Rethinking Retail – Why Revenue Won’t Cut It in a Slow-Growth World

The old rules for value creation no longer apply. Introducing five new focus areas for retail success.

For decades, retail has relied on a simple formula: open stores, sell more merchandise, grow revenue. That era is over.
Tariffs, soaring interest rates and increasingly unstable geopolitics have caused a structural shift in the trading environment, which is slowing market growth:

• The global fashion industry is expected to post low single-digit growth in 2026.¹
• European grocery volume growth is expected to run at 0.2% CAGR until 2030.²

When markets were expanding, retailers could prioritise top-line metrics and rely on volume for success. However, when growth is sluggish, EBIT improvement must come from productivity and discipline.
The necessary mindset change is not easy for retail leadership teams whose time is consumed with firefighting rising costs, logistics disruption, and cautious consumer spending.

The Five New Levers of Value Creation

A new way of thinking about retail requires a new approach. We believe there are five areas where retailers can shift from chasing sales growth to building durable value.

1. Market Share: The New Market Growth

Market share gains now matter more than market growth. For decades, retail operated on a simple assumption: the market itself would grow and a reasonably well-run business could increase sales. Many leadership teams are still calibrating to that reality, making decisions that made sense two years ago but carry real risk today.

Growth today is not simply a question of selling more. In a low-growth market, a retailer can grow revenue while simultaneously destroying value through heavy discounting, piling-up unnecessary inventory, operational inefficiency, or margin-dilutive expansion.

The challenge is not to sell more but to win profitable customers from competitors. This can be done through market positioning and consolidation.

2. Market Positioning: Escaping the Middle Market Squeeze

A squeezed middle market is nothing new in retail but beware of changing boundaries. Take fashion retail, where former well-established price-entry players have suddenly found themselves pushed into the middle market by ultra-low-cost platforms such as Shein, Temu and AliExpress.

A fast-growing second-hand and resale market – 9.3% CAGR between 2024 and 2029³ – is accelerating this dynamic. In fashion, for example, it is diverting spend from the premium end of the middle market by adding yet more value options for price-conscious consumers.

The first step to combat this is to recognise when your market position has changed. The second, is fighting back with unmistakable brand positioning, differentiation and alternative distribution channels.

When your brand sits in the squeezed middle, simply being there and doing a good job is no longer enough; you need a distinct additional proposition, whether that is community, reliability, exclusivity or experience. Sportswear brands like Alo, Gymshark or Lululemon have built-up communities and used social media influencers and fitness creators to foster a sense of belonging among young fitness enthusiasts, turning customers into brand ambassadors through events, challenges and a shared identity around fitness culture.

Another mid-market survival tactic is to leverage new distribution channels beyond traditional retail, brand-owned websites and wholesale. Some 60.8% of European online revenue comes from marketplaces, according to e-commerce market intelligence firm ECDB, rising to 97% in Asia.⁴ Meanwhile, the social commerce sector continues to rapidly grow: A report from EMARKETER says the channel accounts for 6.9% of U.S. ecommerce and is predicted to rise to 9.3% in 2029.⁵

3. Acquisition: Acquiring for Return over Revenue

If organic growth is limited, how do you build competitive advantage? Increasingly, the answer is consolidation. Consumer M&A deal values rose in 2025, and in low-growth markets that trend is likely to continue.⁶ In saturated but fragmented sectors, such as German DIY and European grocery, expansion through acquisition is proving faster and often more reliable than building it from scratch.

Consolidation brings more than market share, it brings new capabilities, digital platforms, logistics assets, data infrastructure and brand portfolios. In addition, scale drives procurement leverage and supply chain resilience in ways that are difficult to replicate organically.

In a slow-growth market, M&A should focus on ROIC. For many retailers, particularly those backed by private equity, this requires a genuine rewiring of how performance is measured. For years, the metrics that mattered were store count and country expansion: how fast, how far, how many.

This made sense when growth was the primary value driver. In a low-growth environment, these metrics can actively mislead. A retailer acquiring stores purely to hit an expansion target, rather than because each new format clears a disciplined return threshold, risks eroding value.

4. Digital and AI: Beyond Basics to Powering Operations

Every retailer is experimenting with artificial intelligence. Far fewer are generating a return from it. CFOs and CEOs are increasingly asking whether artificial intelligence (AI) has moved the P&L.

The use cases that matter are not necessarily the ones that generate marketing headlines, like augmented reality fitting rooms and virtual product visualisation. Likewise, many retailers’ use of AI for operations is limited to summarising meeting notes and report writing. However, the real power lies in uses like powering markdown reduction, inventory optimisation and replenishment, dynamic pricing and demand forecasting.

5. Inventory: The Hidden Strategic Advantage

Inventory may be the most overlooked area where retailers can build meaningful strategic advantage right now. That is partly because it has historically been treated as an operational question for the finance team and the supply chain, rather than a strategic one for the boardroom.

In a structurally higher interest rate environment, the cost of carrying slow-moving stock is not trivial. Excess inventory ties up capital that could be deployed elsewhere, creates markdown risk and sends a signal to investors about the health of the underlying business model.

The levers available are well understood but underused. Inventory accuracy directly affects enterprise value, yet shrink and stock distortion remain persistent problems across the sector.

Working capital discipline is not purely defensive. A retailer with a healthy cash conversion cycle has options that a stretched competitor does not: the ability to negotiate harder with suppliers, move quickly on acquisition opportunities, or invest counter-cyclically when others are retrenching. That kind of flexibility requires consistent discipline across inventory management, supplier terms and capital allocation.

Refocusing for Resilience

These five new focus areas for 2026 are connected by a single thread: in the current environment, financial resilience is a prerequisite for strategic freedom.

The COVID-19 pandemic demonstrated this starkly: retailers that were performing well but expanding on heavy debt found themselves unable to service their obligations when revenue stopped overnight.

The retailers asking hard questions about their balance sheets today, not because they are under pressure but because they recognise it as a source of advantage, will have the most options when the next disruption arrives.

The playbook is not complicated, but it requires a genuine shift in mindset from the instinct to grow towards the discipline to optimise.

Gordon Brothers partners with retailers to optimise asset value and deliver financial certainty during periods of change. With decades of experience, global reach and deep retail expertise, we design tailored solutions that help businesses navigate change, store closures, M&A activity and inventory optimisation, while protecting brand equity, minimising disruption and allowing management teams to remain focused on their core operations.

To explore any of the themes raised in this article in more detail, please get in touch with Olaf Galler or Berta Escudero.

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