Le digital : hier menace, aujourd’hui sauveur du commerçant

The digital realm: yesterday’s threat, today’s saviour of retailers

The health crisis has made clear the strategic roles that both e-commerce and the shop play in providing service to consumers. What seems like a paradox, although it’s not, is helping us to fully appreciate what’s been obvious to us: Retail’s future depends on integrating digital technologies into the business model. Retailers are leading the way, but shopping centres, local authorities and professional organisations are also fundamentally involved.

Online sales (for pick-up and home deliveries) grew exponentially during the lockdown, which is easily explained by the closure of shops and restrictions on the comings and goings of consumers. Consequently, many resorted to online purchases for the first time, and certainly not the last.

Does this threaten the shop? On the contrary.

During the lockdown, growth in online sales was 100% for traditional retailers compared with “just” 15% for pure e-commerce players.

This signals that the digitisation of retail can and must step up the pace. No retail sector or format can escape.

From logistics robots to click-and-collect farms

Let’s look at a few examples. In food retail, Casino (Monoprix, Franprix) is expecting to soon reap the rewards of its agreements with Ocado, the operator of automated logistics solutions, and its accelerated investment in massive automated warehouses that use artificial intelligence to speed up order picking to the second. Casino put its money on the ability of its logistics tool to boost productivity to quickly increase the volume of online sales. The economies of scale achieved should make the new omnichannel business model for the brands profitable as a whole.

On a different scale, we’ve seen the rapid emergence of online marketplaces that bring together food retailers, restaurateurs and producers (click-and-collect farms). Their market positioning—organic, local, high quality—explains success that should continue beyond the health crisis.

To a lesser degree, some independent retailers have struggled to find ways to continue serving their customers in “downgraded” mode: delivery, click and collect, flexible hours, takeaway and so on. These adaptations are made much easier if digital tools for managing orders and deliveries and maintaining constant contact with customers are already in place. This is the case for some well-prepared independent bookstores that have been successful during the crisis while others have fallen short.

What these strategies have in common is the use of digital technologies best suited to ensure resilience and the shift in operations.

How do you accelerate the digitisation of “small-scale” retail?

From now on, local authorities and professional organisations need to focus more attention on supporting the digitisation of retail. That’s what happened as of March, when the French Ministry for the Economy and Finance and the Federation of E-Commerce and Distance Selling (FEVAD) asked specialised service providers to offer retailers preferential conditions.

Even so, although, for many retailers, the crisis provided an opportunity to take the plunge, or at least think about it, it would be naive to expect a widespread spontaneous movement of digitisation of independent or franchised retailers in the coming months. Local authorities will have to guide the process.

Marketplaces: a faux good idea

One approach is to create local marketplaces. Retailers sign up to a service that includes a consumer portal for online sales, various management services and, most importantly, delivery. Consumers order on the website, and the platform handles delivery.

Seems like a more than worthwhile model. Customers find all their favourite shops online in one place, and shops have no learning curve, comprehensive service and economies of scale.

Keep in mind that we’ve seen this marketplace before: It’s a shopping centre, only virtual. It brings together retail offerings under one umbrella (no roof) and channels digital flows (not physical flows), generating deliveries rather than visits.

Is there no need to question the virtual duplication of a model born in the last century?

Let’s ask ourselves what’s the interest in a local marketplace for consumers. Find retailers? Not really, because Google and Facebook already do that for them quite well, or they already know about nearby shops. Get all their shopping delivered at the same time? Yes, but no one offers that service.

For retailers, then, the solution has flaws. What it gains in simplicity—a ready-made shop window just by ticking the appropriate boxes—it loses in personalisation and targeting. And, we know that the increasing segmentation of consumer markets will call for more refined strategies to win over customers.

It is undoubtedly more efficient to build a customer community through well thought-out communication tools than to rely on the traffic generated by a marketplace whose only distinctive character is to be local.

Finally, for cities, what dynamics can be expected of a marketplace that more or less mirrors local retail, as an alternative to foot traffic?

There is certainly an argument in favour of the marketplace: It can quickly mobilise large numbers of retailers to collectively move towards digitising their businesses. But the direction taken must be the right one.

How, then, should retailers be guided through digital transformation?

Move from e-commerce to the enhanced shop

First, we must stop thinking as if there were the shop on the one hand, the website on the other and inventory management in between. Rather than “e-commerce”, we have to think “enhancement of level of service”. This is not just a semantic shift, it’s a change in the stakes. Because, after all, the initial capital of the retailer is, usually, the shop. Its clientele, human presence, advice of salespeople, place in the local fabric, ambiance, storage function, to name a few, constitutes the assets to grow. This is what we must use digital tools and logistics solutions for.

