The e-commerce opportunity for the Spanish retail sector

We shop where and when we want. Nothing stops us as consumers. Technology has given us this ability and has promoted a radical change in our behaviour and shopping habits, finding in Covid-19 an unprecedented catalyst, which is accelerating the digitalisation of retail at a pace never seen before.

The effect of the crisis generated by Covid-19 has been immediate, leaving a scenario of almost total store closures, and boosting e-commerce growth of approximately 36% in Spain by 2020, according to eMarketer’s Global Ecommerce 2020 report. Categories such as food and personal care have grown the most compared to the previous year. According to Hootsuite's Digital 2021 study, 79.3% of Spaniards claim to have shopped online in the last month, and 63.7% recognize that, before each purchase, they get information on digital channels. Changes in consumer habits that retailers of all sizes must take into account in order to respond to these new expectations that impact on an increasingly complex purchasing decision process.

As consumers, we are becoming more and more demanding.

We are looking for useful information, competitive prices, and valuable recommendations and, above all, brands that offer us a customised value proposition and do so at all touch points, whether digital or not. Retailers must meet these expectations and offer an integrated experience, regardless of the channel. According to a Google study, by 2024, at least 33% of retail revenues in Spain will be shared among companies that have an integrated digital offering in their business model, with a significant reduction in the influence of physical-only retailers and a relevant increase in the share of marketplaces in almost all countries.

In addition, this recent Google study indicates that, during Covid-19, the number of channel-agnostic consumers has grown by 8%. No matter the channel, no matter the time, we want it all and we want it now. Omnichannel and customisation are key. Understanding them and addressing them correctly is a winning combination. One can’t work without the other, but together, they have incredible potential, capable of multiplying sales up to five times compared to a single channel experience.

The opportunity for retailers is to leverage the benefits of the digital context in the relationship with their consumer. Building a solid approach on 5 basic pillars is essential for retailers who want to take advantage of the digital environment:

1. Marketing

Addressing an integrated view of the conversion funnel (from the consideration phase to the purchase and loyalty phase) is critical to drive sales and increase investment efficiency. According to EY Parthenon’s Six ways for retailers to drive rapid e-commerce growth’ report, a digital native retailer spends, on average, around 14% of its costs on marketing. Automation, leveraging cloud marketing solutions, artificial intelligence and advanced analytics, is essential to have an agile approach to marketing using "real-time" sales.

2. Technology

As a central enabler that supports defined processes by providing an optimal response to business challenges. The cost of implementing and maintaining e-commerce solutions and all the underlying technologies is not minor. However, the cloud has brought a large number of alternatives capable of adapting to the reality of each business. The key: aligning business needs with technology requirements, leveraging the scalability offered by cloud solutions throughout the customer lifecycle.

3. Merchandising

When defining the assortment in e-commerce (which does not necessarily have to be the same as in the physical store), consumer expectations and behaviour in this channel must be taken into account. Agility in interpreting this data is critical to understanding which categories and products perform best and adapting the e-commerce assortment appropriately.

4. Shipping and fulfilment

As consumers, we expect fast and free shipping. As a reference, a digital native retailer, on average, spends between 10% and 18% of their bottom line on shipping costs, according to EY Parthenon’s previous report. The exponential growth of shipments and the limitations in the so-called last mile, generate the need to explore new models that allow, through synergies, to improve this critical stretch for e-commerce.

5. Customer data and insights

The management of data related to operations, service levels, customer habits and preferences... if integrated, brings efficiency to the entire value chain, while providing a better customer experience that directly impacts on an increase in sales and profit margin for the company. It is essential to define a data strategy aligned with the business strategy, taking into account the most appropriate architecture, management model and data consumption for the particular case of each company.

The present of retail is exciting because decision making, in terms of customer experience, is increasingly based on a deep understanding of the customer and their context. This (data-driven) knowledge is generated in the most absolute omnichannel. An omnichannel approach that aims to be transparent to the consumer because, at its core, the consumer does not think about channels. They think about how to get what they are looking for, in the simplest and most relevant way for their time and context. And this is precisely where the e-commerce opportunity for the retail sector in Spain lies.