Will even more fashion chains go bankrupt? Is Amazon really tackling the Benelux? Will Blokker survive 2019? Will Jumbo’s entry into Belgium be a walk in the park? Six retail experts look into their crystal ball.
"More retailers get started with voice assistants"
What was the most important retail event, trend or development in 2018 according to Gino Van Ossel, retail professor at the Belgian Vlerick Business School? "The market will continue to polarise, with a growing gap between the winners and the losers. Unfortunately, the number of losers turns out to be higher than the number of winners." Speech technology is one of the evolutions to keep an eye on next year, according to the expert: "Up to now, a lot has been said about artificial intelligence and speech assistants, but they have largely bypassed our country. With the arrival of Google Home in Dutch, and the accessibility of AI software, more and more Belgian retailers will get started in 2019."
In addition, Van Ossel points to the arrival of new entrants on the Benelux market. "Amazon will definitely make an entrance in the Dutch language area. Alibaba is becoming increasingly visible in the market, for example by becoming the main sponsor of the European Football Championship with Alipay. In the food sector, the accession of Jumbo into the Belgian market promises to provide some commotion.”
"But let us not forget that several Belgian retailers are making progress. The launch of home deliveries by Colruyt will give the e-groceries market a new boost. Foodmaker remains surprisingly innovative, and its collaboration with Delhaize strengthens the resurrection of the lion that can claw again. Once Carrefour's transformation plan starts to bear fruits, it will become a strong competitor for Collishop, and bring extra dynamics to the food market. Finally, Brantano may become Belgium's foremost fashion retailer, thanks to a sophisticated optichannel strategy." Not all news is good though: "It is inevitable that we will say goodbye to a number of chains."
"China becomes innovation leader in retail"
Laurens Sloot of the Dutch EFMI Business School points to the continuing growth of hard discounters despite the growing economy as his most important evolution of the past year. His latest book "Retail Disruptors" outlines the strategy and impact of this specific branch of retail: "In 2019, service retailers will experience an increasing squeeze due to the growth of hard discount on the one hand and the growth of digital shopping on the other hand, even though the latter is hardly profitable for the time being", he predicts. We must certainly also look to the east: "The re-opening of the Silk Road by the Chinese will gradually have an increasing impact on international trade. Companies such as Alibaba and Tencent show that China is no longer a copycat, but in many cases the innovation leader in retail."
Whether the Dutch Blokker will make it, Sloot does not know: "Probably it will be bought by a private equity entity that will strip the company. Hopefully Blokker survives, for decades it has been a strong formula with fine shops where you can get everything. It has been very convenient to have them in the neighborhood."
He thinks that Jumbo will also be a success in Belgium: "With the Jumbo Food Market formula they can really add something new to the Belgian market. The question is what is Jumbo's real plan: do they want to gradually grow autonomously or focus on a takeover? Everyone looks at Carrefour of course, but I would not be surprised if Jumbo should eventually take over or merge with Colruyt. In any case, I think that service retailers need to work together to become more cost-efficient when it comes to IT, logistics and purchasing. This is necessary to meet the major challenges in the areas of discount and digital. "
"Data determines decisions"
For Cate Trotter, Head of Trends at British Insider Trends, Nike in particular has left a solid footprint in the retail year 2018. "Nike by Melrose, in Los Angeles, has really demonstrated the power of data-driven retail. Nike uses information from the online sphere to determine what happens in the physical store - in terms of product assortment, services and even location. Data will determine so many more planning decisions in the future, both for new stores and for optimising existing ones. Nike's 'digital first' innovations also blew me away. They are completely rethinking what retail can and should be, whilst demonstrating that innovation boosts sales. I am excited to see what they come up with in 2019.
In the near future we will see the rise of 'plug-and-play' retail, Trotter expects: "Technology is going to be bundled in with sales space to offer complete rental packages that benefit retailers. Instead of having to invest time and money into staying on top of new developments, these packages will enable retailers to hit the ground running and to concentrate on doing what they do best."
"Online growth puts pressure on existing retailers"
For Els Breugelmans, professor of Economics and Business Administration at KU Leuven, the continuing growth of online purchases, with spectacular figures in a few categories, is one of the most important evolutions of 2018. She also points to the ever continuing growth of shop vacancy, but also to Zalando's revenue model that is now even questioned by the chain itself - although they announce this as an experiment - and the increasing use of platforms (like bol.com) among consumers. "Physical retail chains are looking for - and finding answers in - experience-oriented stores, as a result of which blurring is becoming more common."
Which evolutions will certainly continue in 2019? "That is difficult to answer: I tend to be careful, but I think we have not reached the ceiling yet for the above-mentioned trends. Given the increases we observe in our neighbouring countries, I dare to expect that in Belgium, which typically lags behind, these trends will continue to flourish. It is interesting also to see the enormous growth of e-grocery in the Netherlands, for example. Will Belgians soon be ready for that too? "
"If you look at the increase in online purchases with pure players and international players that were previously not active on the Belgian market, there is little doubt that existing chains are experiencing pressure. Increased spending in certain categories cannot compensate for the lost sales that go to online competitors. But I dare not predict what chains will go bankrupt. I think that the e-commerce giants certainly look to Belgium. With an Alibaba warehouse that is planned in Liège, I expect that they have a very concrete eye on our country (and by extension Europe)."
