What is the future of the non-food retail sector?

The Covid crisis badly shook the non-food retail sector. After a rebound in 2022, the statistics for 2023 are clear and do not hold out. In this article, I look at the situation in France and draw some fairly general conclusions about the state of the sector. In particular, I propose 3 fundamental trends that will form the backbone of this sector in the future.

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Non-food retail: a mixed picture by category

The latest statistics on the non-food retail sector show a disparate outlook. For example, the household appliances and toys sectors saw a 6% contraction. The furniture sector shrank by 1.9%, while DIY suffered a more moderate 0.4% decline. Only the fashion sector managed to record a slight growth of 1.3%.

Household appliances, like IT and furniture, suffered from the effects of the Covid buying spree. Do-it-yourself sales are holding up better, as the tense economic situation is forcing households to conduct work themselves, which has become much more expensive due to inflation.

These figures also reflect physical stores’ growing need for attracting and retaining customers. Store traffic has fallen sharply, as we detailed in this article.

Multiple and diverse problems

The situation in 2024 will remain the same. The non-food sector will fall victim to various problems: inflation, high interest rates, and the housing crisis.

Inflation has weighed heavily on households, eroding their purchasing power. The rise in prices of necessities is still not over, and the phenomenon of shrinkflation is intensifying. This is leading consumers to make trade-offs to the detriment of non-food goods.

This situation is affecting household and business confidence. In April 2024, for example, French household confidence was 15 points lower than in the pre-covid period. This lack of confidence in the future leads households to postpone major purchases. A recent survey shows that 69% of households worldwide are pessimistic, and 73% in France. This pessimism is reflected in the standard of living, which 40% of respondents believe will fall.

The housing crisis adds a further layer of complexity. High interest rates, a falling birth rate in all industrialized countries, and an aging population are the ingredients of a ticking time bomb. The real estate market and consumer durables renewal are slowing down everywhere. Purchases of capital goods are directly linked to moves.

This time, it’s a complete misalignment after the planets were aligned during the Covid period.

The economy’s fault

The outlook for 2024 is far from promising. National banks continue to fight inflation, which remains far from their 2% targets. Last week, the FED did not rule out further rate hikes. Economic growth will, therefore, remain anemic. Recovery will only be possible if credit conditions ease, boosting inflation. It’s an insoluble equation.

Households know this uncertainty, and professionals in the non-food sector know it. They anticipate cautious consumption and a tendency to save rather than spend.

Influenced by the health crisis, changing consumer behavior has also redefined consumer priorities. The market for second-hand and reconditioned products is gaining ground, to the detriment of new purchases. Retailers must adapt to this new situation by integrating more second-hand offers and repair services.

More than ever, anticipating consumer behavior (notably through marketing research) is a common-sense measure. This research provides the keys to deciphering behavior and adapting your marketing strategy.

I can see 3 basic trends that will function as growth drivers (or anti-rebound drivers) for the sector.

3 key trends for the future

Faced with these challenges, retailers in the non-food sector have no choice but to adapt:

• offer diversification
• improved customer service
• adapting to new consumer habits

This adaptation to new consumer habits leads me to identify 3 fundamental trends that will function as growth drivers (or rather, anti-regression) for the sector.

In particular, in any sector, integrating second-hand items is unavoidable. While this trend began with luxury second-hand goods, it has now infiltrated all non-food verticals:

• second-hand clothing now has its dedicated section, even in supermarkets.
• the major sports chains have integrated it into their offerings.
• second-hand furniture offers are beginning to appear, with startups making this their business model (we met one of them at Vivatech).
• reconditioned electronic appliances are becoming commonplace.

The other trend will be rental for more expensive items that are only used sporadically:

• Do-it-yourself stores are among the first to be affected: their electro-portable shelves are full of equipment with low usage times.
• Sports chains such as Decathlon have also started renting out break-evens, which are very cost-effective.

Lastly, repair is set to become a new source of specialization and growth. General players will likely be able to integrate this specialization easily. I rather think that startups will enter this market, focusing on certain types of repair or certain types of appliances. In the French market, a company like Murfy has demonstrated the benefits of this business model for major household appliances.