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Trends and Strategies of The European Retail
Trends and Strategies of The European Retail
Trends and Strategies of The European Retail
retail
Markets are continuously changing and as exporter to the EU it is important to understand what
is happening and how European market players see the future. In particular, the European retail
is an important sector that defines the trends for several products. This document provides
insight information on 8 majortrends identified for the European retail sector for the coming 10
years and theforecasts and strategies expected for the following market segments: apparel, DIY
products, food (ingredients), furniture and natural ingredients for cosmetics.
Introduction
A trend is about a general direction in which something tends to move. This movement
results of influences, such as growing population, scarcity of resources, political landscape,
developed technologies, and economic changes. A
trend tells what is happening on a global scale but can
also be looked from a regionally (e.g. Europe) or local
point of view. A trend has the power to influence the
behaviour, demands and needs of consumers. For
example, economic instability can lead to more pricequality conscious consumers. The actual impact of a
trend depends on the size, location and characteristics
of the market.The impact can also differ from market
segment to market segment. For example, a health
trend may have more impact in the food and cosmetic
segment than in furniture.
If a trend is noticed or expected to influence the demands and needs of consumers, retailers
have to adapt their strategies to at least maintain their market shares and preferable make
profit. For companies in developing countries (DC) supplying the European market, it is
important to take notice of those trends, because they will probably been translated into
requirements that EU buyers will ask from their suppliers. On the other hand, these trends
can offer new market opportunities in the EU market.
This document provides information on trends influencing or expected to influence
European retail strategies in the following market segments:
1.
2.
3.
4.
5.
Apparel
DIY ( Do- It Yourself)
Domestic furniture
Food (ingredients)
Cosmetics
Section A provides information on the 8 major trends that are estimated to impact the
aforementioned retail segments in the next 10 years. Section B provides information on
strategies that the retail segments may choose to implement with a view to face these
trends.
A. Trends
Based on large, completed surveys on trends from 2010-2020, 8 major trends have been
identified to be of relevance for suppliers wishing to export products to the European
1
market). These are:
1.
2.
3.
4.
5.
6.
7.
8.
It is important to understand that these trends represent the most important ones. One
major trend can consist of several sub trends that are interrelated. Trends also influence
each other and the combined effect of trends can result in new trends being identified.
1.
Supply chain and logistics systems enable retailers to produce, purchase and sell products
worldwide. In terms of effectiveness and efficiency retailer strategies can focus on:
Supply chain and cost cutting;
Information sharing and data transparency;
Collaboration, partnerships and inter-organisational communication;
Globalisation and cross-border supply chains with multi-tier structures;
Technologies for tracking, protecting and managing cargo flows (e.g. RFID, bar codes).
Example: Aholds new supply chain for online business
Ahold, a major multinational supermarket chain of the Netherlands, is about to test a new
supply chain model for online business with the purpose to cut costs associated with
transportation and give their online sales a boost. In this new supply chain the so-called
fulfilment factories and pick up points play a crucial role. Especially the pick up points
can lead to considerable savings on operational costs associated with distribution as
customers themselves have the option to pick up their groceries purchased online.
Example of sources used: 2020 Future Value Chain - Building strategies for the new Decade (link),
Retail 2020 - ReStructure (only available in Dutch) (link) and The Consumer goods forum Top of Mind
2011.
Source: CBI Market Information Database URL:www.cbi.eu Contact: marketaccess@cbi.eu www.cbi.eu/disclaimer
2.
Demographic shifts
Health, safety and wellbeing has increasingly been important in Europe for some time and
will likely become more important due to the increase of lifestyle diseases. Lifestyle
diseases are diseases which frequency seems to increase as countries become more
industrialised and people live longer (see trend demographic shifts as this is the case in
Europe). Examples of lifestyle diseases are: cancer, diabetes, heart diseases, asthma,
obesity and depression.
The result is that consumers in Europe will adjust their lifestyle (e.g. diet, leisure) leading to
changing demands in personal care categories (including healthier foods, probiotics and
neutraceuticals, beauty and mood products), technology-advanced products and easy-touse consumer solutions (e.g. assisted living products for older people).In this perspective
design and innovation can become an important competitive differentiator for some
market segments (see example Philips), as well as other marketing aspects, such as product
information and product labelling (see example Tesco). Consumers who pay more
information on the health and safety aspects of product will want to be able to make
informed choices.
