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The retail industry has already been undergoing a massive change since a long period of time. This industry has seen a huge impact of the rise of internet and associated technologies. It was also amongst the industries which were greatly impacted by the pandemic.

The macroeconomic factors have always had a significant impact on the industry. As a result, there has been a significant change in the trends which are prevalent in the retail industry. Some of these trends impact the financial landscape of the industry as well.

In this article, we will be having a look at some of the trends related to the retail industry which are having a huge financial impact.

  1. Rapidly Evolving Industry: The retail industry has seen an extremely fast paced evolution within the past couple of decades. The industry has first transitioned from mom-and-pop stores to hypermarkets. These hypermarkets quickly transitioned into supermarkets and malls.

    Eventually with the rise of the internet, the supermarkets are also facing a lot of competition. This rapid evolution has had a significant impact on the psyche of retailers as well as investors within the industry. This is the reason that almost none of the players are willing to invest large sums of money in fixed assets which will be amortized over long periods of time. The focus has moved towards asset light business operations which are capable of adapting to the challenges which are posed by the retail industry.

  2. Rise of Internet Retailing: The rapid rise of internet retailing is perhaps the biggest trend which has impacted the retail industry. The largest supermarket chains in the world are under immense pressure as their profit margins are continuously shrinking. At the same time, the internet-based retail chains have rapidly grown.

    Today, companies like Amazon which are directly competing with big box retailers such as Wal-Mart are amongst the largest players in the retail industry. It would be fair to say that the internet based companies have an upper hand as of now.

  3. Rise of Grocery Delivery Apps: There has been a significant change in the manner in which retail stores provide value to their customers. For many years, competition in the retail industry has been all about price.

    The company which had the most efficient supply chain and was able to provide the cheapest products would often become the market leader. However, the consumers of today are not as price sensitive, particularly when it comes to buying retail products.

    The modern consumer is more interested in the convenience and the speed at which these retail products can be delivered to them on demand. As a result, companies like Instacart have come into existence and have scaled up to reach valuations worth billions of dollars.

    Since consumers are not buying many products directly from the retailers but are instead relying on delivery apps such as Instacart, the entire business landscape of retail business has changed significantly.

  4. Rise of Buy Now Pay Later Loans: The rise of consumer credit i.e. “Buy now, pay later” loans has been another significant trend which has taken the global retail industry by storm.

    Consumer credit has existed in many developed countries in the past. However, there too, the quantum of loans was lower than it is today.

    In the past few years, the quantum of these loans have simply skyrocketed. Also, these loans have now become more prevalent in developing countries where a large number of people do not work in the formal sector and hence do not have documented income.

    Certain categories of products such as cellular devices are being sold using such loans on a very large scale. In fact, the availability of such loans has become an important factor which influences the quantum of sales. Hence, it has become imperative for retail companies across the world to either have a strategic tie up with a consumer credit corporation or to themselves provide credit to their customers.

  5. Rise of Fintech: In many parts of the world, particularly in the developing world, fintech companies have become important strategic partners for retail companies. This is a very important trend since brick-and-mortar retail in generally thriving only in these parts of the world. Also, since the markets in these regions are grossly underdeveloped, these regions provide opportunities for possible future growth.

    Fintech companies are providing a wide variety of solutions to the retail stores. For example, there are some fintech companies in India which are enabling contactless digital payments which can be made with cellular devices. The merchant is able to provide these services for free to the vendor thanks to the fintech companies.

    In return, the fintech companies obtain data about the volume of transactions which takes place at the retail store. As a result, they are able to use data mining to determine whether or not they should lend money to a brick-and-mortar retailer i.e. mom and pop store. These loans are made at very high interest rates and are generally unsecured.

    Hence, lending this money turns out to be a lucrative business opportunity. There are other fintech companies which are also providing accounting and ERP systems for small scale businesses in order to obtain data which can be used for mining.

The fact of the matter is that the retail industry has already undergone a lot of change and it is likely to undergo even more changes in the future. These changes are significantly impacting the financial landscape of the entire industry.

It is important to carefully study these trends since they are likely to provide leading indicators regarding the probable changes which might occur in the future.

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