Inflation, affordability, and consumer behavior

Global Retail Outlook 2024: Industry perspective

As a part of our recent report, Global Retail Outlook 2024, we asked 200 retail leaders across the globe to provide their expectations for revenue and operating margin for the industry as a whole. Over the last few months, we have also gathered the industry perspectives by interviewing some of our clients and below is an excerpt of one of such conversations with Ahold Delhaize.

Inflation and costs dominate the agenda

Heading straight into the topic, Wouter emphasizes the delicate balance required to help manage public sentiment and create industry unity in the face of inflation. “The rise in inflation has posed challenges for the retail sector, both for companies and for consumers. We must address rising costs without compromising the customer experience. And we need to do that together."

Shifting consumer dynamics

Consumers are increasingly price-conscious, gravitating towards private brands, and seeking promotional deals. Ahold Delhaize, recognizing this shift towards more economical alternatives, uses loyalty programs and tailored promotions to help cater to the evolving preferences of these price-conscious consumers. “We have also sought industry unity in order to face the new market dynamics. New buying alliances have helped us to purchase more efficiently, ultimately leading to lower prices for customers.”

Sustainability is of growing importance

Sustainability is also at the forefront for European retailers, gaining even more prominence over the last five years. While acknowledging the progress made to integrate sustainability into business strategies, with commitments and tangible actions becoming more prevalent, Wouter advocates for even greater alignment among retailers and suppliers to collectively help address some of the challenges in this field. He envisions a collaborative approach where retailers and suppliers join forces to help reduce their carbon footprints and drive sustainable practices. "This doesn't have to be a competition; with common standards, a common agenda, and more alignment within retail and among suppliers, we can move the needle together. As an industry, we can lead the way."

The digital transformation and its implications

Ahold Delhaize, having initially operated predominantly through brick and mortar, underwent the journey into omnichannel retail. The adoption of digital platforms and mobile applications has become integral to their strategy. “We need to ensure consumers feel the seamless customer experience across digital and physical touchpoints.” But the digital shift in retail also poses profitability challenges, for example, due to the additional costs associated with online retail. “Online delivery, etc. definitely doesn't help your profitability, but it helps your growth. So it is definitely an integral part of our business.”

Wouter embraces the impact of digital technologies like Chat GPT on the retail sector. He sees opportunities in areas such as supply chain optimization and employee engagement, emphasizing the need for responsible data usage and protection. "I think there will be massive opportunities. Some processes can be accelerated so much by it, which is cool."

Leadership in the age of change

But as the retail business changes, new priorities emerge and customers evolve, what does this mean for the role of leadership in the retail sector? Technology and sustainability are increasingly incorporated into the executive agenda and Wouter predicts that technology officers and digital officers will likely play a more prominent role in executive teams. “Leaders should continually keep learning and staying curious about emerging technologies. The shift towards a more diverse executive team, including technology officers and sustainability experts, for example, reflects the industry's recognition of the significance of these aspects in shaping the future of retail.”

Read our full report 2024 Global Retail Outlook to deep dive into more such industry perspectives.