So, the challenge is not to be visible on the Internet to sell online. It’s to increase the efficiency of the shop by enriching it with services.

“If you can’t go to the shop, we present our products to you and then deliver them. If you want to save time by ordering in advance or see whether an item is in stock, it’s possible. If you want to be informed of our offerings, follow us on...”

All these services require organisation (space and sales teams), management tools and skills that must be integrated into operations.

The efforts of local authorities and professional organisations should focus on what can be pooled across a more or less large community of retailers: training and support in choosing the right tools, and delivery service. Obviously, there are efficiencies to be found in the use of the same delivery service for a local market.

And what about shopping centres?

If we agree on the above—that the digitisation of retail must not replicate the shopping centre model in digital format—the idea of a marketplace associated with a shopping centre has little meaning. It may seem conceptually appealing, except that neither customers nor retailers truly need it.

By contrast, lessors are in a strong position to guide retailers in their digitisation initiatives (awareness-building, training, support) and to create the conditions for efficient logistics service. They can do it fairly easily by facilitating the physical adaptation of storage facilities and providing a delivery operator shared by all retailers, whose service would be included in the charges.

Independence and profitability: each to their own trade

For consumers, the digitisation of retail is becoming the norm, as is the case for public services. Consequently, the services provided by retailers, whether free or paid (deliveries), must find their place in a profitable business model. The role of local authorities should therefore not be to subsidize retail by paying its expenses. Can you imagine a city that covers the electricity bills of retailers?

We must also be wary of local public plans that would impose on retailers common digitisation strategies. Each to their own trade: It’s up to retailers to adapt their business models and to local authorities to adapt public services and the infrastructure supporting retailers, in the interests of the public good, without encroaching on their independence. The organisation of deliveries is obviously a major challenge to address. Among the many issues raised: economies of scale (through a single operator), streamlining of vehicle traffic flows, promotion of non-polluting modes of transport, sharing of urban spaces and use of the ground floor, as examples.

We can no longer look at e-commerce through the wrong end of the telescope, its market share. Is it increasing? All the better if it’s a sign of successful digital transformation. That’s the goal, and it can’t be achieved by just adding online sales to the mix. The business model must be renewed by embracing digital technologies.

The digital realm: yesterday’s threat, today’s saviour of retailers

The health crisis has made clear the strategic roles that both e-commerce and the shop play in providing service to consumers. What seems like a paradox, although it’s not, is helping us to fully appreciate what’s been obvious to us: Retail’s future depends on integrating digital technologies into the business model. Retailers are leading the way, but shopping centres, local authorities and professional organisations are also fundamentally involved.

Online sales (for pick-up and home deliveries) grew exponentially during the lockdown, which is easily explained by the closure of shops and restrictions on the comings and goings of consumers. Consequently, many resorted to online purchases for the first time, and certainly not the last.

Does this threaten the shop? On the contrary.

During the lockdown, growth in online sales was 100% for traditional retailers compared with “just” 15% for pure e-commerce players.

This signals that the digitisation of retail can and must step up the pace. No retail sector or format can escape.

From logistics robots to click-and-collect farms

Let’s look at a few examples. In food retail, Casino (Monoprix, Franprix) is expecting to soon reap the rewards of its agreements with Ocado, the operator of automated logistics solutions, and its accelerated investment in massive automated warehouses that use artificial intelligence to speed up order picking to the second. Casino put its money on the ability of its logistics tool to boost productivity to quickly increase the volume of online sales. The economies of scale achieved should make the new omnichannel business model for the brands profitable as a whole.

On a different scale, we’ve seen the rapid emergence of online marketplaces that bring together food retailers, restaurateurs and producers (click-and-collect farms). Their market positioning—organic, local, high quality—explains success that should continue beyond the health crisis.

To a lesser degree, some independent retailers have struggled to find ways to continue serving their customers in “downgraded” mode: delivery, click and collect, flexible hours, takeaway and so on. These adaptations are made much easier if digital tools for managing orders and deliveries and maintaining constant contact with customers are already in place. This is the case for some well-prepared independent bookstores that have been successful during the crisis while others have fallen short.

What these strategies have in common is the use of digital technologies best suited to ensure resilience and the shift in operations.

How do you accelerate the digitisation of “small-scale” retail?

From now on, local authorities and professional organisations need to focus more attention on supporting the digitisation of retail. That’s what happened as of March, when the French Ministry for the Economy and Finance and the Federation of E-Commerce and Distance Selling (FEVAD) asked specialised service providers to offer retailers preferential conditions.

