Sponsored by kpmg

2022

The Australian Retail Report

Trends and insights shaping the industry

We asked over

10,000 businesses, from 23 markets

including 502 from Australia, to detail their concerns, aspirations, strategies, and investments for 2022 and beyond.


Then we asked 40,000 consumers from 26 markets, including 2,000 from Australia if they’re getting it right.

Welcome to the Australian Retail Report 2022:

The shape of ambition

When faced with sudden and significant change, we are compelled to examine our hopes, fears, and ambitions in a new light.

While 2020 was certainly a challenging year and introduced a lot of change, 2021 was the year the pandemic really impacted the Australian way of life. Various lockdowns, state border closures and trading restrictions forced everyone to adapt.

Yet, despite the strangeness and hardship, many have been able to innovate and thrive, showing incredible positivity and resilience. Ecommerce boomed and click and collect became commonplace. Restaurants, cafes and take-aways found ways to serve their customers and keep sales going.

As a result, 63% of businesses across the retail, food and beverage, and hospitality sectors grew in revenue by 20% or more in 2021. Digital transformation has played a pivotal role. In the face of enormous pressure and uncertainty, many businesses have chosen innovation.

Having adjusted through this turbulent period, businesses are now ready for the next phase and setting ambitions for what lies ahead.

Ambition might be in the form of improving customer experience, championing sustainable practices, or expanding into new markets. One thing is very clear in this research. Businesses that embrace technology to enhance the shopping experience, reward customer loyalty and improve operations have the edge on competitors.

We hope the following insights and recommendations help you shape, grow, and realise your ambitions for 2022 and beyond, whatever they may be.

Chapter 1 — Businesses further along in their digital transformation are outperforming their competitors

Digital transformation is a $169 billion opportunity.

In spite of – or perhaps because of – the multitude of pandemic-fuelled challenges hitting the retail, food and beverage (F&B), and hospitality sectors over the last year, businesses across Australia invested heavily in digital technologies. The goal? Improving operations and breaking down silos in backend processes and systems such as payments. 1 in 4 businesses connected payment systems to other parts of the organisation, such as inventory management and supply chain.

This proved to be the right move. 44% of respondents say their business is now in a better position due to investments to improve operations. And customers agree. 55% of consumers believe retailers used technology well to make their products available during the pandemic. No wonder 90% of businesses plan to invest further in this area in 2022.

With so much investment planned, it’s time for businesses to take a holistic view of digital transformation. Connecting operations and customer experience is key to success – not just in terms of sales, but also operational efficiency.

Our studies show that there is a 11% increase in growth amongst businesses that connect payment systems across their organisation compared to those that don’t. This is reflected in their ambitions – the growth projections for 2022 are 9% higher for those who connect their systems compared to those who do not.

Digital transformation is expected to continue opening up a wealth of opportunities. Our research found that 68% of businesses expect to grow by 20% or more in 2022. Overall, hitting these growth ambitions equates to a $169 billion opportunity – and with so many planning to invest further and grow bigger, that number could be even higher. In fact, if technological adoption is accelerated, the retail sector could add 4.6 percentage points to its growth rate over the next five years.

1 in 4

businesses have connected their payments systems to other parts of their business.

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Businesses that connect payments systems with other sections of their business grow 11% more than those that don’t.
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Growth ambitions for 2022 are 9% higher for companies that connect their payments systems across the business.
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of consumers believe retailers used technology well to make their products available during the pandemic.
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How does Australia compare?

Australian businesses should be applauded for their agility and resilience over the past few years. While they clearly invested in innovation and technology, Australia falls behind markets such as the UK and US, which often set trends that the Australian retail sector follows. However, the uptake and opportunity created by investing in technology is greater here than it is in most other markets.

For Australian retailers, investment in the pandemic wasn’t just about surviving, it was an opportunity to set their business up for long term success. And Australian consumers have appreciated the changes. Although below the global average, it is safe to say the majority of consumers were happy with how businesses used technology during the pandemic.

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% of businesses that are in a better position due to investments to improve operations

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% of consumers who felt businesses used technology well to make their products available during the pandemic

The long-term incentive for Australian businesses to invest in technology continues to be strong. In fact, the increase in growth created by connecting payment systems to other parts of the business is significantly greater than in markets such as the UK and US. While there continues to be room for further improvements, more businesses in Australia already link payments systems across their operations - exceeding the global average, as well as most other markets.