"A fragmented FMCG landscape"
"What strikes me this year is that everyone is focusing on the trend towards food with an added sociological value: healthy, local, organic, non-polluting, honest and high quality. At least in terms of communication," observes Claude Boffa, marketing professor at the Belgian Solvay Business School. "The return to service counters is one of the manifestations. Could this be the end of the crazy price reductions of type 2+4 free?"
"In terms of shopping experience in the food sector: everyone offers the opportunity to eat in-store, just like in the United Kingdom. The FMCG landscape is becoming more and more fragmented: the same products can be found everywhere. Consumer loyalty is therefore also shattered and convenience stores win at the expense of traditional supermarkets."
Whether Blokker still has a future in Belgium? "I do not think so: outdated model, unattractive stores that offer much less assortment than in the past, products of poor quality… and they no longer have the means to communicate powerfully. Alibaba and Amazon can eat this market without problems."
Will Amazon break through in the Benelux? "What does 'succeed' mean for Amazon? Earning a huge market share by breaking the prices and then abusing its dominant position to impose higher prices and sell the collected data? Or book business profit after deduction of all costs? In the latter case, I think the Alibaba model is better: the business model of a platform involves fewer logistical costs. We have to ask ourselves this question because most e-commerce players in the world are not profitable when they have to manage the logistics for the delivery of the goods themselves."
And what about Jumbo? "The chain already has problems attracting customers in its Dutch stores. Now they are going to tackle a market that is much more mature and already over-saturated. I am not sure if the sales per square meter will be at the necessary level."
"The signal from the yellow vests"
"Technology players, who are also global retailers today, have set their sights on the living room," says Jorg Snoeck, founder of RetailDetail. "The digitisation of your pocket has been transferred to your living room. Amazon Echo, Google Home and the likes have started a revolution this year, which in the Benelux has remained a bit under the radar, but in reality it is a major shift: companies and brands are eavesdropping, knowing everything about your home environment so they are able to service consumers in their own house. For example, smart locks allow Amazon, but also Albert Heijn, Franprix and Zalando, to literally open the door to automatic supply and ever further erode the role of the retailer as an intermediary."
According to Snoeck, the key question for 2019 is: "Are we going to an accelerated impoverishment of Europe? We see a polarisation of the extremes, which puts pressure on the middle. This is true in all areas: in retail and distribution as much as in politics. Even geographically, Europe risks being crushed in the 'middle', between world powers such as American Amazon and Chinese Alibaba."
"The speed of change is still accelerating. We are starting to say goodbye to the first baby boomers, who if we are honest were the best consumer profile ever, and such an eager generation of consumers will not come back. Especially in the cities, a very multicultural generation is now becoming teenagers, and that leads to a different buying behaviour. This generation of skilled new workforce is accelerating integration into the labour market and will also vote differently. Politically and economically they have other interests and so we get a new reality. "
"A clear part of that reality is already the cost of ageing. A consequence of this ageing is the impoverishment of the EU. Politicians aren’t working on that, because they think from election to election, but that only creates a further disadvantage compared to countries like China. There, the president has been appointed for life and is therefore thinking in the long term."
"The 'yellow vests' are, as far as I am concerned, a clear signal. Retail is clearly a deliberate target in those actions: supermarkets and other chains are considered too expensive. After all, the distribution sector has a major impact on people's lives. Impoverishment will therefore first be felt there. Add to that the global competition, and you feel that the pressure is only getting higher... Within the retail sector we will see more co-creation and cooperatives in response to this impoverishment. Digitisation will paradoxically lead to a humanisation of retail, on condition that we learn to let go, to allow decentralised thinking and entrepreneurship. 'Back to basic', but then reinvented. With the help of technology, of course: it becomes 'inline' retail."
Are more chains going bankrupt? "Yes, they all have too many stores in the wrong places. We see a clear shift to the cities, but the real estate portfolio of the large retail chains has not been adjusted. They have to further redevelop and build shops around cities. Three years ago I said that Blokker would have to close more than half of its stores. Today it is already a reality and the chain is not at the end of the tunnel: they have too many stores in dying locations. Yet there is still a future for Blokker, because it is a strong brand, but then they have to use the Coolblue model: online first, then offline."
"Speaking of the Dutch: the arrival of Jumbo in Belgium ensures that other supermarket chains are arming themselves. Jumbo will have the highest rental prices in Belgium, but the chain will supply from the Netherlands for a lower price. That is why Ahold Delhaize will bet on two concepts: Albert Heijn continues and will serve as a price breaker, while Delhaize puts forward other values, such as ecology, local and so on. To compete with Albert Heijn and Delhaize, but also as an antidote to the Jumbo giant stores, Colruyt is evolving more and more to 1,000-meter shops with the Okay neighbourhood supermarkets as speed boats."
"We also have to look out for the Big 7 (Amazon, Apple, Facebook and Google from the US, Alibaba, Baidu and Tencent from China). Due to its overwhelming growth, China is faced with a resources problem and attracts the worldwide supply of raw materials. This gives them effective control over countries and natural resources. Rothschild wines are today in Chinese hands, and now it turns out that they subtly change the taste to their preferences, in addition to financial interference. On the other hand, there is a growing awareness of the ecological footprint and local responsibility."