6%
China/Hong
Kong
3.7%
Japan
6.5%
Other Asia
Pacific
4.3%
France
8.2%
Germany
9.8%
UK
5.8%
Other
Europe
11.2%
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Product sector breakdown
9.8%
Apparel and accessories
Fast-moving consumer goods
(FMCG)
66.6%
Hardlines and leisure goods
16.4%
Diversified
7.2%%Share of revenue
TOP 250
45
133
Companies by sector
Key highlights
Revenue growth for the apparel and accessories retailers outpaced
the other product sectors, for the third year in a row
Retailers of FMCG are the largest companies and the most
numerous among the top 250— with average retail revenue of
US$21.6 billion
50
22
The strong growth of e-commerce giants Amazon.com and JD.com gave the
hardlines and leisure goods group’s composite revenue growth a big boost—
offsetting negative growth among 13 of the sector’s 50 companies
The diversified group has experienced persistently slow growth—its composite
revenue declined as two of the three largest diversified companies posted
negative top-line results
Percentage share of top 250 revenue by primary product sector
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FY2010-FY2015
Top 10 fastest-growing retailers
e: Estimate
#1
#2
#3
#4
#5
#6
#7
JD.com, Inc.
Albertsons Companies, Inc.
Axel Johnson AB / Axfood, Axstores
Sprouts Farmers Market, Inc.
Steinhoff International Holdings N.V.
Southeastern Grocers, LLC
Vipshop Holdings Limited
OJSC Dixy Group
PJSC "Magnit"
Grandvision N.V.
#8
#9
#10
Key highlights
From 2010 through 2015, the
composite retail revenue for the 50
fastest-growing retailers increased
at a CAGR of 22.2%—more than 4X
times faster than the growth rate for
the entire top 250 group
34 of the fastest 50 companies were
among the 50 fastest-growing
retailers in FY2015
E-commerce and acquisitions are the
key drivers for the fastest 50
FY2015 Retail revenue (US$ billions)Country of origin FY2010-15 Retail revenue CAGR#: Growth rank * Revenue includes wholesale
and retail sales
China
China
US
Sweden
US
South Africa
US
Russia
Russia
Netherlands
$ 6.1
$ 27.0
$ 58.7
$ 5.8 *
$ 3.6
$ 13.2
$ 11.1 e
$ 4.5
$ 15.7
$ 3.6 *
184.6%
81.3%
74.1%
49.2%
47.4%
44.5%
34.6%
33.5%
32.0%
29.1%
157
36
17
164
242
72
84
198
61
244
Top 250 rank
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FY2015
Top 10 e-retailers
#1
#2
#3
#4
#5
#6
#7
JD.com, Inc.
Apple Inc.
Wal-Mart Stores, Inc.
Suning Commerce Group Co., Ltd.
Otto (GmbH & Co KG)
Tesco PLC
Amazon.com, Inc.
Vipshop Holdings Limited
Liberty Interactive Corporation
Macy's, Inc.
#8
#9
#10
US
China
US
US
China
Germany
UK
China
US
US
$ 79.3
$ 27.0
$ 24.4 e
$ 13.7
$ 8.1 e
$ 7.2
$ 6.5 e
$ 6.1
$ 5.1
$ 4.9 e
13.1%
54.5%
18.2%
12.3%
95.0%
0.5%
9.0%
64.4%
1.0%
n/a
Key highlights
E-commerce is the major growth
engine for many top 250 retailers
80% of the 50 largest e-retailers
are top 250 companies
The vast majority of the e-50 are
based either in the US (26
companies) or Europe (19
companies)
The pace of growth of online sales
has decelerated for retailers
engaged in e-commerce, but it
remains higher than the growth in
overall revenue
10
36
33
1
46
92
9
157
97
35
Top 250 rank
e: EstimateFY2015 e-commerce retail sales (in US$ billions)
#: FY2015 e-50 rank * Revenue includes wholesale
and retail salesFY2015 e-commerce growth rateCountry of origin
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13 retailers appear in the top 250 for the first time
Newcomers to the Top 250
PETCO Animal Supplies, Inc.