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% increase in growth amongst businesses that connect payment systems across their organisation compared to those that don’t

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% of businesses that have their payments system(s) connected to other parts of our operations (e.g. inventory management, supply chains etc)

Daniel Taft
Kogan

“Due to investments made in the past year, we're in a much better position to be able to see what products our customers are enjoying, how our logistics is operating and improve the decisions that our managers can make. They work better together now that all of our business intelligence is centrally displayed and clear visualisations are available for the team.”

Daniel Taft — Director of Operations, Kogan

From insight to action

Connecting opportunities with unified commerce

42% of businesses say unified commerce increases sales

Businesses that consistently perform the best are those that can combine their physical and digital worlds to create a fluid, channel-agnostic experience, which prioritises the customer. This is unified commerce, the next level up from omnichannel sales.

Omnichannel businesses are great at delivering cohesive cross-channel experiences to their customers. But behind the scenes, backend systems are often unconnected, complicating cross-channel reconciliation, limiting the experiences businesses can offer customers, and hindering their operational agility across multiple channels and regions.

With unified commerce, payments from all channels – online, in app, and in store – feed into the same system. This gives businesses more targeted, data-driven decision making, and a more seamless, flexible experience for customers. It also keeps businesses agile since they can add new channels and support new customer journeys quickly because everything’s connected.

Connecting opportunities with unified commerce
Chapter 2 — You’ll win hearts, minds, and wallets with unified commerce

54% of consumers believe that retailers should deliver the same cross-channel flexibility they provided during the pandemic.

The flexible, tech-driven experiences made available mid-pandemic have blurred the line between sales channels and encouraged the rise of nonlinear customer journeys. Businesses are providing new or simply different ways to shop, from the convenience of click and collect, to the perks of brand-owned apps – and customers are loving these multi-channel experiences. The majority of consumers are more loyal to retailers who have physical stores and online options (51%).

Both businesses and consumers have a taste for what’s possible with technology – and now there’s no going back. 54% of consumers believe that retailers should deliver the same cross-channel flexibility they provided during the pandemic. Keeping up with these expectations greatly improves the likelihood of repeat purchases and higher spending. Falling short could result in the opposite: 66% of consumers will not shop with organisations that have a bad shopping experience, either online or in store.

It makes sense that linking online, in-app, and in-store payments with a single system – i.e., unified commerce – has proved to enhance both brand resilience and customer satisfaction. 47% of businesses say online stores were able to offset the losses at physical stores during the pandemic.

And the more channels shoppers use, the higher their value: 41% of businesses say a benefit of unified commerce is improved customer experience, and 42% say it helps increase sales.

This brings us to some interesting findings around loyalty programs. Only a handful of brands are making the most of them and it’s an area of the customer experience ripe for innovation. 58% of consumers feel that retailers need to improve the ways they reward them for shopping with them. Payments-linked loyalty is a good place to start, since 50% of consumers would be more likely to shop with a retailer if their loyalty programme worked automatically through their payment card.

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of consumers would be more likely to shop with a retailer if their loyalty programme worked automatically through their payment card.

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of consumers think retailers need to use technology to make their loyalty/rewards schemes easier and more effective.

% of businesses that say the advantages of unified commerce are:

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Increased sales.

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Higher average spend.

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Improved customer experience.

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Increased customer loyalty.

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of businesses that enable customers to shop and complete transactions easily across online and offline channels grew by 20% or more.

The Australian Retail Report
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How does Australia compare?

There’s a big opportunity for Australian businesses to leverage unified commerce to drive growth. Not only does having a unified commerce solution in place help to offset losses but an optimised solution can also help retain valuable customers.

Ecommerce has been a long established channel in the US and UK, while in Australia, the love for physical stores remains strong. However, ecommerce saw significant uptake in Australia during the pandemic and became a lifeline for retail businesses, helping them offset losses from physical stores. While Australian numbers are below the global average and in comparison with the US and UK, Australia has made up ground on more established markets. Additionally, when it comes to providing a shopping experience, Australians have similar expectations to the US.

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% of businesses that were able to offset the losses at physical stores during the pandemic with online sales

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% of consumers who wouldn’t shop with a retailer if they had a poor shopping experience either online and in store

With ecommerce taking off, and Australians continuing to show a love for the physical store, offering Australian shoppers both online and offline channels is key to establishing loyalty and driving growth. In fact, Aussie businesses are more advanced than the UK in this regard, and track closely to the global average. But the US is setting the pace for unified commerce, one which Australian businesses should aim to keep up with.

