Mind Retail: How has Covid changed consumer behavior and preferences in online shopping?
Magda Espuga: Overall, yes: the 2020 lockdown accelerated e-commerce in Spain. Market share increased from 4.4% in 2019 to 7.4% in 2020! Not all sectors are affected in the same way. In fashion, despite the significant decline in the sector, e-commerce almost doubled market share in value, from 8.8% in 2019 to 19% in 2020. A significant part of this success is due to the omnichannel solutions of fashion players that were already operating. These solutions, combined with a rapid response capability, increased the weight of digital for these players like Mango (40% online sales) and Inditex (32%). In 2021, stores reopened and footfall picked up. However, many customers are combining web and in-store purchases, suggesting that omnichannel habits are here to stay. In consumer electronics, the share of e-commerce was already high, with nearly 30% market share in 2019, due to the significant strength of pure-players in Spain. Yet, online sales in this sector reached more than 40% market share in 2020, driven by the strong increase in demand (equipment for teleworking). For this business, a digital market share is expected to continue to grow, albeit moderately.
How has food e-commerce evolved?
Magda Espuga: The evolution has been very different. Market share of e-commerce has only grown by one percentage point during Covid-19, from 2.5% in 2019 to 3.6% in 2020. This is because physical stores remained open. Spanish households were forced to try home delivery for the first time. The majority of the experiences were disastrous due to the logistical chaos of lockdown and unprepared suppliers. Today, most Spaniards go back to a store, especially to buy fresh produce. In Spain, this is a category that has a very low spend online. In addition, Spaniards are reluctant to pay shipping costs, which makes it difficult for retailers to be profitable. That said, some players that provided a better online service, such as Carrefour, have had a very positive impact on customer trust in e-commerce.
Have Spanish consumers finally adopted e-commerce?
Magda Espuga: Thanks to the pandemic, e-commerce has definitely taken off: all age groups have experienced it with success. . Of course, Spaniards still prefer physical commerce, but shopping habits evolved and they consolidated their profile as omnichannel users. In 2021, Spain was the 4th country in Europe in terms of e-commerce turnover with € 68.4 billion in 2021 (editor’s note: after the UK with €236 billion, France with €112 billion and Germany with €94 billion). Having learnt important lessons during lockdown, the Spanish identified the important variables for a new model of consumption, including health, nutrition and physical activity. There is a focus on more responsible consumption alongside the factor “available time” (time with family, friends or with oneself), which boosts e-commerce. In 2022, once a trust in brands that keep promises is earned, Spaniards will be more favourable towards using e-commerce.
Which sectors are still the most vulnerable in Spain?
Magda Espuga: We must mention tourism and leisure, which are very dependent on foreign visitors, whose numbers remain very limited. For these players, the top priority in 2022 will be to survive. Some will restructure their businesses or even close down.
What are the strategic priorities of retailers for 2022?
Magda Espuga: The main priorities of retailers in Spain are clear and common, but of wich adjustment variables that depend on their degree of development, their level of ambition and resources available.
First, omnichannel excellence and the resulting digital transformation are top priorities. Omnichannel means full integration of online and in-store channels: shoppers use both channels as sources of information and then buy via one of them. The interrelation between these channels is clear, and the user experience must focus on improving these cross-channel buying processes. There is also the great challenge of CSR, a subject growing importance to customers, and submitted to new EU legislation that will impact many sectors. Consumers are aware of the need to take care of health, the planet and to support local business. They expect retailers to help consume more sustainably.
How do you manage to meet this complex challenge of omnichannelity?
Magda Espuga: From one retailer to another, the roadmap varies depending on the strategy and the competitive environment. Once the most appropriate omnichannel strategy has been defined, each company sets main priorities around common axes:
– Optimise product mix and inventory levels.
– Optimise the merchant web site to gain agility and commercial attractiveness.
– Improving delivery: stock visibility, click and collect, pick-up points, reinforcing the logistic infrastructure to respect delivery times or guarantee shorter shipping times.
– Strengthen payment gateway security, flexibility and financing.
– Marketplaces, whether niche or generalist like Amazon or Aliexpress, remain a reference for information on many products.
– Digital marketing is becoming as indispensable as much as it is expensive. Search engines and social networks influence purchasing decisions for many products. Linking direct and indirect channels through marketing campaigns is essential.
– Providing a memorable, more personalised shopping experience is the most cost-effective, provided you are resourceful.
– Restructure the store network to more fully adapt to new omnichannel shopping habits.
-In terms of CSR, the priority for retailers is to introduce more sustainable products into their range. The road ahead will be long, and customers increasingly demand proof of real commitment from retailers. They are uncompromising in the face of green washing. Consumers say they expect retailers to set examples and help consume more sustainably.
What is the focus for allocation of investments in retail?
Magda Espuga: In Spain, the significant increase in e-commerce penetration, from 72% in 2020 to 76% in 2021, led to a rise in customer expectations in terms of omnichannelity (convenience, product range, speed and price competitiveness). In the short to medium term, the number one investment priority will be effective omnichannel integration, ensuring that this unified ecosystem guarantees flexibility and consistency, while preserving the company’s profitability.
The two key aspects of the investment plans touch on two aspects:
– organisation (need for new skills) as retailers need the talent to process data, innovate and create emotional connections with customers
Technology: investments in the right technology tools are key to delivering the correct level of omnichannel efficiency (real-time inventory, delivery tracking, frictionless customer journey…).
In terms of CSR, what are the priority investments?
Magda Espuga: The path to sustainability will be much slower and, for some retailers, it will be very complex. In the short term, investments are focused on packaging plus changes in the commercial offer. For those retailers who show determination and commitment, the level of investment will be very significant and long term. In many cases, it is changing the core of the business model, to be more respectful of society and our planet.