Global digital native retailers to 2x revenue share by 2030: Bain & Co

Global digital native retailers will more than double their revenue share by 2030, as per a report by Bain & Company. But the fastest phase of growth for digital-first retailers looks likely to be over, as investors expect profitability and traditional retailers raise their game to gain an omnichannel advantage, thereby levelling the playing field.

A focus on profitability, scale, and new revenue sources is set to drive a growing convergence between old and new retail players, according to Bain’s report ‘The Future of Retail: The Age of Convergence.’

Global digital native retailers will more than double their revenue share by 2030, as per a report by Bain & Company. But the fastest phase of growth for digital-first retailers looks likely to be over, as investors expect profitability and traditional retailers raise their game to gain an omnichannel advantage, thereby levelling the playing field.

Retail ecosystem players, such as Amazon, and other online marketplaces gained considerable momentum over the last decade, capturing about 60 per cent of global retail growth between 2013 and 2021. And its report found that this trend is set to continue with digital native retailers set to more than double their revenue share from 15 per cent to 35 per cent by 2030 as loss-making retailers fail and disappear from the playing field.

The Bain study found that competition for an omnichannel advantage is driving a convergence in both talent and strategy between traditional retailers and digital insurgents. By 2030, Bain & Company predict that half of retail profits will come from new ‘beyond trade’ revenue sources including third-party marketplace activity and businesses to business services and consumer financial services. Traditional retail activities including the sale of goods, by comparison, are unlikely to drive even modest profit growth in the years to come.

As a result, retailers are upping their investment in digital, just as digital retailers are looking to acquire bricks and mortar storefronts. The search for capital to support these transformations will encourage a new wave of deals as retailers look to scale rapidly, the report further suggested.

The Bain & Company report mapped out four key strategies for retail businesses to secure success in the new age of convergence in the sector: undergoing a customer epiphany, where customers, rather than the channel, will increasingly shape decisions as retailers create a comprehensive ecosystem centred around deeply understanding their customers; excelling at omnichannel 3.0, where retailers will have to invest carefully and make trade-offs as they look to standout amid a world of omnichannel competitors; growing beyond trade, for which retailers will have to find new sources of value creation; and playing talent Tetris, meaning retailers must play a tricky game of “talent Tetris” to become the employer of choice in tight labour markets.

Marc-André Kamel, a Bain & Company partner and leader of the firm’s global retail practice, said: “Pre-pandemic, the momentum was with digital natives. Amid store overcapacity, many traditional retailers were struggling to adapt to the rise of e-commerce, competition from discounters, and waves of innovation. At the same time, ecosystem players such as Amazon were gaining share, partly by supporting their retail offering with profit generated by their extensive non-retail activities.

“There are early signs, however, that traditional and digital retailers are converging towards a similar strategy. The two-way flow of talent between some of the youngest and oldest names in the industry is a clear sign of the convergence that will be one of the defining characteristics of retail over the next decade.”

Fibre2Fashion News Desk (DP)