Retail market trends as of September 2022

Consumer sentiment in the doldrums

Consumer sentiment, including the figures for net spending intention, has hit historic lows in OECD countries. While home improvement thrived at the height of Covid and consumers went to town on fashion and leisure post-lockdown, declines in discretionary spending indicate that the effects of this pent-up demand are wearing off.

The fact that retailers have been over-ordering to mitigate supply problems has only made matters worse. With the impact of inflation not passed on fully through the supply chain, we’re not likely to see the headwinds ease.

A major challenge for retailers is to adapt their product lines to take account of the fact that most consumers are cutting back or planning to do so, with over a third seeking to trade down to cheaper items and reduce their purchases overall. The key will be to streamline the cost base and gets the basics right. This means that retailers will have to target a clear customer base, differentiate their proposition and communicate value for money.

Consumer sentiment in OECD countries and Switzerland

M&A hotspots

Certain areas of the sector, including consumer health, health and beauty, pet products and grocery, continued to attract the interest of dealmakers. We’re also seeing trade buyers go for specific opportunities. On the other hand, deal processes are more protracted and there is more intense scrutiny from investors.

Shifting trends and consumer priorities

Following a massive shift to online retail during the pandemic, consumers are now focusing more on value and returning to bricks-and-mortar outlets – particularly value retail and discount grocery stores – in search of lower-cost options. This has been resulting in a decline in valuations of online businesses; the process of consolidation has begun and will continue, and we’re also likely to see distressed M&A and restructuring.

We anticipate further vertical integration and efforts to rebalance supply chains as businesses re-evaluate their risk profiles. Businesses are also adapting their models in response to conscious consumerism. Examples include retailers that are acquiring waste management operators or partnering with packaging companies. Not only do moves of this sort improve a business’s ESG credibility; they also position it in strategically relevant sections of the value chain and help offset scarcity-driven costs risks.

Business situation indicator for the Swiss retail sector
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