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European retailers invest in high-end web technology to accelerate sales in the only part of retail that's growing on the Continent.
Managing Editor, B2B E-commerce
Galeries Lafayette Group, which opened its doors in 1894, is known for the ornate interior and lavish window displays of its flagship Paris store. But while the company has a long history draped in bricks-and-mortar retailing, Franck Zayan, the retailer's Internet and e-commerce director, is on a mission to lead the Galeries Lafayette retail chain into the omnichannel future, in which consumers shop how, when and where they want.
"Omnichannel retailing brings more sales to e-commerce and our stores," Zayan says. "An omnichannel customer spends more than a single-channel customer."
He reports progress on several fronts. When customers "click and collect," that is, order online for in-store pickup, almost half of them buy additional products when they get to the store, he says. And about half of customers who click and collect say they do it for the convenience of shopping at home and picking up their order for free at a later time. That convenience keeps them coming back to shop again, Zayan adds.
Galeries Lafayette, like many other retailers on the European continent, is relatively new to selling online. It launched its first e-commerce site only five years ago—a site limited in the number of products it could display and its speed of processing transactions—that operated as part of the marketing department. "From 2008 to 2011, Galeries was on an e-commerce learning curve," Zayan says.
That preparatory period ended in 2011 when the retailer built a more robust e-commerce site and a new mobile commerce site, and tied them together, along with its more than 60 physical stores. It established a new business unit to oversee Internet operations, and hired Zayan, a veteran e-commerce executive who started with AOL Inc. in 1995, to run it.
Like other European retailers, Galeries Lafayette is aggressively investing in e-commerce technology in response to consumers' growing demand to shop easily online, in stores and via mobile devices, Zayan says. With e-commerce growing quickly while Europe is mired in a long recession, many European retailers are choosing pricey, high-end e-commerce software to keep from being left behind. "Since we relaunched our e-commerce site in 2011, we've been trying to grow really fast," Zayan says. "Our target is to almost double revenue every year online." Galeries Lafayette is ranked No. 210 in the soon-to-be-released 2013 Internet Retailer Europe 500, with Internet Retailer-estimated 2012 web sales of 60.1 million euros (US$78.8 million), up 8.3% from 55.5 euros (US$72.8 million) in 2011.
Online retail sales across 17 western European countries will reach 128 billion euros (US$166.6 billion) this year, up 14.3% from 112 billion euros (US$145.8 billion) in 2012, according to Forrester Research Inc. By 2017, Forrester projects online retail sales in those countries will reach 191 billion euros (US$249.1 billion), a compound annual growth rate of about 11%. By comparison, online retail sales in the United States will rise from $231 billion last year to about $262 billion this year, a rise of 13.4%, then grow at a compound annual growth rate of nearly 10% to $370 billion in 2017, Forrester says.
That growth stands in stark contrast to the dismal state of European retailing in general. Retail sales declined 2.4% in March 2013 compared to a year earlier in the 17-nation euro zone, and 1.6% in the 27-nation European Union, according to Eurostat, the EU's official statistics agency. Little wonder that there is a frantic race on among retailers throughout Europe to capture as much online sales growth as possible.
E-commerce experts say Europe's most advanced online retailers tend to be merchants in the United Kingdom, an EU country that does not use the euro. Top web retailers include John Lewis Partnership plc, Marks & Spencer plc and Debenhams Retail plc, ranked 13, 19 and 70, respectively, in the Europe 500.
These retailers have progressed far enough online to bring e-commerce sales to 20% or more of their total revenue, which has pushed them into omnichannel retailing to find new ways to ride the engine of e-commerce growth, says Sunil Oberoi, associate vice president, digital commerce and multichannel integration services, at systems integrator HCL Technologies Ltd. "They're looking for the next level of growth by going omnichannel and global," he says.
Like many of their rivals, these leading retailers largely are choosing big-name e-commerce vendors so that they can have top technology quickly, and that includes bringing web features into their bricks-and-mortar stores.
Here's a sampling of developments at several retailers:
Marks & Spencer says it is investing $400 million on e-commerce and multichannel technology projects, including migrating from an e-commerce site hosted by Amazon.com Inc. to one developed on IBM Corp.'s WebSphere Commerce platform by SapientNitro, a Boston-based global technology services firm with offices in London and other European cities. WebSphere Commerce, which experts say can cost close to $1 million in technology and services to deploy, is known for providing many customization options in how a retailer can display products and sell across multiple retail channels. The London-based 700-store chain is also building distribution centers that it says will help the new MarksandSpencer.com offer same-day shipping when it launches next year.
Working with U.S.-based Cisco Systems Ltd. and Amsterdam, Netherlands-based INDG, a software developer specializing in interactive e-commerce applications designed for mobile devices, Marks & Spencer is also testing in two of its stores large touch-screen digital display screens that let shoppers configure a room setting with images of furniture, appliances and other products the retailer sells. The shopper or a store associate can use a tablet to control the same room-planner screen and purchase the items online. Or they can save the room setting to let the shopper access it and potentially complete the purchase later from her home computer.