Global Retailing 2022: Industry Remains Resilient, Despite Many Challenges (2024)

E-commerce is an important growth driver for retailers as many consumers continue to shop from home during the pandemic. In fact, online capabilities helped propel a China-based retailer for the first time onto the list of 10 largest global retailers—which also includes seven U.S.-based companies and two Germany-based companies—according to the report.

Nearly two-thirds of retail revenue from the top 250 retailers came from the fast-moving consumer goods category, as many grocers were able to stay open during the lockdown. Some of the most successful retailers in the past year were grocers that also had a large digital footprint.

The most profitable retail sector last year was hardlines—furniture, consumer electronics, and appliances, for example—and leisure goods, which together recorded the highest year-over-year revenue growth rate among industry sectors. With more time spent at home during the pandemic, many consumers purchased these types of products to refresh personal spaces and provide more entertainment options.

Demand for Sustainability

Shifting consumer behaviors, government regulations, and investor sentiment are causing retailers to redirect their strategic planning efforts and investments toward sustainable and responsible growth. Many retailers are now considering the sustainability credentials of their products—as well as their overall brands—as a core part of their business strategies to address stakeholder concerns.

Many consumers are showing a strong interest in sustainability and expect the same from the companies with which they interact. Deloitte’s “Global State of the Consumer Tracker” found 55% of consumers surveyed in October 2021 had purchased a sustainable product or service in the previous four weeks, and 32% said they paid significantly more for a sustainable product or service than for an alternative product. Food and beverages made up the largest share of sustainable purchases, followed by everyday household goods.

Younger generations in particular are concerned about sustainability. Protecting the environment was the top concern for Gen Zs and the third-highest concern for millennials (after healthcare and unemployment), according to Deloitte’s “2021 Millennial and Gen Z Survey.” The study found 44% of millennials and 43% of Gen Zs fear the environment has passed a point of no return and it is too late to repair damage caused by climate change. Consequently, 28% of all respondents said they’ve started or deepened relationships with businesses whose products and services benefit the environment, while the same percentage have stopped or lessened their relationships with organizations whose offerings they see as harming the planet.

Retailers are also facing pressure from shareholders and other investors to adopt sustainable practices. Investors are increasingly conscious of how their own reputations are affected by the retailers they support. Indeed, a study by a global bank found 59% of investors surveyed invest in companies that align with their own values.1 Some global retailers are adopting new practices—such as reducing toxic emissions—in response to shareholder demands.

Sustainable Actions

Deloitte’s “2022 CxO Sustainability Report” finds 86% of consumer industry CxOs believe that, with immediate action, they can limit the worst impacts of climate change. As a result, 66% of consumer industry CxOs expect climate change to have a significant effect on their company’s strategy and operations over the next three years.

Some of the actions companies have already taken as part of their sustainability efforts include increasing the efficiency of energy use, using more sustainable materials, and developing new climate-friendly products or services. Among the sustainability actions considered harder to implement are requiring suppliers and business partners to meet specific sustainability criteria and updating facilities to make them more resistant to climate impacts.

As they attempt to tackle climate change, retail executives can consider strategies already in place at some of the largest global retail businesses:

Emission reduction. Supermarket and grocery retailers continue to focus on strategies for reducing greenhouse gas emissions and increasing the use of renewable energy resources. For instance, some of the biggest retailers are exploring ways to make their supply chain operations greener and power their facilities with renewable energy sources.

Waste elimination. Leading retailers in the United States are collaborating on an initiative to identify, test, and implement innovative new design solutions for everyday retail bags—aiming to deliver convenience for customers and reduce environmental impact. And in the cosmetics industry, some retailers are using refillable packaging to eliminate waste from single-use packing materials.

Product recycling. Recent studies suggest that the secondhand fashion market is growing 11 times faster than traditional retail and is likely to be worth $84 billion by 2030.² Some fashion retailers are allowing consumers to donate, rent, or resell their clothes instead of discarding them. And some hardline retailers have launched secondhand outlets or have committed to using recycled materials in their products.

The pandemic has significantly altered consumer sentiment and purchasing behaviors, which will likely continue to shape future shopping patterns. Meanwhile, shareholders and investors are likely to continue demanding that retailers report metrics relating to sustainability and corporate governance. To create a sustainable future, retailers should address evolving customer and shareholder expectations in their business strategies and environmental practices.

—by Evan Sheehan, principal and global Retail, Wholesale & Distribution leader, Deloitte Consulting LLP