Consumer markets will remain under pressure in 2020 despite some retailers having seen unprecedented demand peaks during the global lockdown.It is a new reality for the fast-moving consumer goods sector, says Amanda Bourlier, head of retail at Euromonitor International.
“This crisis we are seeing at the moment is being compared to the 2007/8 global economic recession – and while there are some comparisons to make there are also important differentiations.”
According to Bourlier this includes the spike in demand for some products and the loss of sales of others. “Grocery sales have spiked significantly as has the demand for products like toilet paper. The economic impact in markets that were affected by the economic crisis in 2007/8 was far more evenly distributed than what we are seeing at present.”
She said one of the major shifts compared to the previous crisis has been the acceleration of discount retail and the rise of e-commerce. These two trends are expected to continue through this pandemic, with online order and delivery practices already increasing dramatically.Companies with an already existing digital presence will find themselves in a more competitive position as an increased shift to e-commerce is expected.
Expectations are high that essential businesses such as grocery, health, cleaning and sanitation retailers, will continue to see growth in coming months as it is highly unlikely that consumer fears will decrease in 2020.
Retailers around the world saw sales surge during the first few months of the coronavirus outbreak. Walmart sales in March are reported to have increased by 20%, while Tesco in the UK recorded increased sales of 30%. JD.com said its online grocery sales had trebled during the height of the lockdown in China.
Bourlier said it remained to be seen if these types of growth figures would continue in light of the deepening global recession affecting household incomes.The immediate challenge for the FMCG sector will be dealing with the radically altered demand environment that will be different in every country as each is dealing with the pandemic in an individual way.
The impact of this on supply chains will be huge and diversification of supply chains will be essential.Magda Hugo, strategic account executive at Global Trade Solution (GTS), agreed saying that as uncertainty prevailed it would become imperative for supply chains to be more agile.“Retailers are adopting agile approaches in executive fulfilment strategies due to forced demand shifts.
Dealing with change is going to be their norm and their logistics service providers are going to have to adapt just as quickly with them.”