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% of consumers who are more loyal to retailers who have physical stores and online options (apps, website etc)

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% of businesses that enable customers to shop and complete transactions easily across online and offline channels grew by 20% or more in 2021

Building on the success with customer experiences, Australian businesses are doing a better job than other markets at meeting customer expectations surrounding customer loyalty programmes. However, with this area ripe for innovation, there is still room for improvement. Directly linking rewards to payment cards is one popular option, but Australian consumers rank below the global average.

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% of consumers who feel businesses need to improve the ways they reward them for shopping with them

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% of consumers who would be more likely to shop with a retailer if their loyalty programme worked automatically through their payment card

R.M.Williams

“We can deliver a unified experience and provide a smoother checkout process with mobile checkout and endless aisle capabilities. It also means we can extend digital into physical retail by connecting our in store to our online ecosystem. This will allow us to get a full understanding of our customers’ shopping behaviours and actionable insights.”

Nathan Alexander — CTO, R.M.Williams

From insight to action

Cross-channel recognition and payment-linked loyalty

Address customer needs in real time

Payments data enables businesses to build a picture of their customers, their purchases, and their preferences in real-time, across every channel and region. With these insights, businesses can investigate their customer segments, understand their behaviour, and shape their strategy with confidence.

Recognise and reward loyal customers

Use customer recognition to make loyalty programs more frictionless by removing the need for a traditional loyalty card or app. When customers make a payment online or in a physical store, businesses can automatically recognise them and award them with points, discounts, or a reward.

Cross-channel recognition and payment-linked loyalty
Chapter 3 — The Aussies’ love of the physical store is stronger than any other market

73% of Australians prefer to shop in physical stores – 14% above the global average.

They say absence makes the heart grow fonder, and Australians are feeling very fond of the physical store experience indeed. While Australians adopted new shopping experiences such as click and collect during the pandemic, they are certainly ready to return to the physical store. Almost three quarters (73%) prefer to shop in store – higher than any other market. Since the pandemic, 34% of consumers say they have a new appreciation for being able to touch, feel or physically try products in store before they buy.

On the business side, things are looking equally affectionate: 45% of businesses expect the proportion of revenue to increase from physical stores in the next year, and 39% plan to open more physical stores in the same period.

For retailers, this is about more than just stocking up shelves, throwing open the doors, and expecting the crowds to coalesce. Today, it’s about creating a destination that entices: 54% of consumers say physical stores should be exciting places to visit. Stores must offer something more than the products and services available online.

Technology proves pivotal in creating an in-store experience worth visiting. From endless aisle shopping – providing kiosks or terminals to check additional stock for home delivery – to offering new ways to pay through QR codes or mobile payment terminals. 67% of consumers say physical stores are an important touchpoint, even if they shop with the same retailer online. 48% say they like to go in store for customer service or to get help with a product they couldn’t get online and 51% are more loyal to retailers who have physical stores and online options.

But even more crucial is the ability to connect online and physical channels to ensure a truly seamless experience: 53% of consumers would be more loyal to a retailer that lets them buy things online and return in-store. Shockingly, only 21% of businesses say they currently provide this option.

Customer and staff experiences are inextricably intertwined; any technology leveraged for in-store experiences should help, not hinder, sales teams. With that said there is demand amongst Australians for new customer experiences. 25% say they would love it if in-store sales assistants used technology to assemble items from their online wish list in the changing room ready to try on. 35% of consumers say they are more loyal to retailers that use tech to improve the experience.

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of Australians prefer to shop in physical stores.
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of businesses plan to increase their number of physical stores in the next year.

Customers are more loyal to businesses that:

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Allow them to buy out of stock items in store, and have them delivered to their home.

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Offer buy online, return in store options.

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Have physical stores and online options.

The Australian Retail Report
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How does Australia compare?

Australia’s love for physical stores is significantly stronger than any other market surveyed, a trend that first came to light during Adyen’s 2020 global research. Despite this, Australian businesses are less optimistic about the economic output from physical stores in 2022 than most other regions.

While Aussies adopted ecommerce rapidly during the pandemic, it hasn’t dampened their love for physical stores. If anything, Aussies would like the best of both worlds and have embraced the idea of being able to do both - trending above the global average and in line with the US which has a more established unified commerce market. The UK is a particularly interesting case as preferring to shop in-store is now in the minority, which could be a sign of things to come.

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% of customers who prefer to shop in a physical store

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% of consumers who feel physical stores are an important touchpoint, even if they shop with the same retailer online

The majority of businesses globally expect revenues from physical stores to increase. Given Australians’ clear preference for shopping in store, it is interesting that businesses’ forecasts trend below the UK, US and global average. This outlook could be a key driver in decision making when businesses look into expanding their physical footprint – where Australia again trends below the UK, US and global averages, despite strong consumer preferences.

