From bricks to clicks: The challenges of online retail in Belgium

After almost two decades of slow growth, e-commerce is finally picking up in Belgium. Last year, the 7 million Belgians who shop online spent an average of just under €1,700 each, for a total online sales figure of €11.84 billion, according to eCommerce Foundation research. In the meantime, Belgian web shops are thriving: BeCommerce, the e-commerce association, counts more than 20,000 of them. According to the latest market monitor survey of the group, about 18% of all purchases in Belgium now happen online.

This sector seems to be growing to the detriment of high street retail. More than 10% of all physical shopping premises in Belgium sit vacant today, with concentrations of up to 16% in larger cities. That's more than 21,000 empty shopping buildings that, according to property research group Locatus, won’t be housing a new business any time soon. The retail apocalypse is becoming real, and the growth of e-commerce – along with mobility issues on the way to the high street, according to retailers – is pointed out as the primary cause.

Tough competition

The biggest pressure originates from e-commerce giants such as Zalando and Bol.com, who lure in customers with next-day delivery and convenient returns policies. But at the same time, some of them are struggling. German powerhouse Zalando was doing fine for a few years, after a multi-year losing streak of deepening losses, but just one unusually hot summer seemed to be enough to reduce consumer demand and bring the company’s earnings before interests and taxes – an indication of actual cashflow – to a loss of €38.9 million for the fiscal year 2018.

There are also ethical questions about the way these companies cut their margins. Zalando offers free shipping (in some countries, such as Italy, only for purchases above a certain amount), return-friendly packaging and free returns, but it has repeatedly come under fire for the working conditions in its logistics centres and the bottom-line wages it pays its workers.

'Data is their secret weapon for the future'

Most of these problems at Zalando’s warehouses were addressed after workers went on strike a few years ago, and a German TV crew shot undercover images of their conditions. There’s no evidence of the well-documented gruelling fate that logistics workers at Amazon have to endure. But in its struggle to keep costs low, there have been unmistakable brushes with the unethical. The same goes for the logistics centres of Dutch e-commerce mogul Bol.com, where a reporter from Dutch newspaper De Volkskrant who worked undercover for five days in one of them discovered – among other things – a returns policy that wildly encourages overindulgence by customers, with goods being returned after a single use and rendered useless for a second sale.

“And yet, I believe these companies will survive,” says Bart De Waele, CEO of Ghent-based digital transformation company Wijs, who has helped several retail brands in Belgium develop their e-commerce strategy. “You can have questions about the way in which they have reached it, but they have slowly amassed the scale necessary to sell low-margin goods online and turn a profit. Data is their secret weapon for the future. Collecting data about your customers turns the common value proposition of retail upside-down. Where companies used to sell products, see which ones the consumer liked and then try to sell more of them, e-commerce players are now, in a way, ‘building’ the consumer in their databases instead of the product offering. The more they sell, the more data they collect. That data subsequently makes it easier to predict what consumers might want in the future.”

Technology and outsourcing services level the playing field somewhat, and the good news is that fledgling e-commerce shops and existing bricks-and-mortar stores have access to – more or less – the same kind of technology that the giants have harnessed. It’s becoming increasingly easy to start your own e-commerce presence thanks to thirdparty companies that handle payment, logistics, compliance and security. There are web platforms that help you build your online presence, such as StoreSquare, Wizishop and Prestashop. They can handle payments easily and securely through PayPal and SaferPay. And logistics operators like national postal service Bpost have services that cater to small business who want to sell goods online.

“If you’re not on the internet, you don’t exist anymore,” BeCommerce director Sofie Geeroms says. “I’m not saying every merchant should have their own web shop. But every retailer should consider offering their customers a choice between offline and online. You can do that on the cheap by working with existing platforms.”

Narrow margins

But even the most accessible of these things cost money, which many small businesses don’t have. Furthermore, plenty simply don’t have an online strategy. “If you’re running a typical store in a small town, where your only value proposition to the consumer is the mere fact of your presence in that location, you’re dead in the water,” De Waele says. “E-commerce players know how to reach the same customer in their home. You need to do something that sets you apart from the rest. But more often than not, the investment is the challenge. Most retailers, especially in the fashion business, operate on very narrow margins. That impedes them from making the necessary investments to take their business online. You need to build some weight to make a splash in the online world. And that’s hard to do. Most businesses simply lack the scale.”

Geeroms agrees on the strategy part. “What they need is a long-term vision about what they want to do online and how they want to invest. Small and medium-sized businesses in Belgium are more concerned with turning a profit than with growth. Now that the retail landscape has been turned upside-down by technology, many of these companies have finally made a decision. It’s not too late, but they need to invest now, and win back market share from the new players.’

De Waele and Geeroms agree that the main value proposition on which big-name e-commerce brands such as Zalando and Bol.com will thrive in the future is one that can also be harnessed by smaller companies: data. “In a sense, the large e-commerce brands are doing something today through the use of data that mom-and-pop stores have been doing for ages: getting to know their customers,” De Waele says. “When you walk into the store of a small business owner, they’ll strike up a conversation with you about your preferences, and subsequently proposes products according to them. They’ll just have to learn how to do that in the digital world.”

This article first appeared in ING Expat Time