Shrinking margins, rising investment: is retail at a tipping point?

Retailers are facing major financial challenges, while they need to step up investments in digitisation and sustainability. Gino Van Ossel co-wrote the European Commission’s new transition path for retail and sees challenges as well as opportunities for retailers.

Gigantic investments

Under the increasing pressure of e-commerce, the Covid pandemic, inflation and cost-cutting consumers, more and more retailers are running into financial difficulties. The list of bankruptcies, restructurings and acquisitions since the beginning of this year is almost impossible to keep up with. Still, new challenges are emerging all the time, retail professor Gino Van Ossel of Vlerick Business School observes.

“Consumers are increasingly more demanding, while retailers are struggling to find good employees. Digitisation and sustainability require huge investments: up to 50 % more by 2030, while prices and margins are under pressure. Moreover, with rising interest rates, financing has become more expensive. One DIY retailer told me recently that he would have to use its complete investment budget for the next ten years to fit all shops with a heat pump.”

Need for change

Yet the need for change is great. The European Commission also realised this, and worked out a concrete transition pathway for the retail sector after the pandemic, in consultation with stakeholders from the retail ecosystem. “It was a co-creation process”, Van Ossel says. The transition path aims to assist retailers to become more resilient, greener, digital and skilled.

The task at hand is not small, with estimates showing that retailers will need to invest between 0.8 and 1.6 % of their total revenues by 2030. Between 0.3 and 0.9 % of their total revenue should go to the green transition, 0.4 to 0.6 % to digitisation, 0.1 % to new skills. “It is on the agenda, now implementation has to follow. How will we convince SMEs to take part? How can Europe support them financially?”

Addressing challenges

What does this mean for your retail business? Which retailers are taking the lead? At the RetailDetail Congress on 25 April, Gino Van Ossel will elaborate on the major challenges retailers face, but also – and more importantly – how to tackle them. The day also features other inspiring speakers, including from Jysk, The Good Roll, Planet B, Thrive, Stitchd, Mastercard, Dobit, CM.com and Hybrid Media, as well as influencer Average Rob. Tickets for the conference can be ordered via the link below.