ECOMMERCE IN BELGIUM

1. The Backdrop

Belgium is a culturally-rich country rooted in Western Europe that houses a diverse heterogeneous regional mix, operating under a Federal Parliamentary Constitutional Monarchy. Its population has incrementally gone up by 1.3% from 2015, currently consisting of ~11.4 mn people spread over an area of 30,528 sq. km. On the economic front, the GDP has witnessed a steady rise from EUR ~404.8 bn in 2014 to EUR ~423.6 bn in 2017 (CAGR of 1.5%), and is forecast to reach EUR ~431.6 bn in 2018, at a year-on-year growth of almost 2%. Meanwhile the demographic mix presents further opportunities for growth, given that majority of the inhabitants (68.6%) are under 55 years of age, with over 40% ranging from 25-54. This means people are young, working, and readily willing to adopt upcoming trends in digitization. It translates into the country’s strong internet user base of 88%, which is growing by ~1.8%. People are increasingly integrating the online space into daily life.

In terms of performance, Belgium ranks 16th globally on the Inclusive Internet Index, which outlines the current state of internet availability, affordability, relevance and readiness. While readiness has been consistently high (ranking 4th in the world and 1st in the EU), the country stumbles upon affordability, where it only outperforms Austria and Estonia. This means while Belgium has high internet capacity, requisite skill-set and cultural acceptance, costs are high relative to income, stemming from an uneven level of competition in the marketplace. Meanwhile, trust and safety are also poor despite having top-rated privacy regulations. These factors have to be worked upon holistically, as they can eventually hamper internet usage, becoming detrimental to the digitization drive. Administrative hurdles also need to be brought down so that it is easier for new entrants to step in. People need to have reasonable access (in terms of cost) and complete trust in the system, before they can embed it into their daily lives. Concurrently the other two factors – Availability and Relevance – would constantly need to be maintained, given that Belgium works with 3 official languages. Developing and maintaining sound consumer connect amidst a large demographic mix becomes paramount.

Logistically, Belgium ranks 6th on the LPI (Logistical Performance Index), reflecting a highly-running customs clearance process, trade and logistical services quality, as well as transport infrastructure.

However, there is still scope to spur up infra development in urban areas, raise toll gates and cut back upon company car tax breaks. Meanwhile, the E-Governmental Index is moderate at 19th, which reflects concurrent past & present investments in telecommunication, human capital and online services. This is in line with the OECD recommendation to increase public investment, which will further boost productivity and be offset by reductions in unnecessary public/private spending.

However, the ease of doing business is not too favorable, standing average at 52nd position. This puts a question on the effectiveness of Belgium’s regulatory system on smaller players, highlighting the need to integrate even more friendly policies that encourage new entrants in the system. This move is much needed in the digital industry, where firms are already competing on several parameters, such as established networking, product exclusivity, as well as big data handling. With this,

players are also required to maintain a hold on their regulatory compliance as cyber fraud has become a core topic globally. The need for a conducive atmosphere is a must, in order keep the online world up and running.

On a macro level, Belgium has an interesting trajectory towards e-development where sound infrastructure is in place, taking into account cultural factors such as content, linguistics etc. Unemployment has been slowly but incrementally falling from almost 8% in 2016 to ~7.8% in 2017; it is forecast to drop to ~7.6% this year. Nevertheless, the labor market is not up to its potential; as per the OECD, while unemployment will continue to decrease, the country further needs to open up the sphere to immigrants and unskilled/older workers so that growth can become more “inclusive”
in nature. This open supply of labor is highly critical for the development of SMEs (especially those involved in the digital market), helping them keep fixed costs at bay and talent acquisition high, as they compete amongst larger players that already have an established network of users. An open floor of competition will ultimately boost product/service quality, benefitting a range of stakeholders in the ecosystem.

2. BUSTLING ECOMMERCE ACTIVITY

The rise of digitization has substantially fueled the ecommerce market in Belgium, where people are readily making use of electronic devices and payment mediums to transact “on the cloud.” Shopping has become mobile, in line with today’s fast-paced generation. This trend will only embed further ahead.