Example: Product development and marketing by Philips
The newly designed Philips Wake-up Light is an innovative light simulator that gently
wakes the body in the early hours of winter mornings, ensuring a sense of relaxation and
well-being.
Retrieved from website Philips, December 2011
Technology adoption requires new service models, offered via the internet and moving
beyond selling individual products. Consumers will expect and demand services 24/7.In
Europe the increase in consumer service demands includes the following sub trends:
Regulatory pressure presents the extent to which regulators (governments and economic
areas) threaten or actually limit a companys operations based on their overall performance
2
The so-called prosumer. A prosumer is an individual who not only acts as a consumer but also
decides how the product looks or tastes. - Retail 2020 - ReStructure (only available in Dutch) (link)
3
From Consumer behaviour in a digital environment of DG for internal policies of the European
Parliament, Policy Department A: Economic and scientific policy (2011) (link)
Source: CBI Market Information Database URL:www.cbi.eu Contact: marketaccess@cbi.eu www.cbi.eu/disclaimer
or certain type of performance (e.g. environmental performance) and the extent to which
they define the characteristics of products. There are a few issues that are increasingly
and/or regularly put on the political agenda for discussion within the EU. These are:
Animal health
Biodiversity
Subsidies
Energy consumption
Emissions
Taxes
Traceability
Import quota
Import tariffs
Waste
Information disclosure/labelling
7. Growing consumer concerns about sustainability
Consumers are more aware of what products they buy and what they consume. They are
better informed (due to internet) and want to be better informed about products, processes
and stores. Furthermore, they hold retailers responsible for the social and environmental
impact of the products they sell, the production processes used, who manufactured the
product (e.g. a company which is known for violating environmental regulations) and
where the product comes from (e.g. does the product come from a country where child
labour is known to take place). Growing concerns about sustainability require retailers to
develop new strategies, such as:
Innovation: Develop, potentially together with suppliers, new and improved products
and production processes.
Choice influencing: Marketing strategies with product labels referring to some
sustainable theme, such as efficient, environmentally friendly, fair (trade),
healthy, locally grown, low impact, organic, sweatshop-free, sustainably
sourced.
Choice editing:Removal of unsustainable products and processes (in partnership
with other actors) or alter the composition of traditional products (e.g. reducing the
amount of fat, salt and calories).
8.
The growth of the worlds population and a rapidly expanding middle class in low- and
middle-income countries with purchasing power have implications for price and
availability of natural resources, like energy, water, natural ingredients and material and
food.Retailers who want to stay on top of this trend need to explore and refine their
product designs, production processes, packaging materials, transportation, impact of the
use of the product and its recyclability.
B. Strategies
Drawing up a solid strategy highly depends on the retailers objective for the coming years.
Business in general and most retailers aim to maximise long-term profits. Once determined
its objective, retailers will start to conceptualise and apply strategies that enable themselves
to achieve their long term objectives. This section advocates potential strategies identified
4
in the different market segments.
This section is mainly based on interviewed carried out with representatives of European or national
associations of the sector covered in this document.
Source: CBI Market Information Database URL:www.cbi.eu Contact: marketaccess@cbi.eu www.cbi.eu/disclaimer
1.
Apparel
With a view to the CBI target group, CBI has selected the following product groups to fall
under the scope of the market segment apparel:
Body wear
Leather clothing
Babies clothing
Sports clothing
Trends
Strategies
Adoption of
supply chain
technologies
Changing
competitive
landscape
Quality, price and availability of products will stay three factors that are
leading the competitive landscape from 2012. The proportion of sales of
goods under own label is expected to increase to 16-20%. The consumer
will stay King and can get every article for every price. Adding the
expected increase in horizontal and vertical collaboration indicates how
the competitive landscape will change. Suppliers can react by becoming
logistically more flexible, with shorter (production) lines and quicker
responses to the market. Sharing knowledge, developing marketing
programs and a consumer view together with retailers can result in a
win win strategy for the future.
