Retail

The retail industry displays a clear divide between food and non-food segments, with the former generally less profitable but more stable and the latter more profitable but more cyclical. Industry structure also varies between advanced economies, where non-food retail constitutes up to 60% of goods spending, and emerging economies, where food retail dominate at 70-90%. Advanced economies are characterised by concentrated food retail markets and the domination of large retail chains, while emerging markets exhibit a hybrid structure with independent local retailers playing a bigger role in the retail mix.

Food retail remained broadly resilient in 2025, with steady 3-4% growth and stable EBITDA margins (6-7%). Sales volumes growth, which flattened and even crossed over into negative terrain in some markets during the 2022-2024 inflation peak, picked up in most markets and compensated for softer price growth. The accelerated shift to cheaper alternatives and private labels seen in past years seems to be stabilising.

Conversely, sales growth in the non-food retail segment has seen limited improvement (1-2%) and has been detrimental to profit growth with median EBITDA margins among listed retailers falling to their lowest levels since the pandemic. Debt service has significantly deteriorated because of the surge in interest rates over 2023 and 2024. Reflecting this challenging market environment, retail insolvencies are oscillating close to or are above their already high pre-pandemic levels in most countries.

Looking ahead, structural transformations such as expanding e-commerce and the booming second-hand market will continue to reshape the industry. Retailers must navigate these disruptions by investing strategically in digital capabilities, sustainability initiatives and adaptive store formats to maintain competitiveness and mitigate future risks.

One industry, but a divide between food and non-food retail vs. advanced and emerging economies

The structure of the retail industry varies significantly between food and non-food segments, and between advanced and emerging economies. In mature markets, non-food retail represents up to 60% of total goods spending, while food accounts for the remaining 40%. The balance shifts in emerging economies, with food retail dominating at 70-90%, leaving non-food retail at just 10-30%.

The market structure also differs. In advanced economies, large retail chains dominate, particularly in food, where markets are often highly concentrated at the national or regional level. Non-food retail is more fragmented, featuring a mix of major chains and independent players. In emerging economies, the landscape is more hybrid, with independent retailers playing a much larger role at the local level.

Retail sales growth is typically stronger in emerging economies, where population expansion, urbanisation, and the rise of modern retail chains provide powerful structural tailwinds. Since 2019, dynamic emerging markets such as China, Mexico, Poland and Vietnam have recorded annual retail sales growth of 3–5%, compared with just 1–3% in most mature European and North American economies.

Across both categories, food retail is typically more resilient and has lower working capital requirements, but harbours fewer opportunities for differentiation as competition is largely price driven. Non-food retail is more cyclical and requires higher inventory levels, but it offers greater differentiation through branding and product offering.

The past few years have been exceptional, dominated by pandemic-driven swings in demand and an inflationary episode that played out differently across retail segments.

Non-food retail: weak growth, margin pressure, rising debt

Non-food retail sales growth fell to a sixyear low in 2025, with moderating inflation and broadly flat volumes that resulted in an estimated 12% topline increase for the year. This marks a further deceleration from the volumedriven upswing of 20212022 (about 10% per year) and the inflationdriven phase of 20232024 (about 3% per year). While weak by historical standards, outcomes were better than expected at the start of 2025: labour markets remained resilient and wage growth often outpaced inflation, thereby supporting purchasing power and delivering slightly higher volumes than anticipated. However, demand resilience came at the expense of margins. EBITDA growth has been negative almost continuously over the past three years as retailers have preferred to prioritise volume protection over gross profit margins.

Performance was heterogeneous across retail categories. Ecommerce reaccelerated to around 4% in 2025 after plateauing in 20232024, supported by strong price competitiveness following several years of eroding real purchasing power. Electronics retailers outperformed (about 5%), consistent with accelerating computer and smartphone unit volumes and higher average selling prices. Clothing delivered mixed results (about 2%). Luxury fashion was flat amid a market that polarised sharply: large fastfashion chains and aggressive Chinese digital marketplaces captured share, leaving the rest of the segment trailing in their wake. Home improvement saw no material recovery (about +1%), being damped by weak construction activity even as financing conditions improved. The latter offered only limited support to residential investment. Department stores remained under pressure (?1%), hit by slowing luxury sales and the secular decline in footfall. The market consolidation trend is continuing to play out, notably in the US.

Overall sector risk remains elevated. Balance sheets still carry the pandemic?era debt accumulated in 2020?2021, and the rate hikes of 2023?2024 weakened credit metrics. The gradual easing of interest rates in Europe and North America should provide incremental relief, and inventory levels appear to have receded from their peaks, alleviating some liquidity pressure—but the improvement is partial, and leverage and profitability headwinds continue to constrain the outlook.

Food retail: resilient but shaped by shifting consumer behaviour

Food retail remained resilient in 2025, with sales growth of 3–4%. After two years of contraction in purchased quantities amid double?digit food inflation, volumes recovered on the back of real income stabilisation. The “trading down” pattern that defined 2023–2024—consumers preserving baskets by shifting to lower?cost alternatives—persisted but showed signs of plateauing in 2025.

EBITDA margins held at 6–7% of sales, slightly above the pre?pandemic norm of 5–6%. The earlier shift toward private labels underpinned profitability: higher store?brand penetration supported mix, price architecture, and bargaining power vis?à?vis branded manufacturers, enabling retailers to secure better terms. That said, both trading down and private?label gains appeared to level off during 2025, thereby limiting further margin tailwinds.

A sustained focus on price continued to favour the most costcompetitive formats and operators, while putting less efficient peers at a disadvantage. As a result, topline performance was uneven across players, reflecting differences in scale, sourcing, and privatelabel sophistication.

Overall risk in food retail remains lower than in non?food, supported by stable demand, defensive category mix, and contained working?capital needs. However, credit metrics are not as strong as they were in the past: higher financing costs since 2023–2024 have weighed on debt?service capacity. A gradual easing of interest rates—notably in Europe and North America—should provide some relief, though the improvement is likely to be incremental rather than transformative.

E-commerce, the second-hand market and retail space reconfiguration keep testing the retail industry

Apart from short-term cycles, the industry is undergoing powerful structural shifts, forcing retailers to adapt.

E-commerce is a mixed blessing. While online sales continue to expand, profitability is elusive for many due to high logistics and fulfillment costs. A major development in this domain is the rise of global e-commerce platforms, particularly by aggressive Chinese players which are reshaping the market.

The second-hand market is growing fast. Cost-conscious consumers and sustainability trends are fuelling expansion, but much of this growth bypasses traditional retailer and benefits peer-to-peer platforms instead.

Retail space is being reconfigured. Changing consumer habits are driving demand away from certain store formats while boosting others, forcing retailers to rethink their footprint. Adapting to these shifts requires targeted investment, creating challenges for those retailers that are heavily reliant on a single format.