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We know that the vast majority of Australian businesses expect to invest further in their business in the coming year, and that technology is a vehicle for growth. Businesses are best placed focusing on increasing the links between online and offline stores and breaking down silos within the organisation, rather than introducing new technologies into their stores. Australians are amongst the lowest of all surveyed in this regard.

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% of consumers who would be more likely to shop with retailers that use technology to improve the shopping experience (e.g. digital mirrors)

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% of consumers who would love it if in-store sales assistants could use technology to assemble items from their online wish list in the changing room, ready for them to try on

Rhian Greenway
City Beach

“The role of the store, particularly in Australia, is to get that customer engagement, be able to range all of your products in one space and have the customer engage with the brand as much as with the product.”

Rhian Greenway — Chief Information Officer, City Beach

From insight to action

Driving in-store convenience through technology

How to improve in-store experiences with payments innovation

Enhance in-person payments

Offer flexibility with options like endless aisle shopping. Use the point-of-sale terminal to get feedback and better interact with customers.

Make donations easier

Make donating at the checkout easier for businesses and their customers.

Recognise your customers

Personalise experiences and grow loyalty through data insights, brand apps, or payments.


Localise the checkout

Present customers with relevant languages and payment options.

Driving in-store convenience through technology
Chapter 4 — There’s untapped potential in real time payments data

24% of businesses use payments data to understand user behaviour and improve customer experience.

COVID-19 hasn’t just influenced consumer behaviour; it’s completely disoriented it. Think of the stockpiling of toilet paper and pantry staples, as well as all the one-off purchases such as kettlebells and desks, and the splurging on cooking utensils, electronics and garden supplies. The historic data businesses use to inform decision making has been compromised.

Our research shows that consumers want businesses to recognise, predict, and meet their needs in a relevant and timely way: 34% of consumers prefer retailers who remember their preferences and previous shopping behaviours to create a more tailored shopping experience. Businesses who can leverage real-time data insights instead of relying on historical data, will be best placed to deliver these more personalised, sophisticated experiences.

The insights unlocked via payments data, particularly unified payments, allow businesses to make quick, actionable decisions with what consumers are telling them. A growing number of businesses are leveraging this opportunity – but many are still missing out. 24% of businesses use payments data to understand user behaviour and improve customer experience, and 24% to build a better picture of their customers.

Those businesses who are using payments data can easily and seamlessly identify popular product lines, inform inventory management, create personalised marketing campaigns, and inform decision making – a testament to the wealth of insights made possible through payments data.

Businesses need to strike a delicate balance. Clearly, there is vast potential to use data to improve the customer experience. However, with data breaches becoming more common and an increased focus on reporting data breaches by the Office of the Australian Information Commissioner, businesses have to go the extra mile to ensure they use and store data responsibly.

45% of consumers believe retailers shouldn’t be able to use their data or purchase behaviour information unless they give express permission. And 38% of consumers will only allow data to be stored and used by retailers if there are assurances around security and privacy. Businesses need to stay informed and compliant to protect shoppers and themselves from data breaches and fraud.

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of customers prefer retailers who remember their preferences and previous shopping behaviours to create a more tailored shopping experience.

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of customers like it when retailers serve personalised adverts or suggestions.

Businesses are using payments data to:

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Understand user behaviour and improve customer experience.

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Build a better picture of customers.

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Inform decision making in other areas of the business.

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Identify popular product lines and guide product development.

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Drive personalised marketing campaigns.

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Help with inventory/guide what stock needs to go where.

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How does Australia compare?

Australians are particularly cautious about handing over their data to businesses – amongst the highest of all markets surveyed. They are less likely to want their data to be used to make shopping easier or to enhance the customer experience. However, Australian businesses are close to global averages when it comes to using data to improve their business.

Although Australia doesn’t have formalised privacy legislation like the GDPR in Europe, or the CCPA in the US, Australians' attitudes towards data privacy are amongst the highest of all surveyed. Australia is above the global average and ahead of the US when it comes to wanting businesses to seek express permission to use their data and comes in on par with the UK when it comes to assurances around data security.

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% of consumers who say retailers shouldn’t use their data/purchase behaviour information unless given express permission

Australia’s preferences around data and customer experiences are consistent with the wariness about providing their personal data. As a result, Australia is ranked the lowest of all markets surveyed when it comes to wanting businesses to use data to make shopping easier. Additionally, Australians are not in favour of personalised adverts or product suggestions, lagging behind the US and global averages.