Demographic
shifts
Growing
consumer
concerns about
sustainability
Increased
importance of
health and
wellbeing
Increase in
consumer
service
demands
Increase in
regulatory
pressure
The areas of regulatory pressure of most concern (in terms of cost) in the
next decade are: energy consumption, import quota & tariffs,
information/ disclosure and labelling, traceability, use of natural
resources and waste. Potentially increasing import tariffs & quota in
producing countries will affect the export potential of a country.
Following local and EU regulations as well as (potential) regulations on
natural resources and scarce goods is important in this field.
Scarcity of
natural
resources
2.
With a view to the CBI target group, CBI has not selected separate product groups to fall
under the scope of the market segment DIY. The trends and potential strategies for the
retail segment DIY are summarized below.
Trends
Strategies
Adoption of
supply chain
technologies
Changing
competitive
landscape
Price, quality and variety stay central in the DIY segment. Lifestyle is
especially important for the consumer. The future competitive landscape
is challenged around more quality and more (labelled) sustainability.
Low quality products are unacceptable and sustainable labels will be
more and more clearly defined (within the EU). In general most retailers
in the DIY segment have their own label. Currently this accounts for 20%
of the market and it is expected to grow to 50% in the next decade. Focus
on sustainable products, quality and social media appear (also)
interesting tactics for producing countries.
Demographic
shifts
Growing
consumer
concerns about
sustainability
Increased
importance of
health and
wellbeing
Increase in
consumer
service
demands
Increase in
regulatory
pressure
Scarcity of
natural
resources
Using less resources is a key factor for the coming future. Government
(EU) regulation is expected to increase in the field of product disposal
and production processes. In general a trend towards less packaging and
more local goods is observed.
3.
Domestic furniture
With a view to the CBI target group, CBI has selected the following product groups to fall
5
under the scope of the market segment domestic furniture :
Furniture parts
Bedroom furniture
Seats
Kitchen furniture
Trends
Strategies
Adoption of
supply chain
technologies
Changing
competitive
landscape
As online sales increase, there is the expectation that the surface area of
domestic furniture shops will decrease by 30%.The economic recession as
well as the increase of online sales have formed the competitive landscape
in the domestic furniture sector into an marketing action-oriented
market. Businesses often sell their products based on once-off offers (e.g.
two-for-one-offers) and consumers shift from one marketing action
towards the other. This puts margins for exporters under pressure. Some
exporters have adopted similar strategies: they offer their importers
special offers too.
Private labels are not yet very common in this market, but they may be in
the future as a response from the retailer to bind their customers to
buying at their shops in stead of following the marketing offers.
Demographic Consumers in their 30s are the most important buyers of domestic
shifts
furniture. As Europes population is ageing, this will have a negative effect
on sales. It is expected that in the next two decades, the number of people
in Europe in 20-29 age band will fall by 20%, whereas the number in the
50-54 age group will increase by 54%.
The retail landscape will change. Large compartment stores (with large
bulk orders, cheaper products) will be more manifest in the countryside,
whereas smaller shops (small orders, small stocks of specialised items,
room for niche products) will concentrate in the urban areas.
There is a decrease of households with three generations co-residing. In
Europe, this form of family solidarity is still much more widespread in
Southern countries than in Northern and Central European countries but
less widespread than in Eastern Europe. As the household sizes are
smaller, there is a changing demand for smaller couches, tables etc. Also,
there is a trends towards multipurpose-furniture, such as extension
tables and beds or couches with internal storage space.
Growing
consumer
concerns
about
sustainability
Increased
There is some attention for beds and couches that have a good effect on
importance of healthy positioning of the body, but this is mostly in the higher segment
health and
and for branded products.
wellbeing
Increase in
consumer
service
demands
Increase in
regulatory
pressure
From 2013 onwards, the EU will implement a new regulation regarding the
legality of timber. This law prohibits illegally harvested timber from all
countries. There are two scenarios on how the new timber regulation may
impact the market share of sustainable certified timber in the
future:1.Either European buyers will accept legal timber and demand for
more expensive sustainable and certified timber will decrease (likely in
Eastern and Southern countries).2.Or implementation will lead to
increased demand for certified sawn wood, as the price of non-certified,
legal timber will be close to the price of certified timber (likely in Western
European countries).
