Home Shopping Opportunity Missed
A new report on Home Shopping from Mintel's Retail Intelligence argues that retailers are missing out on a big opportunity in home shopping. However, the study finds the European home shopping sector continuing to lose retail share, with the few areas of sector growth failing to offset the slow declining big book mail order sector.
While overall retail sales are predicted to grow by 16% between 2000 and 2005, mail order is expected to show an increase of just 8.2%, representing 2.7% of total retail sales in Europe by 2005. British shoppers are spending more per capita on home shopping than any other European country.
Although the report confirms consumers' positive attitudes towards new technology in home shopping, Mintel does not believe there is enough new and better about the Internet to transform home shopping or slow down decline. The report argues that there is insufficient emphasis on developing specialist, niche catalogues and retailers – offline and online alike, are not fully using the opportunities of multi-channel retailing.
Against a generally buoyant retail market, which is expected to show a growth of 16% between 2000 and 2005, home shopping sees its market share declining. Mintel estimates the home shopping sector in Western Europe is worth euro 55 billion, accounting for 2.8% of all European retail sales. The biggest markets for home shopping are Germany, the UK and France. Germany alone accounts for 36% of all home shopping spending in Europe and its home shopping market is bigger than the next two, France and the UK, combined. In terms of per capita spend, however, the UK leads with an annual per capita spend of around euro 242.
A breakdown of the home shopping market shows mail order is still the dominant form of home shopping, although its market share is declining in almost every country in Europe. Mail order fares best in the cold countries of the North. Inadequate and unreliable postal services are often quoted as the reason for poor take-up of mail order in Southern Europe, however, Mintel finds the climate argument and its impact on the nature of the retail structure are also an important factor in accounting for the geographic differences.
Prospects for mail order are, however, more encouraging in Southern Europe. In Spain, for instance, there is a very strong bias to younger age groups and the middle mass market, suggesting mail order still has a more fashionable image.
Although a relatively new area, the television shopping market is already looking overshopped in many countries, particularly in the UK where digital TV has taken off most strongly, and Mintel expects to see many casualties. Television shopping will remain a niche area, which Mintel Retail Intelligence does not see as having the potential to become a major home shopping channel.
The online retail industry has weathered a tough few years with the demise of many pure-play e-tailers, it still represents a tiny proportion of retail sales in every country in Europe. Even so, e-commerce is growing – partly because mail order companies are actively encouraging their customers and agents to use the web, rather than mail or telephone, as their main way of placing orders. Mintel argues that e-commerce is really no more than an alternative to catalogue shopping and does not expect its market share to increase substantially in the near future. Building a thriving retail site on the Internet is every bit as hard as creating an exciting store environment. ‘The cost of constantly keeping a website name in front of the public is huge. A shop has its fascia and shop window. The catalogue lands on the doormat, but a potential customer must make a positive decision to visit a website.’ comments Richard Perks, Senior European Retail Analyst.
Mintel believes that the inability of the industry, and in particular the less well-focused big book mail order companies, to respond to consumers' new demands have contributed to its decline. Meanwhile, smaller, well-targeted catalogues are doing well, and even more so when developed in conjunction with a high street chain.
Mintel's consumer research confirms consumer acceptance towards new technolog in home shopping. British consumers show the most enthusiasm for digital TV (43.2%), followed by French respondents (37.9%). The British are again the most keen on using the Internet in the near future (40.2%), and again followed by the French (30.7%). Mintel therefore believes multi-channel retailing is the best way forward. ‘Retailers should see themselves as brands, which are promoted through every available channel of distribution. Retailers should see themselves in an enabling role allowing consumers to buy their products in the way, which suits them best’ comments Richard Perks.
The move to multiple electronic channels is being driven by the retailers' need to maximise customer service through an increasing range of access options. The retailers that will do best will be those that have a multi-channel strategy that integrates their online and offline operations, providing a seamless experience for customers. Pure-play online retailers that survived are now focusing on maintaining a foothold in the market and the most successful players are likely to merge or form alliances.
The report forecasts a steady increase in the number of alliances between successful pure-play e-tailers and traditional companies in the next few years as the industry converges to take advantage of multi-channel retailing.
