The rise of the Belgian e-commerce market is pushing through changes in the retail sector. According to a study by Sia Partners, shoppers are looking for either convenience or a shopping experience. Creating an omni-channel environment in which there is both convenience as well as a well-designed shopping experience will require retailers and cities to work together to improve transport access as well as develop multi-purpose shopping areas.
Changes are afoot in the retail landscape as more and more shoppers turn to e-commerce marketplaces to buy goods. One of the consequence of the financial crisis, whereby many consumers saw their pay cut, is that consumer confidence has taken a hit. In a recent Sia Partners study, titled ‘Belgian Retail Stores Under Pressure’ the consultancy explores the changing dynamics of the Belgian retail market as it adapts to the new normal of more price sensitive omni-channel shoppers.
Rise of e-commerce
The change in the market has seen Belgian retail growth remain relatively stagnant over recent years, hitting growth of around 1% in 2011, 1.1% in 2012, before seeing an -0.5% contraction in 2013. 2014 again saw growth of 1.1%. According to the research the number of retail stores has been decreasing in recent years, with smaller stores in particular being closed in exchange for larger mega-stores in large cities.
On the other hand, and in line with the global trend, the Belgian e-commerce market has seen steady growth in recent years. E-commerce growth rates hit 25% in 2011, before jumping 38% in 2012. Subsequent years have seen declines in the rate of growth to 26% in 2013 and 14% in 2014. As a result of the rapid growth, 6 million Belgian ‘e-shoppers’, now spend between €700 and €1,000 each per year through online tills.
The growth rate of market segments in the Belgian e-commerce market show considerable variation. Food & personal care grew the least in 2013 at between 0% and 5%, with between 10% and 15% growth expected to 2025. Clothing saw modest growth of between 10% and 15% in 2013, with between 35% and 30% growth projected to 2025. The largest growth categories for e-commerce are books, which will see growth of between 85% and 90% by 2025, and entertainment, which will see growth of between 90% and 95% by 2025.
The increase in e-commerce growth is attributed to two major aspects of the online environment: the first is that it is convenient to shop from a range of devices at any time of the day, while the second is that of price & transparency – it is considerably easier to find the best deal online rather than visiting every store.
As e-commerce sales bites into the retail market, the role of the brick-and-mortar store is changing. As part of the study the consultancy explored the Belgian brick-and-mortar landscape, finding that consumers are now much more interested in the shopping experience itself.
The research found that there are broadly two types of shopping trip, one is functional – which means it is aimed at getting a number of items, often food, required for short terms ends; while the other is for leisure – here the shopping is often for larger more long term items.
According to the research, the attitude of shoppers differs between the type of shopping that is being engaged in. Functional shopping is more often focused on local convenience, where shoppers have a list of required items and seek to complete the shopping experience as quickly as possible – with 20 minutes the longest shoppers are willing to travel. Leisure shoppers are more open to traveling, and are considerably more interested in an enjoyable shopping experience than mere function.
To meet shoppers’ expectations a number of stakeholders, including retailers and cities, may need to come together to create a conducive shopping environment. For such an environment a joint focus on a number of features will improve shoppers’ willingness to travel into cities. Features include parking areas that are close to the shopping area and are relatively inexpensive; fast and easy access to the shopping area; and the availability of a range shop types, from large stores to more specialised local vendors.
In determining the viability of brick-and-mortar stores in the new business environment, the consultancy suggests that businesses run a national level analysis by which it can develop a means of distancing stores in such a way that consumers do not need to travel for too long to reach their desired shop. According to the consultancy, a two-store type approach may be a good option, with large stores in big cities, while medium and smaller cities have small local stores that provide consumers with access to goods while also acting as a ship-to-store point as well as a distribution centre for the local e-commerce activity. Additional benefits include a stronger brand presence, as well as providing a close location where shoppers can return unwanted e-commerce purchased goods.
Cities too need to consider how best attract and position retailers. The focus on developing retail parks, according to the report, may reduce the leisure experience of shoppers that miss out on the aesthetic aspects of the cultural and historic heart of cities. The consultants remark that “They should avoid mistakes such as creating too much shopping area outside of the city centre. All too often these vast retail parks attract retailers that would otherwise open up shop inside the city centre, increasing the downwards spiral of the core shopping area in the city centre. Instead of putting energy in pushing shoppers out of the city centre, they should better focus on putting forward their strong points, ideally aspects like their cultural and historical heritage, etc.”