Olivier Salomon, associate director of distribution & consumer goods at AlixPartners France, delivers his analysis of the challenges for 2024.
What do you think are the main changes in consumption patterns?
We are witnessing a greater fragmentation of consumption with little room for distribution players positioned in the mid-range. The demand is either for low-cost or luxury offerings. The success of a brand like Action, the biggest growth in the sector in Europe, bears witness to this. Second-hand goods are growing strongly (all segments, all product categories), although there are questions surrounding authentication, particularly for premium brand products. Another trend is the transformation of places of sale into places of life like of the new Monop’ concept. In retail, everything that facilitates payment (e.g. Amazon Go) but also the development of facial recognition (particularly in China) is growing. Finally, last observation, brands and distributors no longer fully control the message to consumers (too many channels, sources of information, images, etc.) and are losing control of the narrative.
AlixPartners carries out a “Disruption Index” study every year. What is the objective of this study? What are the main conclusions regarding the retail sector?
AlixPartners supports managers and investors in “high-stakes” situations, particularly in the event of change, disruption or disruption. We advise companies with an average turnover of 100 million euros and often family companies. The study (3,000 managers surveyed around the world each year) aims to identify and find ways to deal with these “disruptions”. Concerning distribution, it is a sector particularly marked by structural changes: inflation and the drop in consumption of course, the transformation of consumption patterns and the development of digital solutions (purchasing, payment, store experience, online …) hence the need to invest heavily, particularly in new technologies. The difficulty is reconciling structural changes and the challenges of immediate results, omnipresent in mass distribution. Choices must be made regularly not on the basis of immediate financial considerations but on consumer appetite. And then, players must be able to identify winning business models, hence the need to test to find solutions.
In your opinion, which are the most innovative international brands?
The simple, systematic, effective Action model is a success. But also Lulu Lemon for her ability to lead a community, to build loyalty, to develop the practice of a sport. It is one of the favorite brands of Generation X in the US. The JD Sports model is also interesting: it is a showcase of the best sportswear brands. The same goes for Grand Frais which offers the best of fresh and local products.
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Do you think selling at a loss is a good initiative?
I don’t think in a long-term way (otherwise, it’s the one who is the most financially solid who wins the market…), but in the short term, this allows prices to be controlled. Even if it is more of a political gesture than anything else. Fuels are in any case a loss leader for supermarkets (few staff, little service, sold with a very low margin, etc.)
What are the main challenges for retailers today?
We can speak of schizophrenia for distribution managers who must imagine the commerce of tomorrow while ensuring the profitability of their company. We must turn the page on 50 years of “massification” and development of consumption around the TV/car/brands/hypermarket model. The winners will be those who have been able to identify, among the numerous technological innovations (including those linked to AI), those which are critical and will enable the development of new business models.
In your opinion, what are the main issues surrounding the supply chain?
Agility to cope with strong variations in demand depending on regions of the world and events (conflicts, economic situation and purchasing power), optimization of last mile management which must be simplified while models of access to products are multiplying. And of course, finding the balance between availability/deadlines/stock and costs obviously…
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How do you see the retail sector evolving in the next 5 years?
I think that there will be a consolidation of physical distribution in major verticals such as furniture, cultural goods, sport but at the same time an atomization of the offer with a multiplicity of brands or distributors (often niche ), mainly present online. Another expected phenomenon is the increasingly frequent disintermediation between producers/manufacturers and consumers. Several models allow this: marketplaces, D-to-C sites or collaborative models between manufacturers. In the food sector, short circuits and local consumption will prevail. Finally, I see strategies of services, personalization or “curation” (selected for you) and exclusivity developing in an environment where millions of products are available instantly or almost…