Top 25 Retailers Losing Share To SMBs To The Tune Of $41 Billion

  • August 9, 2016 at 12:00 PM EDT
  • By Glenn Taylor
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Since 2010, market share volatility in the retail industry has increased 250%, resulting in $200 billion in retail sales being traded among competing brands, according to a study from Deloitte. The biggest players certainly aren’t immune to such trading; in fact, the top-25 retailers (excluding Amazon) have lost 0.9% of their combined concentrated market share, equating to $41 billion in retail sales in 2015.

The report reveals that this volatility — a metric based on the year-over-year weighted standard deviation of market share change within retailers — is now being driven by fragmentation of market share, as small- and mid-level players collectively steal share from traditional retailers.

“This forces retailers to think differently about who their competitive threats are,” said Kasey Lobaugh, Principal and Chief Retail Innovation Officer at Deloitte Consulting LLP. “If they’re fighting against the big behemoth across the street versus fighting guerrilla warfare against hundreds of competitors who are attacking from all angles, that’s a very different competitive battle.”

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To measure market concentration in the Retail Volatility Index, Deloitte measured how the distribution of retail sales has changed within the top 120 to 140 retailers from 2007 to 2015.

‘Brick-And-Mortar Vs. E-Commerce’ Sentiment Not Responsible For Industry Volatility

While the continued rise of e-Commerce, with Amazon leading the way, has often been attributed to retail’s market share scramble, the blame doesn’t fall only on those retailers operating exclusively or primarily online.

Out of the top 25 brick-and-mortar retailers, 16 have growing e-Commerce sales that have consistently outperformed the broader e-Commerce retail market. Between 2010 and 2015, these brick-and-mortar retailers grew their e-Commerce businesses by an average of nearly 21%, compared with a 15% growth rate in the overall market. This statistic indicates that these brick-and-mortar powerhouses are actually taking share from other brands who operate in the e-Commerce space.

“Whereas a lot of people want to say that these brands are losing the e-Commerce battle, if you just look at these brands on the surface, they’re actually doing quite well,” Lobaugh said in an interview with Retail TouchPoints. “It’s not as simple as saying this is a bricks-and-mortar versus e-Commerce battle.”

The report suggests that retailers looking to win in this volatile environment must offer a combination of highly differentiated experiences and product offerings. While those that offered both options delivered annual revenue growth of nearly 11% and an EBITDA growth rate of 15%, those that only offered highly differentiated experiences increased their revenue 8% and EBITDA 9.5%. Retailers with a highly differentiated offering were less successful, boosting revenue almost 5%, but with a lower EBITDA growth of 2.4%.

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