1. The Backdrop

France is a culturally-rich country with an intricate geographical mix that is located in Western Europe, operating under a Republic, Parliamentary Democracy. It houses a population of ~65 mn people over an area of 551,695 sq. km. The domestic GDP has grown from EUR 2,075 bn in 2014 to EUR 2,161 bn in 2017 (CAGR of 1.4%) and is expected to reach EUR 2,206 bn in 2018, at a year-on-year growth of 2.1%. Meanwhile, the French population has been steadily growing and is expected to increase by 0.4% this year. The demographic mix is quite favorable, encompassing over 66.1% people under 55 years of age, with 35.8% concentrated between 25-54. A dominantly young, working population plays well towards economic growth, bringing contemporary trends in the market.

This largely factors in the upswing of digitization, which has swept through a wide range of people and industries. It is therefore not surprising that France hosts a strong internet user base of 88%, which is nominally yet steadily growing by 0.4% and is forecast to reach 89% by 2018. Just about everything and everyone is going online.


In terms of performance, France ranks 6th out of 86 countries and 3rd out of 18 EU countries on the Inclusive Internet Index, which outlines the current state of internet availability, affordability, relevance and readiness. While affordability and relevance hail strong, the country lags behind readiness and even availability to a similar extent. This means while the internet marketplace is within a reasonable cost parameter and largely takes local content/preferences into account, greater efforts are needed to encourage people to make use of the medium. Having a sound quality and breadth of e-infrastructure becomes paramount, as well as building the requisite skill sets and cultural acceptance, amidst a supportive regulatory ambit.

 

Logistically, France ranks 16th on the LPI (Logistical Performance Index), reflecting a strong customs clearance process, trade and logistical services quality, as well as transport infrastructure. Government involvement towards upgradation is also strong, with the E-Governmental Developmental Index standing at 19%, which highlights concurrent past and present investments in telecommunications, human capital and online services. However, ease of doing business can be further improved (currently placed at 31st), in order to create a more conducive environment for smaller firms. This is especially pertinent in the rising digitization spree, where various startups are headed to work upon potentially break-through innovations. Providing them an adequate amount of support and friendly practices becomes critical, in order to stay abreast of dynamically changing technology.
 

On a macro level, France is steadily moving towards developing its e-market, with the relatively young, tech-savvy population looking to embed technology in daily use. However, this opportunity can be given more ground if a sound infrastructure base is made available that helps boost acceptance and trust within e-services. Digital workers also play a key role here – i.e. people involved in creating e-awareness across the country. While overall unemployment has been decreasing in France (down from ~10% in 2016 to an expected 9.3% in 2018), the French labor market can still be refined.
A large part of this involves increasing the participation of seniors in the workplace, further skilling students & workers, as well as creating a flexible & versatile job market that hosts efficient policies in place. Proper utilization of the current demographic dividend is critical in order to further skills towards the emerging digital spree.

 

2. Bustling Ecommerce Landscape

Technological shift has taken over almost every industry, including retail. Ecommerce as a market has propelled significantly on a worldwide level, with the French e-market gaining ground.

Shopping Goes Online

The number of e-shoppers in France has grown by 2x over the last decade, comprising 23% of the population in 2007 to a projected 41% in 2018. Within this, the frequency is quite high, with over 50% of the lot having made an online purchase in the last month itself. In terms of the consumer profile, people aged 35-49 are the most active e-shoppers, comprising a 27% share amidst the entire age group. This is followed by people aged 50-64, constituting a 24% share. Hence, it is fair to say that online buying is not simply restricted to the younger generation; people across age groups are joining in the bandwagon, with majority being experienced personnel such as business leaders & managers. These people use the online channel to purchase a range of articles from a range of devices, with clothing being the most popular on both smartphones and tablets – at a 14% and 15% purchase rate respectively. This is then followed by other categories such as Health & Beauty, Travel Tourism, Technical Products and Games & Toys. Amidst this, Fashion and Health & Beauty are expected to significantly grow in the coming years, being resistant to economic downturns and gaining ground by the increased convenience, direct access to brands and lower prices the e-channel has to offer. The subscription model for Health & Personal care items further drives growth, enabling recurring purchases to be made at regular intervals.


