Estudios Económicos


Central & Eastern Europe
Latin America
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  • Growth of the Chinese and Indian middle classes
  • Growing and increasingly urbanised populations, particularly in Asia and Africa
  • Recovery in international tourism


  • Sales dependent on the economic cycle and changes in consumer support policies
  • Strong competition between companies in the sector
  • Traditional physical stores struggling to cope with the growth of online sales
  • Vulnerability to supply chain disruptions
  • Strong impacted by energy costs
  • Subject to increased ESG regulatory scrutiny from consumers and governments

Risk assessment

Risk Analysis Synthesis

As was the case in 2023, distributors should face a slowdown in overall consumer demand in 2024, weighing on retail sales. However, this slowdown will mask geographical divergences. With a cautious consumer, sales growth will also depend on retailers' price positioning.
At the same time, companies in the sector could see their costs rise. This would also put pressure on margins, with an expected increase in the number of insolvencies.
In addition to regulatory changes, consumer needs are evolving significantly. Retailers are having to make changes to their merchandise and the shopping experience they offer their customers. This requires retailers to adapt.

Sector Economic Insights

Consumer caution in the face of rising prices will continue to weigh on retail sales

The year 2023 was marked by a slowdown in consumer demand, weakening growth in retail sales. With global economic growth set to slow again in 2024 (to 2.3% after 2.6% in 2023), the retail sector will continue to face weak demand. Slower inflation (4.9% compared with 6.3% in 2023), albeit still faster than before the pandemic, combined with high interest rates, will weigh on household consumption. In addition, consumer preference for services over goods could continue to cloud the outlook for retailers.

As in 2023, the slowdown will not be uniform in 2024 and will notably comprise geographical divergences. In the two main Asian markets (China and Japan), sales are likely to show weaker growth than last year. The Chinese consumer confidence, whose index stood at 87.6 in December 2023 compared with an average of 114.3 over 2015-20191, will continue to be dented by an unfavourable labour market and the property crisis, while Japanese retailers should benefit from a weaker contribution from tourism compared with last year. In contrast, US and European retail sales2 (volume contractions of -0.5% and -0.7%, respectively, in 2023) could post a slight rebound thanks to rising real wages. In the US, the exhaustion of the stock of surplus savings accumulated during the pandemic means that US consumption growth should resume its usual link with expected income growth, favouring a modest rebound in sales volumes.

Differences will also be seen depending on the positioning of distributors. The outlook for sales in the luxury goods sectors, which are traditionally less sensitive to economic cycles, is expected to be more positive. Luxury goods will also benefit from the recovery in international tourism as tourist spending has not yet returned to pre-pandemic levels. While tourist spending accounted for 40% of global sales of luxury goods in 2019, it is estimated to account for 30% in 20233. At the other end of the spectrum, discounters are likely to hold up better because of consumers' heightened sensitivity to general price rises.  For example, sales in discount department stores in the US are forecast to fall by 1.3% in 2023, compared with 7% for traditional department stores. To a lesser extent, food retailing should benefit from the low cyclicality of consumer spending. Nonetheless, the high level of overall prices and the volatility of the prices of certain agricultural raw materials (sugar and rice in particular) could force households to continue to shift their consumption towards cheaper but essential products such as pasta, flour or rice, to the detriment of meat, for example. Sellers of non-essential products such as clothing (excluding luxury goods) are likely to suffer the most from the rise in general price levels and changes in consumer preferences. The same will apply to electrical goods and furniture retailers, which will also be affected by the slowdown in property transactions.


[1] An index below (under) 100 means that consumers are becoming more pessimistic (optimistic), and 100 indicates stable confidence compared to the previous month.

[2] Measure consistent between the two regions cited, excluding food services, petrol station sales and motor vehicle sales


Costs could rise, thereby further squeezing margins
Apart from rents, which are likely to continue to be affected by the slowdown in sales outlets and high interest rates (with the exception of Japan), there are upward risks for retailers' other main costs. These concern the price of raw materials, particularly food and energy, which impact the price of their goods as well as their operating costs. In particular, energy prices have a direct impact on the cost of managing sales outlets and on transport costs. The latter appear all the more at risk in an environment marked by geopolitical tensions disrupting sea freight in the Red Sea (around 12% of trade). Other logistics costs, such as warehousing costs, are not expected to fall significantly as inventory levels, although down in 2023, remain high due to sluggish demand. In addition, labour costs are likely to continue to rise faster than in the past against a backdrop of ongoing relatively tight labour markets. This could be the case in the US, Japan and Europe. In the European Union, the vacancy rate in the wholesale and retail sector remains historically high (2.2% in Q3 2023 vs. an average of 1.4% over 2015-2019).
These risks to costs, combined with fragile demand, are fuelling fears that margins will be squeezed, despite the fact that they are already limited by fierce competition in the sector. As a result, distributor insolvencies are set to rise in 2024. These difficulties, and a catch-up effect following historically low figures in the wake of the pandemic, already pushed up the number of insolvencies in many economies in 2023 (+30% for non-specialist distributors in France, for example). The major retailers have not been spared, with Bed Bath & Beyond (USA) and Galeria (Germany) filing for bankruptcy, while French group Casino narrowly escaped bankruptcy by approving a debt restructuring plan in January 2024.


[3] Bain & Company, Long Live Luxury: Converge to Expand through Turbulence


A strong need to transform to meet changing consumer preferences and expectations
In the longer term, retailers could face consumers who are increasingly concerned about environmental and social issues, which should encourage them to adapt their supply chain. This pressure is likely to affect consumer brands in particular, with single-brand retailers likely to be the hardest hit.
Reflecting consumer expectations, investors and public authorities should also continue to have heightened expectations in this area. Regulators, particularly in Europe, are demanding greater transparency and introducing regulations aimed at encouraging sustainable and responsible practices by integrating environmental and social concerns into corporate activities and governance (the EUDR, for example). Certain types of retailers appear to be particularly concerned. Food retailers, for example, are having to adapt as a growing number of countries (EU, Canada, India, etc.) ban the use of single-use plastics, while clothing retailers are facing stricter regulations due to the polluting nature of production and working conditions (child labour, forced labour). Stricter social and environmental standards could lead to higher costs for retailers. These could subsequently be passed on to consumers, who might then find it difficult to reconcile their greater social and environmental demands with their preference for affordable prices.
In addition, there is a growing demand for convenience in the shopping experience, with the development of online retailing. It will respectively account for 15% and 28% of retail sales in the US and China by 2023. This highlights the importance of traditional retailers opting for omnichannel strategies, especially as the development of e-commerce is leading more and more brands to sell directly to consumers (D2C), bypassing traditional distribution networks. The demand for convenience, in tandem with the desire for more personalised shopping experiences, is also fueling the need for traditional retailers to acquire technologies. In order to improve consumer engagement, the development of “phygital” shopping experiences, which involve integrating digital functionalities into physical distribution spaces such as smart baskets or shopping trolleys, is set to continue.


Last update : April 2024

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