Trade is undergoing a major transformation, not just at home but around the world. In addition to the immediate effects of the pandemic, a number of processes have accelerated that are slowly rewriting the foundations of the sector. What are the factors that are likely to have the greatest impact on these changes and in what direction will retailing be heading in the period ahead? We spoke to Hans Carpels, President and co-founder of Euronics, a major player in the key European markets, about the issues.
Which trends in changing consumer behaviour are most likely to influence the future of the industry?
We see many evolutions, which definitely have been accelerated due to the pandemic period and the behaviour of the consumer as a reaction to that. First of all, the consumer has realized that his home is his castle. He/She has been in their home for longer time than ever and want it to be improved. This will not end when the lockdowns would unfold, because work from home will not go away as many companies will allow 1-2 days work from home and also digital schooling will become an integrated part of the curriculum. So the house has to be in perfect state and more enjoyable than it ever was, from which the TCG channel will benefit. Second, much more consumers have experienced that they can buy „simple“ products online without too much hassle.
So we expect that retailers will focus on lesser products in their store but focusing on more special and added value products. What is the point in having 20 sku’s on coffee machines below 75 € in your store…? Third, we will see for the coming months more a demand market than a push market due to the scarcity of essential spare parts, which will push prices of many products up but also demand because consumers will not want to be confronted that some products would not be available anymore.
In which areas do you think it is justified or necessary for industry players to join forces?
There are many elements where both industry on their end and retailers from theirs could cooperate, of course in full respect of competition law, but also where industry and retail could work together. Of course a standardized product catalogue available for all is obvious, but also a common approach towards sustainability and circularity is advisable. The EU has made it crystal clear that natural ressources have to be preserved, so we will have to make up our mind, before somebody else does it in our place. The goal to reach is 65% of all used products to be recycled, but we don’t get much beyond 40% in many countries. Therefore we have to get our minds together. The same goes about repairability, where now some suppliers prefer to exchange, which at the end costs more for environment.
How might the changes to EU competition rules affect the retail sector and when will this be felt in the market?
The goal of the European Commission is to get the Digital Markets Act and the Digital Services Act approved before end of next year. We see some evolutions where pure players frantically lobby to maintain their disproportianal advantages they enjoy now, but as has been proven multiple times, this chokes competition. We think the Commission will not deviate too much from their initial stance because they know it has gone too far and the major players are mostly from outside the E.U. We will definitely see a better defence of competition… although very late.
How can brands’ D2C activities, i.e. direct contact and communication with consumers, shape market roles in the future?
Good question. Suppliers have for years tried to have direct contact with consumers and principally we don’t have a problem with that. But they should respect their own rules set out for the channel as e.g. in the case of selective distribution. When we want to sell the products of selective distribution suppliers we have to respect specific criteria as shop size, footfall, number of staff, training of staff, opening hours (e.g. 6 days a week), which some suppliers are not respecting themselves for their own stores. That of course is a bit awkward, it seems then that there would be a different set of rules for normal distribution, which do not apply for the stores of the suppliers themselves. Furthermore, on which basis do certain suppliers keep some products exclusively for themselves and do not offer those to the channel which they have approved of for all the other products. This seems to me to be discriminating.
Will retailers continue to share specific consumers data to suppliers when they refrain from mentioning these retailers on the brands‘ website? I doubt it, because then they have a direct competitive position. The question remains whether it is wise to submit consumer data, or store data for that matter to the supplier, because he will use this improve his own competitive position. When the supplier is aware that in a certain store the sales of his brand is beyond expectation, he could decide to open an outlet in the same neighboorhood. But some suppliers understood that partnership is always key for a better performance. We cannot do everything on our own, but the same goes for the supplier. We have some examples of major brands in our sector which did direct to consumer, but closed down this operation, because the business model was not viable.
What are the impacts and implications of brands’ direct online selling solutions for retail?
Let’s see if the suppliers will be able to cover all the advantages retailers offer the consumer, e.g. choice of brands ans products, touch and feel, same date delivery, fast repair… Interesting anyhow.
What do you see as the biggest threats and opportunities in the coming years?
Lack of innovation, both from suppliers als from the channel. Product innovation from manufacturing side is needed to keep the attention of the consumers, but also trade has to continue to innovate als they have done the past years.