The RXBX Brand Index 2020 comes in a year of enormous upheaval for European retail – and that may prove to be one of long-lasting change. The Covid-19 coronavirus pandemic has reshaped, at least for a time and perhaps long-term, the way that shoppers are able to buy – with significant implications for the role of shops within retail. Brexit, too, may come to mean significant change for the way that the UK sells to and buys from other European markets. These factors are accentuating trends that were already driving change in the ecommerce and multichannel industry. The growing use of mobile phones to browse and buy, and the extension of social media into shopping are both magnified by coronavirus, while sustainability and environmental issues continue to be important.
Coronavirus has dominated retail this spring, just as it has many other areas of everyday life. While supermarkets, food shops and other essential retailers have stayed open, in many European markets non-essential shops have closed. Now the process of reopening is underway, satisfying pent-up demand both from those who prefer to touch, see and feel items before buying them. Others may want to get products faster than they have been able to when ordering online, since delivery has become slower, and from those who have not been able to find the goods they wanted in stock online. Still more shoppers are likely to cut back their spending amid economic uncertainty.
The sudden surge in demand has exposed the limits of retailers’ capacity to deliver online orders. Supermarkets in particular had to expand their delivery capacity quickly. This is capacity that’s unlikely to be stepped down at the end of lockdowns, especially since social distancing in shops is likely to make trips to shops longer and perhaps less appealing.
In the time that shops have been closed brands and retailers alike have seen enormous changes in buying behaviour. Many people have shopped online for the first time and many have bought online more often. Some of those people will now return to buying the way they did before, but it’s likely that, having tried it out, many will now continue to buy online. The pandemic has potentially brought an enormous change in behaviour, taking retail several steps beyond the previous limits. The RetailX Coronavirus Consumer Sentiment Tracker of May 20 showed that 88% of the 1,000 UK adults polled had stopped (26%) or reduced (62%) visits to shops as a result of the pandemic, while fewer than 1% said they did not shop online - down from 4% on March 11, before the coronavirus lockdown came into effect. Similar findings are likely to be true for most markets locked down as a result of Covid-19.
Brands have already signalled their intention to adapt fast to the new normal of retail. Luxury fashion brand Burberry, for example, said in full-year figures reported in May, that its existing strengths in using digital and online in its retail business had helped it to develop some innovative approaches to retail during the pandemic – ones that it intended to build on in the future. To take one example, a T-mall live-streamed event featuring influencer Yvonne Ching as she browsed Burberry’s Shanghai flagship store was watched by almost 1.4m viewers. Burberry chief executive Marco Gobbetti said: “We have found new ways to strengthen our connection with consumers, drawing on our digital leadership.”
Footwear brand Clarks, meanwhile, said, as it approached the end of the lockdown period, that it planned to expand its digital and social channels as part of a ‘made to last’ strategy. The new strategy, says chief executive Giorgio Presca, “is helping us move fast to get ahead of the changes in the ways that our consumers live their lives, so that we are there for them every step of the way.” He added: “With two centuries of change and adaptation behind us, Clarks has proved itself to be one of the most resilient brands in the world, with our theme ‘Then, now, always’.” The 195-year-old brand will also cut its workforce by a net 700 jobs over the coming 18 months.
Coronavirus precautions aimed at reducing infection are encouraging a shift to contactless payment - that is driving growth in mobile commerce. On larger transactions, contactless payment is easier via smartphone than by bank card since these have relatively low spending limits on individual transactions. Brands that enable payment via mobile wallets and social checkouts, from PayPal to AmazonPay or Facebook Checkout, enable shoppers to make larger payments using preregistered credentials.
In store, some retail brands are encouraging the use of already-developed apps that include barcode scanners and can be used to check out and pay for purchases in-store in a fully contactless way. In the UK, visitors to supermarket branches are encouraged to download and use already-existing apps in order to stay contactless.
Beyond grocery, French sports brand Decathlon is expanding its use of MishiPay’s smartphone payment technology, already being trialled in a small number of shops in the German market to 81 stores in that territory. Customers can use it to scan and pay for items using their smartphone, automatically disabling the RFID security tag before they leave the store. Stefan Hertkorn, Decathlon Deutschland’s leader of store digitisation, said the solution had already proved popular – but that it was proving particularly useful now. “The solution has clear customer benefits in the face of the Covid-19 pandemic, enabling shoppers to use their own device for the entire shopping journey instead of needing to touch store hardware and eliminating the need to wait at a checkout,” he said.
The new move towards contactless could encourage third-party take-up of of the Amazon ‘just walk out’ technology. Amazon made that technology, first demonstrated this year in its own Seattle grocery store, available to other retailers in early March. Dilip Kumar, Amazon’s vice president of physical retail and technology, said at the time that the company had made no market forecasts for this part of the business. Instead, he said on a Reuters briefing call that shoppers’ preferences would decide how big the market becomes. "Do customers like standing in lines?" he asked. "This has pretty broad applicability across store sizes, across industries, because it fundamentally tackles a problem of how do you get convenience in physical locations, especially when people are hard-pressed for time.” The advent of coronavirus may well provide the stimulus that drives adoption of this and similar technologies.
