The world of retail is on roller coaster ride since the start of COVID-19 and 2021 is bringing some more loops! Here is our top 3 of trends we have seen in 2021 so far:
1) The rise of alternative distribution models
Alternative distribution channels are popping up everywhere like mushrooms after the rain in the world of retail. The outcome of this race is still unclear, but one message is obvious: the traditional brick and mortar model is facing increased competition.
- Dark stores everywhere: large cities are being serviced with an army of two wheels delivery services in record times: Gorilla, Dija, Glovo and the likes are offering your goods in under 10 minutes!
- The rise of the drive: buy it online, pick it up in store. That is THE WINNING ALTERNATIVE MODEL in France that now sums up more than 9bn euros of sales in 2020. This model cuts the costs of delivery for retailers which helps P&L of online sales.
- Direct-to-consumer: few companies have entered the D2C business in FMCG but the trend could potentially pick up as costs of organizing such a channel go down. Our favourite example to date is from Danone waters in Spain and their amazing “Fontvella en casa” offering. Quick, easy to use and no delivery cost for water delivered on your doorstep…amazing?
2) Innovation through partnerships
We recently talked about how brands are entering in partnerships in the ice-cream category by franchising existing blockbuster brands mostly in snacks and chocolate.
Haribo, M&M’s, Oikos, Ferrero. Those are only a few of the many brands that decided to move from shelves to freezers and extend their range of products.
Two main business models exist:
- In-house development: that is the case of Ferrero that decided to buy an ice-cream manufacturer in Valencia to develop their own production. A capital-intensive strategy certainly linked to a long term presence in this category.
- Franchising: large ice-cream manufacturers such as Unilever or Nestlé offer their production and distribution power to other brands through franchising agreements. A classic partnership model that offers brands a quick access to the category and attractive innovations to Unilever/Nestlé.
3) Promotions everywhere
The pressure on prices has increased dramatically in 2021 and one very visible effect is the number of promotions we now see EVERYWHERE.
For instance in Spain we have observed how retailers have engaged in a price war starting at the end of 2020. The move happened as Lidl grabbed the third place in market share behind Mercadona and Carrefour. The German retailer is known for its aggressive pricing and its ongoing growth could very well have been the trigger for this price war.
In an economic environment where we start to see a small pick-up in inflation this price war might turn out to be very expensive for both retailers and manufacturers! Additionally, the easing of lockdown measures and the comeback of “out-of-home” consumption might put more pressure on retailers that might not be growing as fast.
# What next?
Have you seen other major trends in the world of retail in 2021? What is you view on the trends we highlighted? let us know in the comments below!
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