Smart & Final Stores, Inc.
BGFretail Co., Ltd.
Hobby Lobby Stores, Inc.
Nojima Corporation
Ulta Salon, Cosmetics & Fragrance, Inc.
Homeplus Co., Ltd.
PT Indomarco Prismatama (Indomaret)
HSN, Inc.
PT Sumber Alfaria Trijaya Tbk (Alfamart)
FY2015 retail revenue growth (%)Country of origin
Savola Group/Panda Retail Company
Sprouts Farmers Market, Inc.
American Eagle Outfitters, Inc.
Top 250 rank
163
208
222
227
229
231
234
235
236
239
240
242
247
Hypermarket/Supercenter/Superstore
Other Specialty
Cash & Carry/Warehouse Club
Convenience/Forecourt Store
Other Specialty
Electronics Specialty
Other Specialty
Convenience/Forecourt Store
Non-Store
Convenience/Forecourt Store
Hypermarket/Supercenter/Superstore
Supermarket
Apparel/Footwear Specialty
ne
5.1%
12.4%
28.7%
2.7%
86.5%
21.2%
20.1%
2.9%
15.5%
10.9%
21.1%
7.3%
S. Korea
US
US
S. Korea
US
Japan
US
Indonesia
US
Indonesia
Saudi Arabia
US
US
Dominant format ne: not in existence (created by divesture or merger)
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Retail trends
The art and science of customers
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“Fewer, better things”. Customer preferences are shifting from rampant consumption to intentional consumption.
Curated possessions and experiences have become more important than the number of things customers own.
Consumption of ‘experiences’ has outpaced the consumption of ‘goods’ by a factor of three over the last two years.
There is a movement away from the mass-produced toward the “bespoke.”
There has been decreased share of wallet on non-durable and durable goods, and declining foot traffic at mass retailers and department stores.
An increasing preference is seen toward environmentally friendly products.
Changing preferences
Less is more
H&M Conscious
Traditional fast-fashion retailer H&M
is responding by launching programs
like “H&M Conscious” which will
debut a new Conscious Exclusive
collection of high-end,
environmentally friendly pieces each
year. This is a shift away from fast
fashion’s traditional business model,
built on customers buying more
frequently at a lower price.
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There is an increasing trend of customers “following” celebrities and brands on social media, and also building their own “following”.
Customers are seeking experiences and products that reflect the personal brand they promote on social media.
Hotel guests, particularly Millennials, value how their trips are perceived on social media as much as the actual quality of the real experience.
Travel and tourism sector is striving to gain presence in customers’ social media space in the form of geotags, hashtags, and reviews.
Retailers that can consistently deliver authentic, shareable experiences to customers will grow a fiercely loyal customer base.
Changing preferences
Power of shareable retail
experiences—Australia’s T2
For the last five years, T2’s coffee sales
have outpaced tea sales in almost every
country. T2 sought to change all that by
bringing the “hip” back to tea. It
designed packaging and in-store
experiences that pop with vibrant colors
and bold patterns, which make for
pretty social media posts.
T2 boasts a loyal social media following
which helped it grow from one store in
Melbourne in 1996 to a global brand,
acquired by Unilever in 2013.
“Following” economy
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“Retailization” of the world
Changing formats
The maker movement, the sharing economy, and other factors have made it increasingly difficult to define what a retailer is and does.
In 2017 and beyond, market fragmentation in the retail space will continue to grow.
Market volatility is attributed to explosive growth of non-traditional retailers developing new models to serve customer needs.
Customers with increasing purchasing power in developing countries, are willing to rely on less traditional retail models for more purchases.
Established markets are marked by less dramatic market penetration from alternative formats, but the level of sector blurring is unprecedented.
There is a rise of subscription model based retailers such as Dollar Shave Club, Trunk Club, and Blue Apron.