E-shopping Billing Strong

The e-shopping market has gained strong footing, with over 60% of internet users buying online. While the average spending per buyer (which has gone up by 13% from 2015) is expected to decrease slightly this year, the aggregate amount will rise and reach over EUR ~7mn. This frequency kicks in even more quickly during the last 3 months of the year, with over a third of the purchases being 3-5 times in 2017.

The average online order can vary from anywhere less then EUR 50 to even over EUR 1,000, depending upon the nature of sale. Nevertheless, almost half of the purchases made are between EUR 100-499, reflecting a diverse mix or products/services purchased electronically. For example, Clothing & Footwear is the most popular product category as of 2017, standing at 42% of online purchases; it is closely followed by Home Electronics, Books and Cosmetics, at 31%, 21% and 18% respectively. However, the focus is more than just on non-durables; over 70% of surveyed consumers are also willing to make large purchases in airplane tickets, with over 50% ready to pay for other travel tips or venture into services in finance/insurance. Interest is expanding over various lines.

Cross Border Frenzy

While national sellers stay strong, Belgians have increasingly started to buy from abroad, with sales from non-EU nations up from 18% in 2016 to 21% in 2017. Sales from sellers in other EU nations have slightly declined by 3% from 2016-17, with 34% of the population shopping from the Netherlands due to linguistic compatibility. Meanwhile, purchasing from other countries of origin has also become popular, with various shoppers buying from other parts of Europe, the US, China and other Asian countries.

When asked why, 53% consumers state they shop overseas for a lower price while ~30% shop for increased product variety, exclusivity and range. This development stands favorably for the ecommerce market, which itself facilitates people to shop without territorial borders.

Tuning Into Logistical Variety

Having ecommerce is one thing; to have various mediums to engage in ecommerce is another. For today’s consumer, shopping online is no longer simply about buying a dress on the desktop and then paying by traditional debit/credit cards to close the deal. Rather, people like to utilize a plethora of options available to them, whether it be picking & choosing between shopping platforms, payment mechanisms, delivery options etc. For example, while over 54% and 30% of online spending takes place on laptops and PCs, other devices such as tablets and smartphones are emerging steadily; they will gain greater ground in the coming years as m-commerce becomes the contemporary way of doing things.

Meanwhile, a basket of e-payment options have kicked in such as digital wallets, mobile banking, prepaid vouchers etc., opening up opportunities for people to transact electronically. However, the activity in Belgium is at a nascent stage, with 55% of online payments being through traditional cards and only 20% or less on platforms such as PayPal. Nevertheless, this conception will change as payment processing becomes real-time, with usage of cash waning off eventually.

Delivery is also a core driver, with 55% consumers preferring to get delivered in their home during the daytime. 13% of Belgians are also willing to pay extra for faster delivery, given that this element is of sound importance. In fact, startups or less experienced firms are recommended to intently take these factors into account, knowing their local ecommerce associations, deducing what payment methods are suitable and localizing the product content to connect with a diverse mix of inhabitants. This is crucial for Belgium, given its linguistic variety. Such cultural tuning can lead to search engine optimization.

Getting Social On Social Media 

Social media has gained immense global appeal over the years, including in Belgium. It is not simply restricted to “liking” or “commenting” on personal pictures, statuses or events, but has rather become a commercial medium for users to post re- views. For example, around 65% of the population has used social media since January 2018, with over 66% of users logging onto Facebook. Consumers readily utilize such platforms to express their content or grievance with a certain purchased product/service, which can eventually culminate into shaping a firm’s corporate image in front of potential clients.

While the habit of always reading reviews has marginally declined from 44% in 2017 to 42% in 2018, the act of writing reviews has gone up. In fact, Electronics is the most reviewed product category (by 18% of consumers), which is followed by Fashion, Games, Beauty/Health by 17%, 13% and 12% respectively. Hence, this factor cannot be ignored when operating in the ecommerce sphere; players always need to maintain a strong e-identity, utilizing social media to create a positive buzz and not a complaint forum.

