European retail summer: Five key trends for retailers

From the cost-of-living crunch to the generational divide, the retail state of play in Europe offers plenty of insights for local retailers. Simon Porter explains.

I’m just back from an inspiring retail discovery tour in Europe. After taking in Spain, Germany, France, Netherlands and the UK, five key trends have become apparent.

1.????? Focus of retail on online marketing, pickups and delivery

It's clear how much European retailers are invested in non-physical retail.

While the trend (particularly in Central Europe) still leans toward a preference for physical retail shopping, retailers are pushing hard online.

This has, in turn, spurned a plethora of associated retail experiences around pick-up and delivery. Each market has its nuances.

In France, supermarkets Leclerc and Carrefour are leading the way in urban centres with their dark stores offering hypermarket ranges in the centre of town. More generally, click and collect locally known as ‘drives’, is offered by more than Leclerc and Carrefour and stretches to over 5,000 stores, a high number relative to the population.?

‘Leclerc chez moi’ – meaning Leclerc at my place – offers three models of click and collect – Drive solo (dark stores in rural areas), Drive accole (pick up in supermarket car park) and Pickup (instore pick up).

2.????? Application of data across all retail touchpoints

Given we’re talking about such big markets, it is no surprise there is more competition which drives both innovation and also intelligence.

The superpower of retail for the next decade and beyond is data with customer data fuelling the global rise of retail media. But it is also informing insight and intelligence that retailers are using to improve shopping experience and their margins.

For example, supermarket Albert Heijn, one of the biggest retailers in the Netherlands, has been using thermal imaging to track shopper movements in-store. From this, the brand learned a cohort of shoppers had longer dwell times in both food and cosmetic categories. Turns out the rise in allergy awareness has resulted in more time spent reading labels increasing dwell time.

This insight creates an opportunity for brands from better labelling and signage to creating allergy-free areas in-store. Alternatively, supermarkets could lean in and use the dwell time for increased upsell and cross-sell.

3.????? Cost of living as a change agent for the way people shop

Regardless of the market, the elephant in the room is cost-of-living pressure.

Europe is definitely feeling the pinch but there was a sense of things getting better as inflation has started to abate. However, cost-of-living has clearly had an impact. FMCG shoppers have felt the pain and there is a noticeable emphasis on value comms.

Grocery-wise, a shopping basket adjusted for currency exchange highlights how bad we have it here and must raise questions about price gauging for Coles and Woolworths. On average, we’re paying about double for a similar basket of groceries compared to the UK and Germany.

Taking it a step further – and purely for research purposes – it was illuminating to see a schooner in Sydney versus a pint in London and a stein in Berlin. All came in at roughly the same price. But, you’re obviously getting a lot more liquid for your lips in a pint and stein so again we’re doing it tough in Australia.

Research shows 93 per cent of European shoppers are worried about the cost-of-living crisis and are changing their behaviour accordingly. Changed behaviours include everything from eating in more to buying more frozen and canned goods. These are behaviours that Australian shoppers are replicating as the squeeze tightens.

Store choices are increasingly being driven by rational factors, for example: loyalty, proximity or promotions versus well-known brands, engaging staff and quality products. It’ll be interesting to see if this trend lingers as the crisis eases.

4.????? MillZ versus Boomer retailer dichotomy

A fascinating trend playing out in the culture wars is becoming increasingly relevant in retail: MillZ – the combined millennial and Gen Z cohort – versus Boomers.

Retailers in Europe seem torn between going all in with MillZ or protecting their base with the comfort of Boomers who have been less affected by the squeeze. More European retailers look to be pivoting toward MillZ.

Winning with this cohort requires clarity of purpose and emotion to cut through scepticism much more than Boomers. For example, according to the GFK purpose impact monitor, 54 per cent of MillZ value transformation purpose in retail versus 39 per cent of Boomers.

5.????? The vibrancy of on-premise

Finally, from Spain to Germany to the UK, it’s noticeable how much more vibrant the European city centres are than ours. Café culture, pub culture and a general summer mood add up to a much more impactful vibe. More people are hanging around after work and taking in the experience. This provides a real boost on-premises in these locations.

With so much pressure on this sector in Australia, it is incumbent on government and local authorities to learn lessons from our European counterparts to breathe life into such an important part of a city's culture.

So what should Aussie retailers take on board from all this?

Be relevant where your shopper is. Use data to get personal with savings. Strategize for the struggling. Be heart first to connect with MillZ underpinned by the rational to hang onto your Boomer base.

Finally, you get a lot more value for a stein in Berlin than a schooner in Sydney.

Simon Porter is the Head of Retail for media agency Hatched. This article was first published for Inside Retail in July 2024.