Vipshop has grown by popularizing
the flash-sale model
E-commerce power-players Alibaba and
Tmall have competition from Vipshop,
which has grown by popularizing the
flash-sale model. It sells mid-market
clothing and accessory brands, using a
time-limited discount model.
90 percent of Vipshop’s sales are outside
of China’s Tier 1 cities.
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On-demand shopping and fulfillment
Changing formats
The on-demand fulfillment frontier is extending from apparel and hardline retailers to grocery, automotive, and services.
Consumers expect speed, high-quality, and on-demand shopping experiences which includes real-time reviews and fresh products.
Europe will likely continue to be the battleground for the future of grocery with AmazonFresh and Carrefour rolling out 1-hour delivery across cities.
One trend likely to continue is traditional grocers partnering with technology and delivery companies to provide products for on-demand delivery; with grocers effectively almost becoming vendors to technology companies.
Amazon – Altering customer
expectation on fulfilment
This year, Amazon joined the
list of top 10 global retailers for
the first time. Amazon’s growth
has been significantly driven by
its prime service which attracts
younger, higher income
customers. While Amazon
doesn’t disclose data on growth
for its prime service, some
estimate the number of
worldwide members to be 80
million
and growing at around 50
percent CAGR.
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Changing expectations
Use of artificial intelligence or robotics for self-service in stores is expected to continue.
The impact of technology is not limited to the in-store experience. Exponentials are changing how we live and how we will shop.
Un-manned cars will allow smaller or hyper-local retailers to afford personal, same-day deliveries.
Wide-scale adoption of augmented reality, 3D printing, holograms, and other technologies are expected to impact shopping experience.
Exponential living
Ebay and Myer—World’s first VR
department store
EBay, in partnership with Australian
retailer Myer, has created the world’s
first virtual reality department store.
Using eBay Sight Search, consumers
can explore over 12,500 products from
Myer, access real-time price and
product information, and add selected
items to their basket.
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Global economic outlook
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United StatesWhat to expect from the Trump Administration
Congress:
• Both houses of Congress controlled by Republicans
• Republicans hold 52 of 100 Senate seats
• Require 60 votes to break a filibuster
• Trump must work with Chuck Schumer on many areas of legislation
Traditional Republicans Trump Republicans
Tax cuts and reform Restrict trade
Deregulation Restrict immigration
Free trade and capital movements Industrial policy (Carrier, Ford, GM, Boeing, Lockheed)
Encourage skilled immigrants Infrastructure investment
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United StatesWhat to expect from the Trump Administration
Topic Policy
Trade • Wants to label China a currency manipulator, possibly impose tariffs
• Will withdraw TPP, negative impact on Japan, empowers China
• Wants to re-negotiate NAFTA, possibly impose tariffs on Mexico
• Pressure companies not to shift resources to other countries
Spending and deficits • Boost spending on infrastructure, military
• Will not cut entitlements
• Pay for increased spending by borrowing
Regulation • Less regulation of environment, energy, labor, financial services
• Impose parental leave requirement
• Exit Paris accord on climate
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United StatesWhat to expect from the Trump Administration
Economic and financial impact:
• Tax cuts and infrastructure spending boost supply of bonds, stimulate economy
• Accelerates wage increases and boosts inflation
• Boosts short term economic growth, but not necessarily longer term growth
• Cutting corporate taxes brings cash home from overseas, boost value of dollar
• Infrastructure spending and deregulation could boost longer term growth
• Trade and immigration restrictions slow growth, boost inflation, increase risk of recession
• Initial market reaction indicates that investors are not focused on trade, more focused on fiscal and regulatory measures. This could change.
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• Rising expectations of inflation in US and Europe
• Expectations of bigger budget deficits in the US and UK
• Investors expect stronger economic growth in US and Europe
Asset marketsRising bond yields
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Oil prices rebounded due to:
• Declining U.S. investment and production
• OPEC decision to cut production, not likely well enforced
• If production falls:
− Prices will rise.
− Shale producers will return to the market
− Boost production
− Suppress prices.
