What: McKinsey has teamed up with Eurocommerce to produce a study based on a number of companies’ answers to their survey, in order to estimate the cost of what they call the “triple transformation.”

Why it is important: Additional investments are expected in sustainability and systems, in order to keep up with the pace of international competition and local customer demands. However, since these changes also impact roles, HR budgets will also need to expand in line and outside of the already planned budget framework. All these extra-investments are set to dent even further the margins of retailers already under serious constraints.

McKinsey review the top 3 challenges that retail is facing in the EU: sustainability (decarbonization of a value chain that contributes to 40% of the EU greenhouse emissions, of which 95% are coming from scope 3), digitalization (with e-commerce expected to double from 15% to 30% of the business, driving 90% of the growth), and skills and talents shortage.

McKinsey estimates that the needed investment will amount to an additional investment on revenue of 0.8 to 1.6%, or €315bn to €600bn.

Sustainability will involve an investment of €335bn to prepare the sector for green growth, with a focus on net-zero operations, sustainable offerings, circularity and waste management. For McKinsey, a focus on warehouses could address 20 to 40% of Scope 2 emissions. Scope 3 emissions could be tackled with green vehicles fleets, among others.

Digitalization is expected to cost up to €230bn to transform the industry, and is both an opportunity and a disruption. Digital channels, automation, advanced analytics and IT modernization are part of the solution.

When it comes to skills and talents, the distribution sector as a whole employs 26m people in the EU (13% of the workforce) and McKinsey estimates that 13m people will need to be trained and 1,5m hired every year through 2030, costing an additional €25bn to €35bn coming on top of the €70bn already planned to be invested. Roles are being reinvented: cashier, stockists, warehouse roles, transport roles, category management or HR, all of them are impacted by the digital transformation.

The triple transformation: transforming the EU Retail and wholesale sector