ANNE VIARD

PARTNER, MAZARS IN SPAIN

"Legal developments will cause significant changes in companies with regards to their data processing and protection policy..."

Digitization by its very nature requires data. May 25, 2018 is a date put into almost every online company agenda, as GDPR marks a paradigm shift in data protection and privacy. What do you think about the challenges, costs and potential benefits of this regulation?

Legal developments will cause significant changes in companies with regards to their data processing and protection policy, as well as the irruption of the DPO figure (Data Protection Officer), who will gain much more relevance than to date. Although, in some cases, certain companies may consider that this new legislation only represents an increase of costs and administrative burdens, recent cases of data breaches have raised awareness in most companies, who see that new legal developments will be a turning point to strengthen their data processing policies, increase transparency on consumer data processing and avoid reputational damages caused by data breach.

Scalability is a core aspect of SME business models. By investing in a service such as a cloud platform they can both start small, and expand as their business grows. How do you see the utilization of such platforms evolving in the future with regards to ecommerce?

A minority of ecommerce SMEs in Spain counts with specific management software used to support the ecommerce area, particularly in ICT and retail sectors. Nonetheless, most companies are undergoing a digital transformation process in order to increase competitive- ness and reinforce their customer experience strategy. Many of those companies that are following this kind of change count with online stores.

Among digitalization processes, it seems that the implementation of cloud solutions is gaining prominence. Although many companies continue being reluctant to adopt cloud management solutions, half of the companies with an ecommerce area indicate that their management software is already fully cloud-based. However, one fifth of companies that count with ecommerce services prefer to maintain their solutions on premise, mainly due to the abovementioned concern about data security. ​

The past few years have seen a proliferation of cloud-based online store platforms. Online store “plug & play” solutions allow entrepreneurs to focus on the business, instead of on the technology, count with an experienced ecommerce team, an added value not available with open source solutions, the hosting is scalable and will be able to absorb demand peaks, and being on a cloud infrastructure provides us with flexibility to be able to scale resources on demand.

What regulatory/legislative measures in Spain are currently having a positive and/or negative impact on SMEs attempting to innovate (or invest in innovation) through technological means?

In 2013, the Congress approved the Entrepreneurs Law to promote new companies’ creation, particularly by small freelance employers, and to urge the economic growth and reactivation, easing all formalities and reducing costs to create companies. Such Law allows granting express residence visas in order to attract talent, innovating business projects and investment

in Spain. Experts in international mobility ensure that the Spanish regulation favours attracting talent beyond European frontiers, at a moment when the Brexit will generate talent-attracting opportunities for the remaining EU countries. This could allow attracting European institutions and worldwide innovation centres.

When financing start-ups, Spain has gone from being an excessively banked country to trusting other financing channels, such as business angels, venture capital funds, crowdfunding, etc. Financing and credit access are matters still to be tackled, since natural persons (75% of Spanish entrepreneurs start their business without any employee) continue facing low financing opportunities. Also, Spain must focus on reducing the start-ups’ failure rate, considering that approximately 80% of new companies do not subsist beyond two years. Finally, Spain continues requiring tax policies more oriented towards the entrepreneurial and investment stimulus of small companies.



Entrepreneurs have become the core of innovation and transformation, being able to turn any idea into a business and/or start-up. Nowadays, the Spanish ecosystem counts with attractive start-ups for foreign funds, accelerators and incubators. Risk reluctance has decreased in the last few years, and failure is less and less penalized.

Despite the different goals still to be achieved, Spain has moved very much forward to be virtually aligned with other business powers. The Entrepreneurs Law, highly criticized among innovators and investors, has laid foundations and set limits to a sector that is ready for take-off.

How close is Spain to moving towards ‘Industry 4.0’, the digitization of every aspect of business? What key areas are lagging behind (related to ecommerce) and how do you believe these will be solved?

 

The majority of Spanish industrial companies are on a medium or low digitalization status and only a few Spanish industrial companies can be considered digital champions (their value chain is fully digitalized and integrated).

Regarding technologies in which Spanish companies are investing, and those that will have more potential in the future, we see that investments are being made on predictive technologies to maintain assets and products and implement digital systems to control and monitor manufacturing processes –known as MES. Meanwhile, those related to the Internet of Things are considered to have the highest projection.

