‘This correction was expected’

After corona years in which the trees seemed to grow to the sky, the number of parcels sent in the e-commerce sector is declining for the first time in thirteen years. With Black Friday and the end of the year approaching, the industry does not immediately have much to fear, but what afterwards?

Few have fond memories of the pandemic, but online store owners experienced boom years. The number of parcels and express shipments sent in Belgium increased from 232 million in 2019 to an all-time high of 365 million in 2021. An increase of 25.5 percent.

Growth could not continue indefinitely, stagnation was recorded last year. Due to the reopening of physical stores, according to the Belgian Institute for Postal Services and Telecommunications, ‘only’ 362 million parcels were processed in 2022 and there could be a significant decrease this year. Bpost sent 13.2 percent fewer parcels in September than a year earlier and several companies provided little encouraging news. Sales of fashion online store Zalando are expected to decline by 0.5 to 3 percent this year and Bol also dismissed ten percent of its staff.

The e-commerce sector is therefore taking a hit, although according to professor of marketing and retail expert Els Breugelmans (KU Leuven), it is somewhat unfair to compare the current figures with those from the corona crisis. “This is a correction that was to be expected in any case. During the pandemic, stores were closed and people could only buy many things online, but now there are more options again. There is no indication that e-commerce is on the decline.”

Inflation

In addition, inflation plays an important role: life has become considerably more expensive in recent years and people are spending a larger part of their budget on energy and other basic needs. This leaves less money to browse the range of (online) stores as carefree as before. People postpone major purchases longer and also go more looking for price breakers. According to Breugelmans, it is not at all certain whether the loss of online stores will be compensated by expenditure in physical stores. “Although the shopping streets are of course doing better now than in recent years.”

The decline in turnover figures in the e-commerce sector was perhaps expected, but several large companies are still taking a hit on the stock market. Last week, for example, HelloFresh saw its stock market value fall by 24 percent when it had to adjust its profit forecast.

According to retail expert Jorg Snoeck (RetailDetail), this has a lot to do with changed expectations of shareholders. While the emphasis in recent years has been strongly on turnover growth, investors are increasingly demanding that a profit is also made. He does not expect the Amazons and Zalandos of this world to collapse in the short term, but he does expect that they will have to do better if they want to maintain their market share. “There is more competition in the online market,” says Snoeck. Not only because more online retailers emerged, but also because traditional stores cannot simply be wiped off the map.

Before the pandemic, a strong distinction was made between online shops and physical stores, but today the two seem to be increasingly intertwined. Traditional retailers have expanded their online activities more strongly and adjusted their strategy. “The function of the store has changed,” says Snoeck.

He is talking about omnichannel retailing, where the online and offline arms of a company reinforce each other. For example, customers can come to the shoe store to explore the range and then order the desired sneakers online. This can often even be done via tablets set up in the store. The building in the shopping street is then there to strengthen the bond with the consumer. Conversely, customers can find out exactly what items they want online and try everything on in the store. “The strong division has disappeared, the flagship stores of major brands are even ways to advertise the online brand,” says Snoeck. The e-commerce sector also counts on Black Friday and the end-of-year period to make up for the gap in recent months.

Local boutique

The question then remains to what extent the local boutique that does not have an online store can survive in the future. After all, consumers are very price sensitive and increasingly seem to expect everything to be delivered to their door. Snoeck believes that there is still a place in the market for such companies, although they cannot completely cut themselves off from the internet. Customers also expect that their local store can consult suppliers’ stock to order additional products. “If they adapt to this modern way of retail, they will be fine,” says Snoeck. “People give their local trader his income and the local connection is also important.”

Finally, there are also additional opportunities for traders from some sectors who do not yet have their own online store. “The potential is often underutilized,” says Breugelmans. “For example, items from supermarkets, DIY stores and garden centers are hardly sold online. There are still gains to be made there.”