Receiving a green light from the UK’s competition commission in November, Tesco’s £3.7bn deal to acquire wholesale giant Booker, announced in January, set a precedent for a year of consolidation in 2017, which also saw Amazon strengthen its grip on groceries after purchasing Whole Foods Market for £10.7bn. The consolidation is likely to continue into 2018.
Meanwhile, between January and September 2017, 37 retail businesses went bust or were bought out of administration, according to the Centre for Retail Research, including Jaeger, Agent Provocateur and Brantano.
That already beats the full 12-month total for the previous two years, and shows marketers have a tougher job than ever to draw in shoppers in the face of intense competition from big retailers and dominant online marketplaces.
Speaking at this year’s Festival of Marketing, John Lewis’s marketing director Becky Brock pointed out three companies – Amazon, eBay and Alibaba – will soon account for 40% of the world’s ecommerce, as she backed even more consolidation to occur over the coming years.
She warned: “This means there’s a real urgency to rise to the challenge because if we don’t, we could become irrelevant.”
The effects of this consolidation are clear for retail marketers, in that these monolithic competitors will have huge marketing budgets, economies of scale to drive down prices, and a growing number of consumer touchpoints dominating share of wallet.
But for product marketers, there is also the issue of a shrinking number of viable channels for reaching consumers en masse, and more wholesale price pressure from fewer companies dominating the routes to market.
One thing that could drive this era of consolidation – in the UK at least – is Brexit, with the weakening of the pound making UK retailers ripe for foreign takeover. And according to Steven Esom, a retail veteran who served as the managing director of Waitrose from 2002 to 2007, “any business looking at their cost base can see the advantage of consolidation”.
With The Co-operative Group also now clinching the purchase of convenience retailer Nisa, having had a bid of £143m accepted in November, and the fact Asda is considering a bid to buy discounter B&M, you can expect more high-profile acquisitions in 2018. Brace yourself for the unexpected.
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Phvntom, Inc. is a digital marketing company located in Boise, Idaho that creates websites, apps, and full-scale promotions/campaigns for other businesses. The views and opinions expressed in this article are strictly those of its authors and were not written by Phvntom. This article was originally published by Marketing Week.