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Retail: a sector in crisis?
Jan
Depopulated city centers, increasing corporate bankruptcies, reduced consumer spending and signs of retail exhaustion are on the rise. Renewing the sector requires a perfect balance between a charming in-store experience and the boldness of digital innovation, as well as novel sources of income such as second-hand goods. If the future is uncertain, it is also full of promise.
Social plans and store closures of Auchan, Casa, IKKS and other major brands have marked 2024. They highlight a silent revolution that is redefining the foundations of retail in France.
Retail, a historic pillar of the French economy, is reeling under the weight of economic and social change. This crisis is not a plain adaptation to the development of online commerce, but it reveals deep cracks in the customary model, now under attack. In 2023, retail sales saw growth decrease by 2.9%. In 2024, turnover stabilized at approx projected growth of 1.5%.
Read more: Revitalization of city centers through trade is possible!
A situation that goes beyond economic issues. This market reflects weakening purchasing power, cautious consumption and persistent inflation. The entire sector must rethink its strategies to meet novel consumer expectations and environmental challenges.
Decrease in purchasing power, competition from digital technologies
Retail in France is going through a challenging period, characterized by a decline in the purchasing power of households. Economic growth remains delicate in 2024 increase by 1.1%leading to increased caution among consumers. The latter reduce their discretionary spendingespecially in industries such as clothing and home furnishings, which are reporting significant declines in sales.
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These changes highlight the development of digital technology, which has changed consumer expectations. On a global level share of e-commerce in retail sales will more than double in 2017-2027. In 2024 it will cross the threshold 10% of retail sales in Francea number that is constantly growing. As you can see in the chart, in some product categories, e.g. electronics, this share may even exceed 40%.
Investing in drive, click and collect and markets
Brands continue to invest in digital commerce and channel integration. They involve drive-thru, click-and-collect, marketplace display, and even home delivery (via drones, for example). E-commerce sites like Amazon are also driving growth. They offer immediate availability, competitive prices and hassle-free shopping.
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At the same time, consumers are paying more and more attention to criteria such as sustainability and personalization. In the face of these changes, local businesses are finding themselves in a challenging situation. City centers, once economic engines, are particularly affected by a decline in visitor numbers and an boost in retail vacancies.
Omnichannel strategy
To adapt to degenerating in-store traffic and increasing competition from e-commerce, retail brands have no choice but to rethink their business models. Balance between investing in novel technologies and maintaining the in-store experience.
Read more: Amazon is no longer a sales site for customers, but a service platform for sellers
An omnichannel strategy that combines physical and digital sales becomes crucial to ensure a seamless shopping journey. Objective? Suggest a similar offer, regardless of the channel and easy switching from one channel to another. Seamless shopping experiences include, for example, implementing Drive, click & Collect at Carrefour and even checking in-store stock levels on the brand’s website. They combine the proximity of their stores with the speed of e-commerce.
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Other brands, such as Fnac Darty, have also successfully used omnichannel. They enhance their online experience by advising their clients online via chat/video and live streaming. In addition, Sephora offers its stationary customers the opportunity to order online products that are not on the shelves. This strategy reduces customer frustration, gives them a more convenient experience and allows you to have a wider range of products.
Le Court Circuit: the local market
In the face of the crisis, some industry players saw the emergence of alternative business models as an opportunity to reinvent themselves. Local markets are experiencing particular development, enabling local farmers and traders to sell their products via a common platform. This is the case Judicial Circuit. This French platform brings together a community of producers committed to good and local products. They guarantee consumers the opportunity to discover local products, order them online and have them delivered to a collection point. In this way, retailers operate digital technology to access a broader customer base while retaining their local roots.
Opportunity on the second-hand market
The secondary market has experienced a real explosion in recent years. It encourages customary retailers to rethink their strategy to avoid being left behind.
Players such as Vinted and Leboncoin have already captured a significant share of the second-hand market, especially in the clothing and electronics sectors. In the face of this trend, some customary brands are trying to reposition themselves. Decathlonfor example, it launched its own second-hand marketplace to allow its customers to rent sports equipment and even resell and purchase used sports equipment. Fnac Darts has developed an offer for used electronic and cultural products, with a section dedicated to the sale of refurbished products. These initiatives aim to attract customers who care about their purchasing power and the planet.
By integrating these circular economy models into their offerings, customary retailers are seeking to position themselves as responsible players while seeking novel sources of revenue. These varied responses to the crisis show that the retail sector is not in plain decline yet. It is constantly reinventing itself: between the enchantment of the in-store experience and the boldness of digital innovations, it is already shaping tomorrow’s retail today.