For textiles, there is no such regulation regarding sustainable production,
but there is an increased attention for harmful substances in dyes.
Scarcity of
natural
resources
4.
Food
With a view to the CBI target group, CBI has selected the following product groups to fall
under the scope of the market segment food:
Food ingredients (incl. coffee, tea,
juices, jams, herbs, nuts, oils, rice,
etc.)
Fishery products
Wine
Overall, it is expected that the market will remain relatively stable in the next 10 years,
meaning that is expected that changes will not exceed 2%. All trends will influence food
retail, however the most influencing trend is indicated to be increased importance of
health and wellbeing.
Trends
Strategies
Adoption of
supply chain
technologies
Changing
competitive
landscape
Demographic All kinds of demographic shifts influence the food retail sector. The most
shifts
influencing trend seems to be urbanisation. Urbanised consumers want
to have easy and quick access to food (supermarkets need to be available
2
to them). As a result urbanised areas have made a relatively lot of m
available for food. Aging population leads to smaller proportion (as well
as smaller households), easy-to-open packaging and readable labels.
Growing ethnic and cultural diversity will lead to the retail adopting a
Increased
importance of
health and
wellbeing
The composition of products will be adjusted more and more, e.g. lesser
salt, calories and fat but more fibres. Purity and authenticity of flavour is
very important too. Moreover, within the framework of EU legislation on
the nutritional aspects more attention will be paid to clear and
informative labelling on energy, fat, proteins, sugar and carbohydrates,
including information on Guidelines Daily Amounts (GDAs).
Increase in
consumer
service
demands
Increase in
regulatory
pressure
Scarcity of
natural
resources
Again, the food retail will focus on make processes more sustainable, find
uses for every component of a raw ingredient and possibilities for
recycling of waste and packaging will be explored.
5.
Cosmetics
With a view to the CBI target group, CBI has selected the following product groups to fall
under the scope of the market segment food:
Essential oils
Waxes
Trends
Strategies
Adoption of
supply chain
technologies
Changing
competitive
landscape
Due to the financial crisis consumers will seek out small luxuries in
difficult times. Products that can quickly make a difference to an
individuals well-being and self esteem are those that are most likely to be
prefer by consumers.Also consumers will look for brands that they trust
and are in tune with their needs. Fragrance and colour cosmetics are the
most important segments in the last yearsand together with sun care
protection products are expected to have an important contribution in the
market. The awareness of consumers on the ingredients used and the
impact they produce on the environment, is forcing companies to move
forward more natural and sustainable ingredients.Eco-labels and private
labels are also moving the sector in the same direction and offer new
opportunities for producers of natural ingredients. The demand of sun
care protection products is driving as well the sector to develop new
formats ( i.e. spray instead of greasy thick creams) and broader added
value products (i.e. foundations with SPF).
Demographic Social media is proving to be a prime opportunity to target under 25s. Also
shifts
provides great opportunities to position beauty products, in particular
fragrance and toiletries, to a male audience who is harder to engage
thorough traditional platforms. Anti-aging creams and anti-cellulite skin
care products are in high demand among the aging population of Europe.
Growing
consumer
concerns
about
sustainability
traditional products.
Increased
importance of
health and
wellbeing
Increase in
consumer
service
demands
Increase in
regulatory
pressure
The new cosmetic legislation of 2009 will make it easier the entrance of
cosmetics and natural ingredients to Europe because of the
harmonisation of requirements in all EU countries and also the electronic
notification system consider for all products put in the European market.
Although a ban of all products tested on animals must come into force as
of March 2013, the EU is working on a new proposal of this legislation
which will presented in 2012. The private sector and government are
working on funding new alternatives for animal testing. It is expected thus
that this deadline of 2013will be postponed. Contrary to what happened
last years, nanomaterials are now also regulated in the new cosmetic
regulation and the requirements regarding these materials are limited to
notify the presence of them whenever present in cosmetics products. ISO
is also developing a standard for cosmetics that it is expected to be
published in 2013.
Scarcity of
natural
resources
Other trends that to rise more in the coming years are a renewed emphasis
on sustainable packaging to minimize waster and eco-footprint.