When giving my Marketing lectures, there is something I always tell my students: There is nothing in life like Competition. Competition, when it takes place under fair conditions, takes the best out of people and companies: Creativity arouses, think different approaches become a must, customer orientation becomes essential and eventually, new values propositions arise. On the other hand, the lack of competition makes people and companies lazy, accommodated and ultimately, inefficient.

Having said that, let me bring in these questions and think about them:

  • Is the European Retail competitive?
  • Do we really have a European Retail Market?
  • What is the status of the e-commerce in Europe? Is it really promoting competition?
  • What are the barriers behind those results?



I know that the answer could change industry by industry but, in general, I would say that we are not that competitive and still need to work hard on building a real European retail market, in which e-commerce plays the right role.

Let me start with the latter and share some figures from  Schumpeter at the Economist:  A mere 3,4% of Europe´s products and services are sold via the web, compared with 4,6% in the United Stated, and only 8,8% of European e-commerce flows across borders. Moreover, as the article explains, there are huge price differences per country in some countries (with price gaps between countries as high as 40%), and some big Retailers like Carrefour are desperated looking for new ways to grow and differentiate.

What are the causes behind this?

Why are not retailers evolving and coming up with new market approaches?

Why don´t e-tailers boom and conquer the marketplace?

The response is complex but let me touch on some of the key points:

  • The large retailers do not seem to have faced a really competitive environment till the crisis showed up. They have been basically pushing an abc strategy consistently implemented across the entire industry.
  • Those large retailers have not looked consistently for new ways of innovation. They have of carried on limited incursions into the e-commerce and new formats, that seemed to be more an excuse than a real search of new value propositions.
  • The governments have also limited the room for innovation and competition by imposing trade restrictions to the deployment of new retailers (for example, the restrictions that hypermarkets have found in several countries), on the product portfolio to be commercialized by some retailers (take for instance what has happened in Madrid with the “chinos”) and the opening hours (trade is usually forced to closed on Sundays in most countries).
  • The european market is still not behaving as a unique one, and retailers are dealing with a huge bunch of local regulations and taxation, that make the expansion unrealistic or unsustainable.
  • The consumers have traditionally being scared of trying out new retail formats such as the one offered by e-etailers, in spite of all the new technological infrastructure available.



However, as you are aware, the crisis has accelerated change and customers are now looking for something else, be it best price, best service , new value proposition or a combination of all of them.

The result has been a higher than expected market shrink in which only retailers that are doing something different (like Pixmania in consumer electronics or Mercadona with its private label strategy) are being able to grow.

Time to change therefore. The Regulators will hopefully support the transition, introduce incentives for competition and internationalization and push change.

A new marketplace is on its way. And  if European retailers do not evolve, American or Asian competitors will certaintly take their place. Evolve or die!!!


Ignacio Gafo

Sponsorized by:
Volvo - Marketing blog


Raúl del Águila February 8, 2012 - 9:36 am

If you take a look to Alice.com then you’ll realize that there are oportunities in the retail sector, both in Europe and in Spain. But we must be aware of the rule’s change in the consumer experience.

Jonathan February 17, 2012 - 12:28 pm

I think consumer behaviour has a lot to do with this, particularly in Spain. Until consumers demand more from retailers, they have little incentive to improve. Awareness is a big issue, many consumers do not even consider e-tailing channels, either through ignorance or out-dated concerns over the security or convenience. How many people have taken advantage of something like Pixmania? Their prices and offering seem to suggest they do not have the scale to compete with Amazon UK (who offer free delivery to Spain!), or have not felt it necessary. One hopes that the arrival of Amazon España will energise this market here in Spain. As I consumer I do not care if the company is European, American or Asian, I am not prepared to pay 40% for the privilege of a generous returns policy on the limited product range offered on the high street.

Juan Pablo February 17, 2012 - 2:17 pm

I wonder how much is the ROI on Pixamania, will it work in the long term? nice to have but…

Ignacio Gafo February 19, 2012 - 6:09 pm

@ Juan Pablo: I do not know the figures from Pixmania. However, you need to take under consideration that they work with relatively small fixed costs. Would be great anyway to see those numbers…

@ Jonathan: Fair point. We do need more competition and customer education in Europe and particularly Spain! People do not know what they are missing + what they can get through alternative retailers. Amazon could do that job, but they will need to push further. They will need to do so in order to beat the new company created by Telefonica, together with Berteslmann and Planeta.


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