Do Belgian retailers have any chance of survival?

Do Belgian retailers have any chance of survival?

“Switch or die” is the message that rings increasingly clearer through retail land. Its next victim is cash & carry chain Makro, which has to thoroughly reorganize its Belgian operations to spark new commercial impulses. Some doubt whether the Belgian retail sector still has any chances of survival at all, but I think the future is not that bleak.

Belgium pushed to the side?

The digital revolution is shaking up the retail sector in such a way that we can really talk about a “Switch or Die” scenario: those who are not able to quickly and fully adapt to the new, digitalized retail reality, will not only be squashed by the pressure of online ‘pure players’ like Amazon and Zalando, but also by the retailers who have managed to create an omni-channel strategy in time.


It is not a coincidence that Albert Heijn is moving towards an omni-channel company, now that its offline results are dropping. The distributor considers the Belgian market to be very enticing in this sense, but that means yet another foreign party is invading the Belgian retail market, while Belgian retailers are increasingly being pushed to the side.


Wage handicaps and other issues

Belgian trade federation Comeos fears the worst, even for those who (are able to) go digital: according to their own figures, 37 % of online turnover is flowing away to foreign traders - a figure that might almost double to 68 % by 2018. The fact that we lose (online) turnover to foreign traders, has several reasons: the Belgian wage handicap is a classic argument, as labour costs are sometimes up to 20 % higher compared to some neighbouring countries.


Another important issue, especially for e-commerce, is how companies from larger markets profit their advantage in scale. Countries with larger neighbours with the same language (like Belgium, Ireland, Austria or Cyprus) can easily be “conquered” by their bigger counterparts, who even do not have to translate their website in order to invade the smaller market.


Offline retailers may not be under this particular pressure, but they have to deal with changed consumer preferences. Companies that want to survive, simply HAVE to go for online. A well-conceived omni-channel strategy may cost a lot of money, but the alternative (not going for omni-channel) is just unthinkable. 


Matter of survival

Restructuring a company remains a painful necessity: Makro has to cut costs and let go 374 people, which everyone just has to accept as a necessary step towards survival. However, that is not enough: the chain also has to work on its commercial offer towards the consumer, because a reorganization alone will not suffice to create a new impetus. 


If we want to avoid another "Free Record story", then we have to allow retailers to arm themselves in this Amazon-Zalando world of new business models. Some say it is already too late, as local costs are so high that they eliminate any competitive edge Belgian retailers may have. But is that really true, are Belgian retailers unable to compete?


Purchase power preserved

There are always two sides to a story and that is also true for the Belgian situation. The heavy burden we have to shoulder, apparently helped us pass this crisis relatively unscathed, according to research at the University of Antwerp. Consumer trust and (more importantly) the economy did not drop as sharply as in other countries, thanks to our social welfare state.


EU statistics point out that Belgium has been the third largest grower in the last five years, exactly because we were able to strike a balance between economic growth and purchase power. That is why the Belgian retail has managed to stay clear of the huge turnover drops that plagued (amongst others) the Dutch DIY sector with enormous declines.


Collaboration is essential

While the European Commission had expected a 0.4 % drop of local consumption (and OECD even predicted -0.7 %), we are going to limit the damage to a 0.3 % drop according to calculation of Belgium’s central bank. Our Dutch neighbours are significantly worse off, as a number of sectors are really suffering because of the lowered purchase power of the consumer.


Everyone (retailers, employees, unions and the government) have to realize that we are facing a challenging period. Looking for a scapegoat is just a waste of time: only if we all work towards a single goal, we can turn our country into a competitive, prosperous market – tuned into the mobile age.


We should look up to retailers that have made the best of the situation; those creative and innovative retailers, which have pushed our country and the sector forward. Like the top-notch retailers at the RetailDetail Omnichannel Congress, they (have) realize(d) fully well that collaboration and not conflict is essential to switch to an omni-channel society.





(Translated by Gary Peeters)