Even so, although, for many retailers, the crisis provided an opportunity to take the plunge, or at least think about it, it would be naive to expect a widespread spontaneous movement of digitisation of independent or franchised retailers in the coming months. Local authorities will have to guide the process.

Marketplaces: a faux good idea

One approach is to create local marketplaces. Retailers sign up to a service that includes a consumer portal for online sales, various management services and, most importantly, delivery. Consumers order on the website, and the platform handles delivery.

Seems like a more than worthwhile model. Customers find all their favourite shops online in one place, and shops have no learning curve, comprehensive service and economies of scale.

Keep in mind that we’ve seen this marketplace before: It’s a shopping centre, only virtual. It brings together retail offerings under one umbrella (no roof) and channels digital flows (not physical flows), generating deliveries rather than visits.

Is there no need to question the virtual duplication of a model born in the last century?

Let’s ask ourselves what’s the interest in a local marketplace for consumers. Find retailers? Not really, because Google and Facebook already do that for them quite well, or they already know about nearby shops. Get all their shopping delivered at the same time? Yes, but no one offers that service.

For retailers, then, the solution has flaws. What it gains in simplicity—a ready-made shop window just by ticking the appropriate boxes—it loses in personalisation and targeting. And, we know that the increasing segmentation of consumer markets will call for more refined strategies to win over customers.

It is undoubtedly more efficient to build a customer community through well thought-out communication tools than to rely on the traffic generated by a marketplace whose only distinctive character is to be local.

Finally, for cities, what dynamics can be expected of a marketplace that more or less mirrors local retail, as an alternative to foot traffic?

There is certainly an argument in favour of the marketplace: It can quickly mobilise large numbers of retailers to collectively move towards digitising their businesses. But the direction taken must be the right one.

How, then, should retailers be guided through digital transformation?

Move from e-commerce to the enhanced shop

First, we must stop thinking as if there were the shop on the one hand, the website on the other and inventory management in between. Rather than “e-commerce”, we have to think “enhancement of level of service”. This is not just a semantic shift, it’s a change in the stakes. Because, after all, the initial capital of the retailer is, usually, the shop. Its clientele, human presence, advice of salespeople, place in the local fabric, ambiance, storage function, to name a few, constitutes the assets to grow. This is what we must use digital tools and logistics solutions for.

So, the challenge is not to be visible on the Internet to sell online. It’s to increase the efficiency of the shop by enriching it with services.

“If you can’t go to the shop, we present our products to you and then deliver them. If you want to save time by ordering in advance or see whether an item is in stock, it’s possible. If you want to be informed of our offerings, follow us on...”

All these services require organisation (space and sales teams), management tools and skills that must be integrated into operations.

The efforts of local authorities and professional organisations should focus on what can be pooled across a more or less large community of retailers: training and support in choosing the right tools, and delivery service. Obviously, there are efficiencies to be found in the use of the same delivery service for a local market.

And what about shopping centres?

If we agree on the above—that the digitisation of retail must not replicate the shopping centre model in digital format—the idea of a marketplace associated with a shopping centre has little meaning. It may seem conceptually appealing, except that neither customers nor retailers truly need it.

By contrast, lessors are in a strong position to guide retailers in their digitisation initiatives (awareness-building, training, support) and to create the conditions for efficient logistics service. They can do it fairly easily by facilitating the physical adaptation of storage facilities and providing a delivery operator shared by all retailers, whose service would be included in the charges.

Independence and profitability: each to their own trade

For consumers, the digitisation of retail is becoming the norm, as is the case for public services. Consequently, the services provided by retailers, whether free or paid (deliveries), must find their place in a profitable business model. The role of local authorities should therefore not be to subsidize retail by paying its expenses. Can you imagine a city that covers the electricity bills of retailers?

We must also be wary of local public plans that would impose on retailers common digitisation strategies. Each to their own trade: It’s up to retailers to adapt their business models and to local authorities to adapt public services and the infrastructure supporting retailers, in the interests of the public good, without encroaching on their independence. The organisation of deliveries is obviously a major challenge to address. Among the many issues raised: economies of scale (through a single operator), streamlining of vehicle traffic flows, promotion of non-polluting modes of transport, sharing of urban spaces and use of the ground floor, as examples.

We can no longer look at e-commerce through the wrong end of the telescope, its market share. Is it increasing? All the better if it’s a sign of successful digital transformation. That’s the goal, and it can’t be achieved by just adding online sales to the mix. The business model must be renewed by embracing digital technologies.