Chris Buecker, CEO of Retail Plus, explains why agile retailers and brands have reasons to remain confident. “While the pandemic has certainly been disruptive, it also offers new opportunities”.
At the start of this year I boarded a plane in Zurich headed for Las Vegas, where I visited the annual CES show. The mood was positive and everyone was optimistic that 2020 would be a good business year. But then, in February, a strange virus came to Europe from China, which we would later call COVID-19. And it changed everything.
The rest we know – lockdown, shutdown, border closures and a restriction of freedom for everyone, which we never would have imagined in our time. The Mobile Congress and the leading international industry congress, the Technical Consumer Goods (TCG) Summit, had to be postponed until next year and IFA 2020 took place in a much smaller format. In short, many things were turned upside down.
It also had a major impact on the electrical retail sector. Online purchases experienced rapid growth, with triple- digit increases in some cases; people who had previously only or mostly bought in-store discovered the convenience of online shopping. But for most click and mortar retailers, the e-commerce revenue was unable to compensate for the drop in sales from their shops.
These abrupt changes also brought a shift in demand patterns and consumer trends. 83 per cent of consumers changed their shopping behaviour due to COVID. At the same time, people were not really in a mood to eat out, they spent more time in their homes. The work from home policy has triggered a huge boom in IT and office products; employees first had to equip themselves professionally at home and had such a great need for laptops, webcams, desktops, monitors etc. Delivery bottlenecks arose.
“Home cocooning” led to many people rediscovering cooking and some becoming real chefs. Other categories that enjoyed growing demand were gaming, health and wellbeing.
According to a GfK study in the five most important markets in Europe – UK, Germany, France, Italy and Spain – the pure players were able to record an online sales increase of 37 per cent in the first half of 2020, while the collect and click providers recorded an online increase of 80 per cent. The traditional retail channel had to digest a sales decline of 19 per cent.
The pandemic and its late effects will accelerate a process in the electrical retail sector that began several years ago: The age of digitalisation. In just two months, we have witnessed a shift from offline to online that would normally have taken our industry five years. While the online market share in Europe in the pre-COVID electrical retail sector was 27 per cent, GfK estimates that it will be 35 per cent in the post-period. There has never been such a quantum leap before.
Personally, I am optimistic about 2020 as a whole. A survey of senior managers from the CE industry in 25 European countries conducted on 24 September during the online TCG Summit Leaders Talk (pictured above), a monthly online panel discussion platform, clearly showed how the mood has changed in the second half of the year.
While half of the respondents reported revenue losses in the months January to June (13 per cent of which were in the double-digit range), the assessment for the second half of the year was very positive. Three quarters of the respondents forecast revenue growth, of which almost half (46 per cent) even expect double-digit sales growth. During the aforementioned online panel discussion, the senior executives of Euronics, Acer and M.video expressed confidence that the rising demand would continue in the first quarter of 2021.
I also have faith about the coming years, provided that market players consistently set the right priorities (especially focusing on digitalisation and customer centricity).
I see two major opportunities here – during the crisis, we have seen that technology has been recognised by the consumer as a way forward. And this is a big opportunity for retailers and brands to convince the consumers to buy more. Thus, the electrical retail sector is in a promising position when fighting for their share of the consumer’s wallet.
The second opportunity is to accelerate innovation – the cycle of renewal. In a crisis, people tend to buy more durable products that would last longer. Consumers should not buy the cheapest, but the best. During a crisis, buying products that would last longer is a much better economic solution than any other. For electrical retailers with a well-educated and motivated sales force, this represents a brilliant chance for upselling and to secure sufficient margin that is so vital to survive.