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% of consumers who like it when websites/apps use their data to make shopping easier – e.g. saving time at checkout, remembering preferences

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While there is still room for improvement, Australian businesses are ahead of the curve, beating the global average and the UK when it comes to using payments data to inform business decisions. Australian businesses also rank close to the rest of the pack when it comes to using data to build a better picture of their customers. The key for businesses is to remember that they must treat customer data with utmost responsibility and those who manage it well, will see a lot of upside.

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% of businesses that use payments data to build a better picture of their customers and behaviour

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% of businesses that use payments data to inform business decision making in other areas of the business

dominos

“The rise of digital channels, business intelligence capabilities, and transaction data helps us to better understand our customer base, and to run better targeting, better proposals, and better promotions to these customers.”

Casper Mooyman — Head of Marketing, Domino’s

From insight to action

Securing trust with smooth payment authentication

Make the most of customer data while staying compliant

No ecommerce strategy is complete without a clear plan for Strong Customer Authentication (SCA), especially since consumers expect the process to be fast, with no action required from them. There’s no one-size-fits-all approach to applying SCA, but the right technology partner will take care of this for businesses.

Implementing authentication protocols, even when required by regulations, helps to reduce fraud – but there are additional steps businesses should take to ensure secure payments.

With the Adyen Authentication Engine, we won’t trigger 3D Secure for out-of-scope transactions or exemptions. We'll also skip 3D Secure if the issuing bank doesn’t enforce it.

A resilient industry with new ambition

A resilient industry with new ambition

The evidence is there. Businesses in 2022 are optimistic about the future, and so they should be.

Whilst resilience and adaptability have been key themes of the last few years, there is also opportunity. Digital transformation remains a key priority, accelerated by recent challenges but at the same time more within reach than ever. Consumers continue to drive innovation and flexibility, and businesses are expected to not only keep up, but continue to shape whatever comes next.

At Adyen our focus is, and always has been, on supporting long-term, sustainable growth. We’re committed to ensuring our customers remain at the forefront of this ever-evolving industry and look forward to speaking with you about how payments can be the strategic growth driver you’re looking for.

About KPMG International

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KPMG firms operate in 145 countries and territories with more than 236,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities.

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KPMG International Limited and its related entities do not provide services to clients.

For more details about our structure, please visit home.kpmg/governance

© The Australia Retail Report 2022

Adyen is the financial technology platform of choice for leading companies. By providing end-to-end payments capabilities, data-driven insights, and financial products in a single global solution, Adyen helps businesses achieve their ambitions faster. With offices around the world, Adyen works with the likes of Facebook, Lorna Jane, the Cotton On Group, Kogan.com, Showpo, Rodd & Gunn and Jurlique.

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Methodology

The Adyen Retail Report is a comprehensive guide to the global and local trends impacting businesses around the world, fuelled by evolving consumer behaviours and the possibilities of financial technology.

We spoke to businesses primarily in the retail sector, but also polled segments in the hospitality and food and beverage (F&B) sectors. These industries are facing both similar and contrasting challenges and opportunities; including their perspectives ensures we capture the growing exchange of inspiration, strategy, and innovation between industries, from the rise of self-serve kiosks to data-driven loyalty programmes.

This study includes merchant and consumer data from a wide scope of countries, examined and compared on both global and local levels to ensure a holistic view complemented by regional nuances.

Consumer insights

Opinium Research LLP polled 40,020 adults in Singapore, Hong Kong, Japan, Australia, UAE, the UK, France, Italy, Spain, Portugal, Germany, Poland, Belgium, the Netherlands, Brazil, Norway, Denmark, Sweden, USA, Canada, Malaysia, Mexico, Ireland, Austria, Switzerland and India. Respondents were incentivized to participate.

Merchant insights

Censuswide polled 11,530 merchants in Singapore, Hong Kong, Japan, Australia, UAE, the UK, France, Italy, Spain, Portugal, Germany, Poland, Belgium, the Netherlands, Brazil, Norway, Denmark, Sweden, USA, Canada, Malaysia, Mexico and Ireland. Respondents were incentivised to participate.

Fieldwork was conducted between 23 December 2021 - 8 February 2022.

The sample includes minimum quotas of 100 in retail, 50 in travel and hospitality, 50 in food & beverage per market.

Opinium and Censuswide campaigns are conducted in accordance with all ESOMAR principles and best practice.

Economic insights

We commissioned the Centre for Economics and Business Research (Cebr) to provide analysis on the current state of retail, hospitality, and F&B businesses around the world.