European Retail in 2021: Imperatives to navigate the turbulent times ahead

Five themes to help organisations in a changing retail landscape, as technology, consumer behaviour, and business models evolve.
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In 2021, retail in Europe is facing unprecedented and dramatic shifts. Not only are brands, suppliers and their customers still navigating an ocean of uncertainty arising from the chaos of COVID-19, they must also handle dramatic shifts like the stampede to omnichannel, as well as disruption from local matters like Brexit.

Identifying where to play

The European retail channel landscape will continue to evolve and adapt to ever-changing shopper needs. Online growth, for example, is nearly double as much in value terms, and triple in percentage growth terms, as its nearest competing channel, discounters.

  • The discounter channel will continue to lead physical retail growth, followed by supermarkets. Dominant players Aldi and Lidl are increasingly becoming omnichannel to boost penetration, and the post-pandemic recession will make their value offer even more attractive to shoppers.
  • Hypermarkets are expected to stagnate despite retailer efforts to revive the channel. Expect flat performance but be mindful of individual operators that can overperform regionally, or at category level.
  • Convenience is losing momentum as its conventional operators are challenged by both retailers outside the channel, and non-retailer players. Convenience is no longer a ‘channel’ but a ‘concept’ that is about serving core shopper missions right.

Establishing how to win

Retail is constantly under pressure to adapt, and keep pace with technology, consumer behaviour, and the disruptive business models altering how consumers shop. Indeed, Kantar asked business leaders for their 2021 predictions as part of our Global Compass survey, and overwhelmingly they anticipate transformation. The majority anticipate large-scale changes to strategy, organisational structure, and ways of working.

With the next decade likely to witness an unprecedented state of flux, clear guidance has never been more important. To provide this, the collective retail expertise of our Market Insights team has identified five themes that will help define the business imperatives for navigating the turbulent times ahead with confidence.

1. Re-Budget for Net Revenue Management

There is a heightened need to understand the new retail economics. Re-budget for net revenue management by combining customer, shopper and channel insights to ensure maximised profits. Pull on the levers of sales, marketing, and supply chain management to ensure that promotions, mix management, portfolio planning and price, pack, architecture (PPA) are optimised.

2. Re-Negotiate the consumer relationship

The next five years will see the rapid acceleration of algorithmic retail. This fundamentally changes the rules of engagement and will require upgrades in the use of AI, the Internet of Things (IoT), and machine learning to help streamline marketing, improve the customer experience, or perform critical tasks for operational efficiencies and business agility.

3. Re-Build channel plans

With retail in a dramatic state of flux, traditional channel planning is becoming obsolete. Rather than thinking about the impact of each customer journey segment on every component in the commerce ecosystem, focus should be on unifying the entire brand experience with every customer. Those getting it right will be omnipresent for shoppers, creating harmonised retail.

4. Re-Organise for business efficiencies

To compete efficiently and effectively requires reorganising operational structures and rethinking capabilities. This means harnessing new skills in data analytics for algorithmic retail, new marketing capabilities to fully utilise social platforms, and new sales skills in building relationships with unfamiliar platforms and business models

5. Re-Frame sustainability for credibility

Sustainability is shifting from a “nice-to-have” to an essential part of the retail offer. This will be compounded by new international trading agreements with sustainable policies becoming legally mandated. With much uncertainty around who to trust, the key to winning is boosting mental availability to shoppers by making it easy to find sustainable products, services and information from your brand.

Ultimately, the need for optimising channel and customer plans for an environment where consumer behaviour is increasingly transcending channels, and constrained by a recessionary environment, has never been greater. A significant learning from 2020 was the rapid acceleration of omnichannel. Now, we must look beyond this, seeking ways of unifying the entire brand experience with every customer into a harmonised retail value chain. With the impact of COVID-19 extending into 2021 and beyond, the focus must now switch from reacting-and-adapting to creating.

For further reading, download the Executive summary of Kantar’s European Retail Outlook 2021+ Report here:

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