Distributors generated a global turnover of about USD16,700bn in 2019, up 1.5% from 2018. Lower consumer spending across key regions sent growth well below its ten-year average (3%). In light of the global pandemic sending the global economy into negative territory, we believe industry turnover could decline by as much as 5%, with a clear divide between food retail, for which consumer spending is resilient, and discretionary retail, which generally suffers from reduced spending in times of downturns.
The pandemic comes at a bad time in mature economies (62% of global turnover) where discretionary retailers have been struggling to preserve their profitability in the face of intensifying competition for online sales and declining store footfall. The mandatory prolonged closure of discretionary stores could send annual sales down by 10/15%, while annual sales of food and fast-moving consumer goods should remain broadly flat. This drop in revenue could delay efforts by companies to profitably grow their e-commerce businesses and rejuvenate their store concepts, at the risk of further losing market shares to the dominant e-commerce giants.
Emerging economies (38% of global turnover) are expected to prove more resilient because the share of food in total consumer spending is higher, and because food purchases are often subsidized.
In light of this gloomy picture, we anticipate another year of record large retail insolvencies - more than 50 companies with a turnover superior to EUR50m have gone bankrupt every year since 2017.