The pandemic has driven new developments in social shopping too. Facebook has launched a new Shops feature during the lockdown to enable retailers to create a single online presence and sell direct to customers, for free. This is closely linked to shopping features on its sister social platform Instagram. “Our goal is to make shopping seamless and empower anyone from a small business owner to a global brand to use our apps to connect with customers,” said Facebook chief executive Mark Zuckerberg in a video announcing the new product. He added: “Our business model here is ads. So rather than charge businesses for Shops, we know that Shops are valuable for businesses. They’re going to in general bid more for ads and we’ll eventually make money that way.”
Average cross-border sales rose, worldwide, by 11% in the year to mid-April, according to a Global-e study. The May 2020 Global-e report, Covid-19 cross-border ecommerce trading implications, found that within individual European markets, cross-border buying fell while lockdowns were in place but started to rise again as infections fell significantly and tensions relaxed. In Italy, for example, discretionary online cross-border spending rose between the beginning of April and mid-April, with sales up by more than 40% compared to March, and by more than 110% compared to October 2019. It detected similar patterns in Austria and Denmark.
At the same time, shoppers from key European markets are generally buying more online. A Kantar report commissioned by Detail Online suggested that the proportion of German, French and UK shoppers that make at least 50% of their retail transactions online had increased dramatically in March 2020. And in the UK, IMRG data suggests that online sales were flat following winter storms and flooding in early 2020 but rose sharply overall as workers prepared to shop from home during lockdown, although clothing sales were more hard-hit. In February, IMRG found, UK online sales fell by 0.4% year-on-year (YOY), but by April they rose 23.8% YOY.
But future uncertainty still lies ahead, not only through the coronavirus trajectory, but also through Brexit. At the time of writing the impact of Brexit on cross-border European trade remains uncertain. The UK left the European Union on January 31 2020, but the terms of the future trading relationship between the two are yet to be settled. If no deal can be agreed between them then the two would theoretically trade on World Trade Organisation terms. In the meantime, the UK has published a schedule of tariffs that are due to apply to goods imported from anywhere in the world from January 2021. Exports would be subject to tariffs charged by other countries. Under that tariff, for example, import taxes on leather clothing accessories would be charged at 4%, and on cotton baby clothing at 12%. These are just two small examples – but ones that demonstrate how complex cross-border trade may soon become for those selling into and out of the UK – Europe’s largest ecommerce market. Until 2021, however, retailers do not pay tariffs to export or buy from the 31 countries of the European Economic Area plus Switzerland. It is possible, though currently looking unlikely, that a deal will be agreed that will simplify future tariffs.
Over the last year there’s been rising support for action to curb carbon emissions, while selling in more sustainable ways. From Extinction Rebellion protests in London in April 2019 to Greta Thunberg’s attendance of a series of European rallies in February and early March 2020, the issue has been centerstage as perhaps never before over the last year. Brands have reflected the level consumer concern about sustainable issues in a variety of ways. Sustainability is now one of seven key areas on the home page of Swedish fashion to homewares brand H&M, which explores the issue further on its website. All of its product details now show where an item was made and what it was made from. Shoppers can also use its app in-store to scan an item’s price tag and find out where it was made. Sustainability has moved front of mind at retail brands selling across Europe. US adventure clothing brand Patagonia puts its environmental activism centre stage on its website, where it encourages shoppers to get involved in environmental campaigns alongside its online shop. Brands from Ikea to Timberland now emphasise what they are doing in order to ensure they sell in more sustainable ways.
At the same time a growing body of research suggests shoppers are now increasingly aware of environmental issues and that that affects the way that shoppers want to buy. Research from the Fashion Retail Academy, published this spring, suggests that more than half of British shoppers (51.4%) are now choosing long-lasting clothes over cheaper one, while only 14% consciously opt for cheaper, fast fashion items. More than seven in 10 (71%) now opt to recycle rather than throw away clothing, and 25% of women say they’ll wear second-hand clothes. Lee Lucas, principal of the Fashion Retail Academy, said at the time: “This shift towards quality over quantity, recycling and buying second-hand is not just about saving money, it is a reflection of how customers are increasingly mindful of fashion waste and the supply chain. Vintage clothing is in and sustainable clothing brands such as Patagonia, which offer a lifetime guarantee on their clothes have become more and more popular.”
Brand sustainability starts with the manufacturing process, is reflected in marketing and extends to the final mile and packaging. More carriers are buying electric delivery vehicles – and highlighting that fact in their own brand communications. Brands themselves are opting to include less plastic packaging and to show how the items they make can be recycled. As with other themes explored here, this trend is likely to be accentuated by the Covid-19 pandemic, which has seen traffic levels fall as more people start to work from home. Change that has come about for short-term reasons may well turn out to be for the long-term.