Surging Market Dynamics

In terms of financial performance, B2C Ecommerce revenue has seen a stable increase over the years, growing from EUR 5.4 bn in 2013 to EUR ~10.5 bn in 2017 (CAGR of 18.1%) and is expected to become EUR ~11.8 bn in 2018. Meanwhile, the E-GDP share of total GDP has significantly grown from being ~1.4% in 2013 to ~2.5% in 2017; it is expected to reach over 2.7% in 2018.

In fact, the B2B market is also adopting B2C characteristics with systems that standardize interactions across channels & geographies and raise information clarity. B2B firms are also taking steps to simplify processes and transactions, in order to increase convenience for both the buyer & seller and integrate channels/business models across the value chain. Ecommerce has evolved the traditional relationship framework where distributors are no longer “middlemen.” Their responsibility has extended throughout the process, which includes being responsible for the consolidation
of customer data.

3. Key Challenges

Dissemination of ecommerce across industries and value chains is inevitable; however, its rapid adoption also carries forward a range of issues that firm are expected to address at the earliest.

Integrating the True Ominchannel Business Model

Today’s consumer no longer demands a singular product journey, but one that is personalized, complex and omnichannel in nature. Belgian buyers are no different; close to 50% prefer webshops that also have a physical store in the country, while ~80% also want webshops to address key elements such as price clarity, delivery speed & reliability, user-friendly payment mechanisms etc. Hence, paying attention on all these intricacies across the value chain becomes paramount.

Unfortunately, many retailers fall in the pitfall of merely giving an option to shop online; this is not omnichannel. Rather, an omnichannel system is one that merges the online and offline environments, with a channel agnostic strategy that is customer-centric. A single purchase should be able to make use of multiple channels, adding value to the consumer. This is what they are actually seeking.

Getting Rid Of Security Blockages

One of the greatest obstacles of the cyber world is security, as people are very hesitant of having their personal information left astray in the clouds. Specifically, fraud is a major issue when it comes to managing transactions for both e-tailors and buyers. Fortunately Belgium is better placed in this matter, with over 91% of local consumers not having experienced online banking fraud. Nonetheless, out of the remaining, 8% have been defrauded at least once, while 1% have fallen prey multiple times. Hence, Belgium firms must take care towards eradicating this issue completely, especially when such problems end up eating a firm’s 8% revenue every year.

While technological advancement has inadvertently made fraud more “sophisticated” and easier to execute, the same technology can be better channeled to increase security and protect consumers’ data and funds. Payment channels must be integrated with an instantaneous response time, with a focus on “payment after delivery” to enable a smooth purchase journey. Building trust amongst buyers becomes key to take the ecommerce drive forward.

Rooting For the Digitally-Driven Model

In order to embed ecommerce to its core, firms must be able to redesign all business processes/activities towards a digitally-driven strategy. This calls for extensive technological integration, not simply adoption. Unfortunately, many firms simply believe in getting expensive machinery and data systems in place, without having a conducive environment to run it in or skilled- staff to take care of ongoing issues. This often hampers their development as digitization becomes an outlier to the firm.

Technology is only the enabler of digital business goals, not the goal itself. Hence, firms must be cautious in facilitating digital transformation through appropriate technological means and handling big data that is often times unstructured. Tools such as AI (Artificial Intelligence) and robotics can be used to take a more proactive approach towards understanding customer data and addressing needs beforehand; however, this can only be beneficial when such tools are integrated in the business model itself, and not in a single piece of machinery.

4. Way Forward

Looking at the big picture, ecommerce in Belgium is here to stay and grow ahead, as consumer preferences are shifting towards an omnichannel experience. Factors such as the growth of different e-payment mechanisms, supply chain models, marketing mediums etc. are complementing this trend, encouraging firms to opt for a flexible and customized purchasing experience.

The ultimate success rests itself on how well players can integrate digitization in their core business models and utilize the right technology to streamline, automate and optimize processes; all while maintaining high security standards to build trust. Having data availability is one thing, but channeling it into core value activities is the driving mantra.

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