The growth rate of online commerce in France is expected to slow in the next few years. This is a normal feature of a maturing market, but it still means that e-tailers will need to make urgent efforts to create customer loyalty.
With more than 100,000 sites registered and €37.7 billion worth of goods sold online, e-commerce in France doesn’t seem to have been much affected by the crisis. However, this is not the view of Xerfi, a France-based economic studies institute, which has just published a report on the growth rate in the e-commerce sector for the coming years. The report predicts a gradual slowdown in growth, which may even plateau as early as 2016. In 2011 growth in online commerce was at 22%. This was quite substantial, but this year it’s set to fall to 18% and expected to decline again to 13% in 2015. On the whole this is pretty weak growth when you compare it with the growth rate of 53% achieved ten years earlier in 2005.
Crisis and competition to blame?
However, according to François Laurent, co-founder of ADETEM, the French national association for marketing professionals, this is completely normal. "The growth rate of e-commerce is declining simply because, having started from zero, it’s now entering a mature phase." Xerfi confirms this view, forecasting that the number of online buyers will be at its maximum potential around 2016-2017. Another reason for the slowdown might also be the lower levels of purchasing power among online consumers - this year the average household expenditure for a ‘basket’ of goods has fallen to €90.3 - but that isn’t the only reason. Competition has got tougher as well. The top forty players alone generate online sales which account for nearly 25% of the entire French e-commerce sector. And these are for the most part ‘pure players’ – i.e. retailers who only do business online. The report comes up with several ideas for dealing with the problem. One example relates to large distributors.
Hope for large distributors with effective loyalty programmes?
Large hypermarket chains have managed to make up some lost ground, mainly through the “Drive” concept, known in the English-speaking world as the "click and collect" service. Moreover, out of 90 major French retail chains, 70% currently have an online merchant site. The report also points out that in contrast with the situation in France, in the UK - the top e-commerce market in Europe - the majority of online sites belong to companies with physical shopping outlets. Going forward, Xerfi reckons that e-commerce sites ought to be doing more to create customer loyalty. But François Laurent insists that a loyalty drive will need to be backed up by more in-depth change. "The problem of e-commerce is that it is based solely on low prices, but creating loyalty only via low pricing just isn’t viable in the longer term," he stresses. So, "the business model needs reinventing, and needs to move from simple hard discounting to... something else." And as far as Laurent is concerned, that something else is not banal gimmicks based around cards and suchlike which anyone can have, but should be all about real quality service and added value.