Future of Retail
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As store-based retailing moves beyond its zenith, the growth of platform
ecosystems alongside omni-channel are driving the next wave of competition
and business model evolution.
Signals of change:
Business models and
partnerships
Store-based retailing had already
passed its zenith. The pandemic
put additional pressure on
non-digital business models.
While many physical stores will likely return to
growth over the coming years, those looking to
drive growth through physical stores alone will
surely struggle. This places a question-mark over
the overall viability of the retail business model.
Until about 10 years ago, the retail business model
had remained largely unchanged for decades, if not
centuries. The most successful retailers were those
that were the best at sourcing desired products,
shipping them and selling them in physical
locations. Now, with routes to market evolving, this
recipe for success has changed. The legacy retail
business model has been disrupted.
To succeed in the future, retailers will need to
evolve at pace and become either platform
ecosystems, true omni-channel players or smaller
niche-focused specialists.
This transition will require pace, capital and
capabilities — with not all of these available in
abundance for most organizations, many will need
to proactively consider partnerships.
Platform businesses models already dominate
many consumer-focused industries. Indeed, the
10 biggest companies in the world (by market
capitalization) are all platform players. In many
markets, platforms dominate: Alibaba, a Chinese
e-commerce market, is gaining an increasing larger
market share with Baidu dominating the market for
search, and Paytm moving to capture India’s
payments market.
Investors certainly seem to believe platform
business models will continue to dominate the
future business landscape. According to a 2019
study*, platform players enjoy average revenue
multiples of almost 9, compared to traditional linear
businesses which enjoy multiples of between 2 to
4. Over the past decade, the market capitalization
for the top seven platform businesses grew by
more than 1,000 percent.
To succeed in the future,
retailers will need to evolve
at pace and become either
platform ecosystems, true
omni-channel players or
smaller niche-focused
specialists.
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*Note: (a) Market Capitalization as on 24 July 2009 and 03 July 2019, sourced via DataStream and S&P Capital IQ; accessed 3 July 2019