Looking at the current ecommerce landscape in Spain, how mature are the digital supply chains when looking at the big players and SMEs?

 

According to data by the Ministry of Industry, 40% of Spaniards regularly perform Internet shopping, every month. 25% of them shop online once every three mon- ths, and 23% with a frequency of over three months. Du- ring the last years, ecommerce has increased in Spain by percentages above 10% per year. Thus, Spain is the fifth country in ecommerce consumption, but occupies the 18th position with regards to logistic efficiency.

Regarding big players, some of the big Spanish companies are global leaders in their market segment. With regards to SMEs, in the Food sector, for instance, there are specialized ecommerce online operators which have been pioneers in the one-day delivery of orders which remains at the forefront of the digital supply chain.

Digitalization is becoming a key aspect on the development of ecommerce companies and has started making great differences between ones and others as new technologies advance, able to fully transform the supply chain. However, many companies continue being reluctant to face changes implied by Logistics 4.0, or are anchored on the initial stages of this process. Among advances to be assumed by any logistics company, we mainly highlight the Internet of Things, IoT.

What aspect of the ‘digital supply chain’ do you believe has added the most value for Ecommerce businesses in Spain, and which aspects (such as autonomous and B2C logistics) do you see having a major impact in the future?

Consumers requires more and more customized products and services, adapted to their pace of life, turning logistics into a differential element of competition. Being able to deliver one product at a logistic cost lower that the competitor’s, on a period of time as limi- ted as possible, and increasing the client’s satisfaction, are new challenges for the logistics sector. Companies must adapt to the fourth Industrial Revolution, with a value chain focused on the consumer and a digitalization of processes affecting the whole supply chain.

Within transportation and logistics, the IoT (the Internet of Things) will be the most relevant technology in coming years. Sensors, processors and communication protocols are some of the key technologies to exploit the potential of the IoT. Through an interconnection, opening of new interfaces and algorithms, a more customized production will be ensured, as well as a more efficient shipping management based on forecast demand, stock and capital cost reduction, route optimization, client geolocation, and knowledge of the merchandise’s location and traceability, payment automatization, etc. Digitalization is leading to intelligent supply chains.

There are other technologies that, together with the IoT, allow the development of consumer-focused innovations:

  • Someofthemarerelatedtoone-daydelivery terms, even immediate delivery, and new services that promise delivery within one or two hours. While last-mile logistics are being solved with drones and autonomous vehicles, the sector is now working on last-meter logistics (who will ring the final client’s bell to deliver the product?).

    The last trend of delivery effectiveness also bets for the use of intelligent lockers, located on readily available neuralgic points for the final client.

  • Taking advantage of ‘Big Data’, for instance, to create optimized transport routes by using cloud -based technologies. The analysis of millions of data allows monitoring vehicles’ routs, products, and knowing delays as they happen, as well as locating and avoiding risks on the supply chain, such as traffic jams.

  • Using blockchain technology throughout the supply chain. Every time a product changes hands, the transaction could be documented, creating a permanent historical record of the product, from production to delivery. This would decrease lead times, additional costs, human error, etc., that are highly affecting transactions nowadays.

  • 3D printing. At least, it represents four benefits for the supply chain: stock reduction, global and long-term availability, zero transportation costs, and immediate delivery.

  • The design of new robots allows automating storage, handling, and order preparation operations. The sector is working on robots able to copy the human hand, with all sensitivity and gripping skills.

Innovation has reached logistics and has come to stay. Companies using information provided by digitalization throughout supply chains must notably improve their processes to continue being competitive and satisfying consumers, who set new game rules.

Ecommerce and omnichannel are the apexes of the logistics evolution in recent times. Nonetheless, recently, as the use of ecommerce is being generalized among the broadest layers of Spanish population,
and when home deliveries are slowly extending to less-populated areas, ultra-fast deliveries are a key competitive differential, something that places the focus further on the quality of logistic services as the true workhorse to cover the business area generated by ecommerce, led in Spain by Amazon.

"When financing start-ups, Spain has gone from being an excessively banked country to trusting financing channels, such as business angels, venture capital funds, crowdfunding, etc..."