− A ceiling will be reached.
• Expect a prolonged period of relatively low oil prices
Asset marketsCeiling on oil prices
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Currency Influences
US dollar • Strengthened over last two years due to relatively strong growth, higher yields, expected tightening of monetary policy
• Declined in past year due to revised expectations of Fed policy
• Increasing now due to expectations of new fiscal policy
Euro • Downward pressure due to ECB policy, expected easing of policy, expected shift in US policy, pessimism about euro sustainability
Pound • Downward movement due to expected drop in inbound foreign investment
CurrenciesDollars, Euros, Pounds
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• Until two years ago, capital flowed into China, exerting upward pressure on currency, boosting reserves
• Now, capital flows out due to:
• Weaker economy
• More outbound investment
• Rich Chinese moving funds out of the country
• End result, downward pressure on currency, selling of reserves
• Possible rapid depreciation before Trump takes office, could fuel conflict with US
CurrenciesRenminbi
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United StatesEconomic conditions
Job market strong, mature:
• Job growth slowing, but remains strong
• Job openings rate historically high
• Shortages reported, especially for those with specific skills
• Economy at full employment
• Participation stabilizing after long decline
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2001 2003 2005 2007 2009 2011 2013 2015
Job openings rate
Payroll employment growth
Source: US Federal Reserve
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Declining male participation:
• Shifting demand for skills
• Displacement from technology and trade
• Hurts economic growth, but also hurts social stability
• Contributes to income inequality
• Contributes to populist politics
United StatesEconomic conditions
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United StatesEconomic conditions
Influences on the consumer:
• Rising employment
• Wages begin to accelerate – especially at the lower end of the spectrum
• Stronger cash flow, less debt, greater ability to borrow again
• Persistent low energy prices
• Improved financial market conditions
• Rising income inequality slows consumer spending growth
Debt service/disposable income
Source: US Federal Reserve
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Slower growth, different growth:
• Slower growth due to weak exports and investment
• Transition from low wage to higher wage manufacturing
• Transition from manufacturing to services
• Transition from exports to domestic demand
• Excessive growth of state-sector, slow growth of private sector
• Needed transition from investment to consumer spending
• Transitions hampered by policy
• Economy at risk from excessive debt
ChinaTransitioning
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• Declining working age population boosts wages, hurts economic growth, hurts export competitiveness
• Declining rural-urban migration hurts growth. Requires end of second-class status for migrants
Growth of working age population
ChinaDemographics
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Mixed picture:
• ECB policy has suppressed euro, suppressed borrowing costs, and boosted asset prices
• Consumer spending weakening after good growth
• Unemployment remains high
• Investment remains weak
• Strength in Spain, Ireland, Germany
• Weakness in France, Italy
• Inflation starts to accelerate
EurozoneGrowth outlook
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• UK economy surprisingly resilient
• Investment and hiring could falter due to risk of new trade barriers
• Cheaper pound will hurt consumer spending, economic growth
• Government appears headed toward “hard Brexit” with subsidies for companies and industries
• Potential impact on autos, financial services, pharma
• Impact on rest of world muted
Source: IMF
United KingdomBrexit and beyond
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Persistent stagnation and deflation:
• Per capita GDP growth not bad
• Despite Bank of Japan easing, including negative interest rates, deflation persists, credit creation falters
• Economy intermittently stalls
• Exports weaken as yen strengthens
• US dollar strength could reverse upward pressure on yen
• Prime Minister wants fiscal stimulus
• Failure of TPP hurts
JapanGrowth outlook
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Recovering from a bad episode:
• Many EMs hit by perfect storm:
– Strong US dollar
– Weak commodity prices
– Led to high inflation
– Led to tight monetary policy
– Too much debt
• Russian and Brazil remain in recession
• Rebound in activity as currencies and commodity prices stabilize
• Longer term outlook still strong
• Short term risks:
– Stronger US dollar
– US protectionism
– Decline in oil prices
Emerging market debt/GDP
Emerging marketsGrowth outlook
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