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Retail & E-Commerce

Sector

Retail & Ecommerce

prasoon-morya
Prasoon Maurya

Sector Expert
   

Snapshot

The Global Retail market sale amounted to around $24 Trillion in 2018
Retail is related to the sale of goods and services to consumers. Transactions take place through various channels of distribution across an ever-growing range of industries, such as food, motor vehicles, apparel, and electronics. Retail markets and shops from a network of physical retail stores which consumers visit to purchase goods and services. While physical or in-store retail is the dominant channel in this market, forms of non-store retailing are becoming more and more popular. Online retailing or e-commerce markets are making their share out of the of the retail sector in many global markets. Desktop and mobile commerce are few examples of business-to-consumer (B2C) e-commerce. Many retailers operate an omni-channel model, which aims to integrate offline and online channels. Asia has some of the biggest retail markets in the world in China, Japan, and India. Seven & I Holdings, owner of Seven-Eleven, and JD.com are two of the largest retailers coming from this region. Online sales channels are popular in Asian markets. Online sales accounted for a quarter of all retail sales in China in 2017. Walmart remains the largest retail corporation in the world, operating discount department and warehouse stores across 27 countries.
Market Overview

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GDP ($ billion)
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R&D sending (billion USD)
Sector Highlights


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INDUSTRY SCENARIO FOREIGN INVESTMENT INDUSTRY TRENDS MAJOR PLAYER

Global retail sales were forecasted to amount to approx. $30 Trillion by 2023, rising up from approximately $23 Trillion in 2017. The retail industry involves the journey of a good or service. This typically starts with the manufacturing of a product and ends with product sold to consumer by a retailer. Retail establishments have many forms such as grocery stores, restaurants, and bookstores etc. Globalization and various trade agreements between markets and countries resulted into many retailers capable of doing business on a global scale. Most of the world’s leading retailers are American companies. Walmart and Amazon are few examples of such top American retailers. The success of U.S. retailers can be seen through their performance in online retail industry as well. Selling overseas is a huge and very real opportunity along-with it brings real challenges too. Localized marketing, payments, logistics, currency exchange and tax and duty compliance are just a few of the challenges the cross-border retailers have to deal with.

  • The retail market has matured and is highly competitive in the developed economies of Europe and North America
  • Developing economies of Asia-Pacific, Middle East, and Latin America play an instrumental role in driving the market growth
  • Consumer spending typically accounts for around 67% of the Global GDP, has been a key indicator of the health of the retail market
  • The increasing strength of online shopping has been a major driver in the growth of global retail industry
  • Smart Phone penetration across countries is driving the e-commerce channel
  • The global B2C e-commerce is projected to grow at a CAGR of 7.9% from 2020 – 2027

The world’s Top 10 retailers contributed 31.6 percent share to the Top 250’s total retail revenue, an increase of 0.9 percentage point year-on-year. The top three retailers maintained their positions, while Amazon jumped up two positions to No. 4 with the highest retail revenue growth of 25.3 percent. Higher efficiency of business operations and inventory control by the Top 10 retailers earned them a 0.5 percentage point lead in terms of Return on Assets (ROA) performance over the Top 250. The net profit margin composite of the Top 10 was weaker than the previous year. When compared to the Top 250, this is in large part because eight of the Top 10 retailers operate in the low-margin Fast Moving Consumer Goods (FMCG) sector (the exceptions are Amazon and The Home Depot), where margins are under increasing pressure from rising costs, lower pricing power due to increased competition and transparency, and the need to invest in digital transformation of the businesses

  • Amazons acquisition of Whole Foods contributed to the high revenue growth, partly driven by the high sales of fresh seafood and other perishable items
  • Costco’s expansion of its operations & warehouses into France & Iceland played an important role in its 8.7% retail revenue growth rate
  • Wallmart’s major growth drivers have been from the acquisition of e-commerce websites Jet.com, ModCloth, Shoes. com, Moosejaw, and Bonobos.
  • Wallmart is making greater investments in store remodelling to integrate its store and digital businesses and also has made investment in store wages.
  • Walmart’s recent investment initiatives include the acquisition of Indian retailer, Flipkart, and its partnership with Japanese retailer Rakuten

The Global Powers of Retailing Top 250 companies achieved strong growth in FY2017. Retail revenue increased for nearly 83% of the world’s 250 largest retailers i.e. approx. 208 companies, resulting in a currency-adjusted composite growth rate near to 6%, much higher than the previous year’s 4.1% growth. 92% of the companies that disclosed their bottom-line results operated profitably. The aggregate Retail revenue for the Top 250 companies was $4.53 Trillion in FY2017, which is on an average size of US$18.1 billion per company. The reporting companies declared a net profit margin of 2.3% in FY2017 on a composite basis, lower than the 3.2% in FY2016, thereby indicating more focus on top line growth. The return on assets of 5.0% was better in FY2017 than the 3.3% reported in FY2016. Analytics, automation and robotics will become more dominant in manufacturing, logistics and stores, as legacy firms continue to look towards new technologies to move faster and offer greater differentiation. Digitalizing the supply chain is not new, but it will have greater scale impact in 2020.

  • Artificial intelligence will remain retailers’ preferred technology.
  • Expect more frictionless retail: Retailers will turn to technologies that remove the traditional pain points of brick-and-mortar retail
  • Direct to consumer and private-label selling accelerates
  • Global ecommerce booms outside the U.S.
  • Automation powers productivity
  • E-commerce is expected to become the largest retail channel in the world, accounting for 14% of the total retail sales by 2021, outpacing sales through retail outlets, like supermarkets, independent grocers, and apparel and footwear retailers, among others
  • Asia-Pacific is Home to Digital Powerhouses for retail industry growth
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