Future of Retail

About the report

Australian retailers, like their counterparts globally, want to turn the page of disruption of 2020. Yet Australian retailers are unsure exactly what the future will bring.

Much has changed over the past year. But the reality is that many of the changes wrought by the COVID-19 pandemic – to buying behaviours, to workforce models, to channel mixes and to business models – were underway long before the pandemic. COVID-19 only accelerated these trends (in some cases by 5-10 years), driving an unprecedented level of urgency to retailers’ actions.

As these trends evolve, the links between physical locations and the ability to sell products and services are fraying quickly. And, as they unravel, the shift from ‘retailing’ to ‘consumer commerce’ is picking up speed. Indeed, the entire definition of what it means to be a retailer is changing.

In this point of view, we explain why the market is changing. We describe what the winning business models of the future will look like. And we explore how you can achieve this transformation, outlining the key capabilities and strategies you will need to move your organisation into the future.

Future of Retail

Transitioning from 'retail' to 'consumer commerce'

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Signals of change

3. Customer

Customer expectations and needs are rapidly changing as retail moves from being a ‘push’ (i.e.B2C) to a ‘pull’ (C2B) model.

1. Disruption accelerated

The recent crisis has drawn a stark line under any indecision. The choices retailers make in the next months will influence their success over the next 5 years or more.

4. Reducing cost of doing business

With retail margins under increasing pressure and costs increasing across multiple aspects of the value chain, most recognise that conventional forms of cost cutting are no longer enough to shore up margins and ensure the business is fit for the future.

2. Business models and partnerships

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.

5. Purpose

Customers want businesses to stand for something bigger than the products they sell. The recent pandemic has only sharpened consumer preference for purpose-driven organisations.

Future success for seven types of consumer commerce businesses

The word ‘retail’ is likely to become redundant and will be replaced by ‘consumer commerce’; seven types of business models will emerge as winners going forward.

Platform-based businesses

Platform businesses are increasingly dominating the go-to-market channels and take a broader approach to target both B2B and B2C offerings.
Multinational retailers

Large multinational retail players will transform themselves into platform businesses and will grow their capabilities through M&A and new market entry.
National heroes

National heroes often have the advantage of securing a loyal customer base and leveraging loyalty programs to meet customer needs. To enhance their positioning they will also need to focus on creating partnerships to tap into synergies and create scale.
Value-based retailers

Discounters have been one of the fastest growing physical formats over the last 10 years. However, they will now need to establish or evolve their online value proposition to profitably survive in the future.
Direct-to-consumer

In some cases brands are building their own capabilities to deliver this proposition, or are buying this capability and more frequently are leveraging platform businesses in order to bypass traditional retailers and gain additional margins.
Category specialists

Category specialists offer unique and focused products and services targeted towards a specific retail category or a defined customer.
Independents/Mutuals

Mutuals and independents have the unique ability to directly gather and respond to changing community needs. Independent local retailers are also re-emerging as viable players, often utilising online as their core or an additional channel to market.

Eight capabilities, twice as likely to succeed

The eight capabilities of the KPMG Connected Enterprise deliver tools, methods and frameworks to achieve a new, better business-as-usual with agility and accelerated innovation:

Integrated partner and alliance ecosystem
Insight-driven strategies and actions
Innovative products and services
Digitally-enabled technology architecture
Seamless interactions and commerce
Responsive operations and supply chain
Aligned and empowered workforce
Experience-centricity by design

These capabilities help retail businesses define a customer-centric approach to digital transformation that connects the front, middle and back offices, which will be of critical importance to navigate the future Consumer Commerce landscape.

Base: 1,299 professionals involved with customer-centric strategy decisions
Source: A commissioned study conducted by Forrester Consulting on behalf of KPMG, September 2018.

Moving from today to tomorrow: towards a connected future

Now that you know what models will win and what capabilities you need in order to succeed, the big question is how to move from ‘here’ to ‘there’. KPMG firms can help you plan the four main steps you will need to take — define, design, pilot and implement.

Define

The first step is to decide which winning business model (or combination of models) is right for your organisation. The answer may be a combination of the winning business models we identified earlier in this report — or it may be a hybrid.

Pilot

Test and pilot your strategy in high-priority functional areas, seeking not only to validate your strategy, but also to uncover opportunities to tap into a larger potential for change across the organisation. A deeper dive into the company’s value chain can help identify the best immediate course of action and potential for future change.

Design

Once you have defined your future business model, consider how each of the key connected capabilities discussed earlier can influence your success. Think about what aspects you must build yourself, what you can buy and who you can partner with to enhance these capabilities.

Implement

Now it all comes down to activating, scaling and improving your strategies across the enterprise. While this will clearly lead to very different roadmaps and priorities for different retailers, the key is to remember that all of your activities, capabilities and plans are connected — from the front office through the middle office and into the back office.