[Distribution Trend] 2024 Global Distribution Outlook, Global Retail Industry Response Strategy

 

*Data_Kearney Domestic On-Offline Sales Growth Rate Trend

2024 Retail Report - ① Global Distribution Outlook

*Source_Retail Talk

• Key themes that will drive the global distribution market in 2024.
• Global distribution market enters a phase of slowing growth
• Retail media secures profits by expanding PB
• Invest in retail tech to improve convenience and efficiency

Four Strategies for Profit-Based Growth in 2024

1. Profit and cost innovation “Increased profits by strengthening retail media and PB”

The first strategy is ‘Revenue & Cost Innovation’.

Rather than engaging in activities to increase sales or temporarily reduce costs through short-term initiatives, efforts are being made to create a structure where continuous growth and profits can be expected.

The second initiative to secure sales and profits is to strengthen PB (Private Brand).

Looking at trends in the United States, we can see that in the past, NB (National Brand) and PB growth trends were similar, but PB has expanded significantly over the past year.

The third initiative is format innovation.

Global leading companies' format innovation is progressing in two directions: 'localization' and 'profit improvement'.

Amazon took advantage of this as an opportunity to open stores in outlying areas of the city, securing sufficient parking and service space, strengthening its grocery assortment, and reorganizing its format.

7-Eleven is a company that is successfully pursuing a strategy of format diversification by location and commercial area, and in Australian business districts, it is developing a strategy of opening stores in the company building in a micro (ultra-small) format.

We are changing our marketing methods to improve profits.

Instead of reducing the marketing budget and frequency, we are using a strategy to simultaneously increase effectiveness and efficiency through one powerful marketing campaign.

2. Overseas expansion “Target with products and services that fit the market”

The second theme is overseas market development.

While consumer goods companies have seen many success stories thanks to the Korean Wave, distribution companies have not yet had many success stories. For successful overseas expansion, it is most important to secure the ‘Product Market Fit (PMF)’, that is, the market suitability of the product or service for the relevant market.

When seeking overseas expansion, it is necessary to use a strategy tailored to the company's business stage. If the business is in the early stages, it is effective to carefully consider the market suitability mentioned so far and determine which product can succeed in which market to create a success story. If the business is in the growth stage, attention should be paid to operational efficiency. . And in the final step, branding investment is necessary to prevent the brand image from becoming obsolete.

 3. Building a D2C channel “The destination is connected commerce”

The third major strategy of global companies in 2024 is to expand D2C (Direct to Consumer) channels. D2C channels offer many advantages to manufacturers in that they can increase branding, improve customer experience, and secure customer data.

Many companies are attempting to build their own malls to communicate directly with customers and sell, and there are already success stories and failures that provide lessons.

*Fabric Tokyo started out online, but was successful by operating an offline store and taking advantage of the characteristics of each channel.

4. Retail Tech “Convenience for customers, efficiency for companies”

Retail tech innovation by global companies is progressing from two perspectives. From the customer's perspective, the goal is to improve convenience at all contact points from ordering to payment and delivery, and from the company's perspective, it is to increase back-end operational efficiency, including logistics center operations.

*Virtual fitting technology introduced by Walmart.

The retail tech that is currently at the center of the issue in the distribution industry is definitely generative AI. Chatbot technology using generative AI is contributing greatly to improving customer experience by breaking away from the standardized solutions of the past and providing more sophisticated services based on context understanding.

2024 Retail Report – ② Domestic distribution industry settlement and outlook by industry type

*Source_Retail Talk

In the daunting year of 2024, the common goal is ‘improved efficiency’ and ‘profit margin management’.

As uncertainty persists, the outlook for the retail market is not very bright. Lee Kyung-hee, executive director of E-Mart Distribution Industry Research Institute, said, “2024 is a time when distribution companies must respond to quantitative and qualitative changes in the consumer market while also seeking to improve profits through operational efficiency in the era of high costs,” and used keywords for the 2024 response strategy. ‘RESET’, which means ‘strategy reorganization’, was proposed.

• Reconsider Customers: ‘Redefinition of customer attributes’ according to demographic and generational changes
• Enlarge Coverage: ‘Expansion of distribution scope’ beyond products to service areas
• Simplify Operations: ‘Operation efficiency’ in the era of rising costs
• Export & Investment: ‘Exploring overseas expansion’ due to saturation of domestic market
• Target for Low carbon: ‘Exploring ways to reduce carbon and energy costs’ for ESG management

Global retail industry response strategy in an era of high inflation

*Source_Retail Talk

 

*Data_IMF ‘Inflation rate of change by country’

How retail companies avoid losing customers in an era of cost-of-living crisis

• ‘We are cheaper than Aldi’, competing with Aldi prices
• Changed membership direction to ‘immediate discount’ instead of ‘accumulation’
• Carrefour launches ‘Grocery Purchasing Power Guarantee’ insurance

*Carrefour launches ‘Grocery Purchasing Power Guarantee’ insurance

*Tesco offers exclusive price benefits at the time of purchase only for ‘Club Card Price’ members.

Four response strategies for the global retail industry

① Price-focused/ultra-low-price icon, ‘Strategy to compete with Aldi’

② Membership policy modification/'instant discount' rather than 'accumulation'

③ The best way to expand PB handling/lower prices and take care of margins

④ Profit improvement work ahead of/prepared for price stabilization

*Aldi PB products have barcodes printed on all sides, and the barcodes are large in size, increasing checkout efficiency.

In the second half of next year, customers will visit retailers that helped them through difficult times.

Now that there are multiple layers of negative news in the consumer market, the starting point for establishing a response strategy is to analyze how customer behavior has changed and redefine the company's customers. Global retail industry experts predict that when price increases stop next year, consumers' purchasing behavior will gradually return to normal patterns and loyalty to retail companies that took into account their difficult circumstances during the cost of living crisis will increase.