In this multi-part miniseries, we glean some insights from across the pond from Goldman Sachs’ head of retail investment banking, Jen Davis, whose clients include large retailer CEOs across the US and beyond.
In this first instalment, we consider sentiment among US retailer CEOs. The growth of online retail and the consequential decline in bricks-and-mortar footprint is, of course, the single largest change in the environment which continues to dominate and transform the industry.
The retail sector, it can be argued, has been at the front line for the impact of technology in an ongoing transformation which is far from complete nor clear what things will look like when all industries have fully adapted.
According to Goldman Sachs’ head of retail investment banking, Jen Davis, ecommerce has grown “enormously” over the past six years – from about 5 per cent of total retail, it is expected to reach almost 17 per cent by 2021. However, Davis stresses, “it’s important to remember that pure store-based retailing is still almost 80 per cent of the overall market”.
“Our clients have definitely shifted from a more defensive posture several years ago – and after waking up to that reality, and a lot of painful investment, both in terms of ecommerce capabilities, distribution and logistics – they are now taking on a much more offensive posture. [Reatilers are] realising that having an omnichannel model, where you have both a brick-and-mortar store base, coupled with a strong ecommerce experience, is really what you need to have for the customer journey today.
“What the ‘digitally native’ brands have done is around two core themes: improving the customer experience and improving the overall value proposition. [They have] disrupted that in terms of thinking through the customer experience in terms of very customised experiences overall; personalised marketplaces and marketing overall, destination stores.
“And on the value proposition, really thinking through is there private label products, is there a way to disrupt the middleman in terms of manufacturing? And so, the ‘digitally-native’ brands and millennials’ exposure to those have really upped the ante for our core retail base, that they had to involve their own business models to address those two core themes.”
One response among older, more established retail brands has been to either selectively acquire or partner with these ‘digitally-native’ brands. In tomorrow’s installment, we explore Goldman’s take on how this partnership between ‘old school’ and ‘digitally-native’ works and what in it for both parties.
Davis was speaking Goldman’s Jake Siewert, in the firm’s latest Exchanges at Goldman Sachs podcast.