Internet digital world European retail business facing the Storm.

Internet digital world European retail business facing the Storm. The European retail business has lived during these 60 past years several revolutions which have had a deep impact on its physiognomy and in our way of life and the society in its whole. The recent revolutions linked to the rise of internet and the digital world seem to take another step, it’s not the physiognomy of the cities which is changing anymore but the society in its whole.

Step 1: the neighbourhood businesses and the factories in Europe

Step 2: the birth of mass distribution and relocation of the production: the rise of the car industry

Step 3: the development of franchises, malls and pedestrianization of cities

Step 4:  Internet and the digital world desertification of the cities

In the 50s, right after World War 2, neighbourhood businesses are rising, the factories located right next to them are running in full swing. The consumers who are low motorized appreciate having nearby shops and so came several types of restaurants and services (Shoemakers, carpenters…) in the streets of the cities. In the 60s Europe knows a new type of business, mass distribution (mostly alimentary). France will be the first country in Europe to develop it, Italy and Germany being far behind. Visionaries buy agricultural land in the periphery of the cities and develop massive shops with massive parking. This type of retail will rise and create hypermarkets of 10 000m² and more with non-alimentary shopping mall around. These giants will have a significant power on the selling price encouraging industries to relocate first in Eastern Europe (Poland, Czechoslovakia…) and then towards Asia (China, India, Vietnam) where the workforce is the cheapest. The auto industry starts on the same time a massive development as the consumers going to these hypermarkets will be in the need of buying a car. From the seventies to the 2000 and despite the oil crises, a global boom of businesses in every distribution channel is rising. Independents shop retailers first partly destroyed by the mass distribution start to join franchises. The pedestrian city centre leads to the gentrification of the independent businesses. Shopping malls with several types of businesses rise. However, the bistros and the small artisans decrease. From 600.000 in the 60s, the number of bistros in France fell to 35.00 in 2018.  Investors buy commercial real estate which leads to expensive rent prices in the business areas of the cities. If in the early 2000 online shopping took its first steps, not every time in a successful way. The new giant is born: Internet and the digital world. The shops in the mid-cities are closing, the small towns are becoming bedroom communities, mass distribution loses its market shares and even the prestigious brands are shaking.  Internet digital world giants such as Amazon or Alibaba are the new nightmare of the traditional businesses. In France the legislator created legal barriers to protect small businesses, stop the development of hypermarkets and reduce their blackmail to have discounts and bigger margins. But at least the legislator is helpless toward the new giants. Amazon is the biggest supermarket in the whole world even if it is fully digitalized. It is also the biggest group purchasing organization (GPO) in the world. What if Orwell’s Big Brother was in fact Jeff Bezos (Amazon’s CEO)?  It is unquestionable that the typical businesses will need to invest in market niches in order to survive. For instance, some textile manufacturers are now aiming new consumers such as seniors or oversized people who are not yet comfortable with online purchases. Others fashion brands based their communication on the “Never out of stock” which means that the general products are always available. It is directly opposed to the fashion shops whose collections change every 6 months.

But what about payments? How to deal with unpaid invoices? Are the overdues also evolving with Internet  digital world? Even if strong habits are still here in countries like France, we still observe a massive change of the way consumers pay. During the 50s and the 60s bill of exchanges and checks were the most used way of payment. When, Mr. Moreno invented the smart card in France everything changed. Way before its neighbours’ countries, French people will start using credit cards to the great pleasure of mass distribution discovering a new and simpler method of payment avoiding the insecurity of checks and the complicated manipulation of cash. Furthermore, it is still evolving with the evolution of our phones with which we can now pay with. Debt collection firms have also professionalized their approach, for example, the procedure by a collector in the context of home visits disappeared. Courts have gone digital, it is now possible to proceed to an online payment of your court fees with your credit card. Commercial information has gone digital as well, offering business information at extremely low prices causing the end of several investigator’s jobs. What hasn’t changed is the weight and cost of legal action in southern Europe (Spain, Italy, France, Greece, Portugal…). Lawless zones emerged concerning low-amount debts. Debt collection firms will have to adapt to this new environment. It is likely that the dematerialisation of payments will deeply change the structure of the payments especially the supplier debit which may disappear. Businesses will have no choice but search for new ways of funding. In the first days of 2019 we face a dramatic situation mainly in France for the specialized retails like fashion or shoes. There is a massive disappearing of shops due of the fact that for many different reasons the consumers change their habits. For the mid-sized producers and the small shops there is only a future if they intensify their cooperation inventing new retail ways of selling.

In an Internet digital world retail cannot act as in the sixties or seventies, the actors must invest in perspective and prospective.

Georges Vonfelt