The introduction of a range of payment mechanisms also plays well for the online shopping sphere, encouraging consumers to complete their transactions in an efficient, instantaneous and reliable manner. While the preferred payment medium is still local debit/credit cards (with 34% consumers using credit cards in 2017), e-wallets have gained strong momentum, holding 3x the users of PayPal.
This surge in ecommerce is also driven by a buzzing cross-border market, where purchasing from unknown countries has increased by 3% and purchasing from national sellers (still dominant) has decreased by 3% from 2016-17. Purchasing from sellers in non-EU countries has risen by 2%. In-fact, 75% of products purchased online in 2017 were delivered from China, along with 41% from the US. This is because consumers actively browse through French and international marketplaces, with 42% of cross-border orders placed on foreign sites. This avenue looks promising ahead as 38% of surveyed consumers plan on buying clothes from abroad (online) in 2018.

 

The Omnichannel Experience Gaining Ground

The journey of today’s consumer is far from singular; it is a complex web of multiple channels and processes, with each experience being highly personalized. Over 75% of online French retailers are click and mortar, with the country being a popular ground for e-retailers to test omnichannel strategies.


However, this demand is not restricted to sales; rather, the value chain towards the extreme end becomes even more critical, with firms making sure a proper support system and feedback mechanism is there to assist in after-sale queries/concerns. The e-channel is a pertinent medium here as 66% of surveyed consumers contact customer service via the seller’s email or website. Meanwhile, 44% call representatives up while 38% and 14% utilize instant messaging apps and social media respectively. Digital platforms have become important either way.


Players must therefore actively employ data analytics to predict consumer behavior, designing a proactive Customer Relationship Management (CRM) program to address needs before they arise. For example, presently many e-tailers have adopted a variety of features such as free shipping, quality of delivery service and newsletters to build consumer loyalty. These features will become even more prominent in the coming time as machine learning and artificial intelligence hail high for such advanced cloud-based CRM solutions, enabling a personalized, multichannel purchase route throughout.

Mobiles Becoming SMART

Online shopping is not restricted to websites. Smartphone usage is becoming more widespread with 50% and 40% of consumers utilizing their phones to access search engines and visit social networking sites respectively. Watching videos and looking up product information are quite popular.
This digital mobile revolution is beneficial for the entire ecommerce ecosystem, given that mobiles are complementary to other devices for online purchases. In-fact, ~24% consumers are using mobile devices for purchases, which is eventually replacing computer usage. This also explains why 93% and 71% of the French population utilizes mobiles and smartphones respectively, while 81% and 41% work on laptops/desktops or tablets. Phones are becoming SMART and steadily gaining appeal.
Over 50% of e-tailers acknowledge the growing impact of m-commerce as a complementary sales channel, with 75% of the population using mobiles to search for information prior to purchase, 28% using smartphones to compare prices and then subsequently 56% making purchases on merchant apps themselves. In terms of devices, Apple is the most popular platform for m-commerce, used by 41% of surveyed consumers, with “Wish” being the dominant app, with ~148,000 downloads. Majority of the consumers make these purchases from home as opposed to other public places, inherently due
to having proper internet connectivity – WiFi is preferred for such purposes as opposed to 4G.

 

Booming Social Media

In the last year, the number of active social media users has increased by 6% (56% of the population), with Youtube and Facebook accessed by 69% of the lot. This dynamically drives online shopping, with consumers sharing their product/service experiences with others on the same domain. Pages with video posts are very popular because it gives potential consumers the chance to view discrepancies (if any) between the actual product delivered and the one displayed on the merchant site.


These platforms are also used to further revenue. For example, 70% e-tailers use Facebook ads to develop sales while 56% resort to Google. The ultimate aim here is to target a large audience in one go, as people actively scroll down their social profiles multiple times a day. At the same time, players must also develop and keep a tab on their own social media pages and address any queries/concerns in a timely manner, making sure that there are more “thumbs up” than “thumbs down.”
 

Promising Market

The thriving ecommerce market holds a promising outlook ahead, with B2C turnover growing from EUR 49.5 bn in 2013 to EUR 81.7 bn in 2017 (CAGR of 13.3%), which is forecast to further increase to EUR 93.2 bn in 2018. Meanwhile, the E-GDP share of total GDP has steadily risen from being ~2.4% in 2013 to ~3.8% in 2017; it is expected to reach ~4.2% in 2018.


Along with this, ecommerce has emerged as a vibrant market for employment, generating 49,000 jobs in 2017; this could climb to 56,000 jobs in 2018, helping boost labor prospects ahead.

3. Key Challenges

Logistical Management across the Value Chain

Consumers largely utilize online channels due to the increased ease, convenience and flexibility they have to offer, surpassing territorial borders. This expectation holds true for all kinds of activities across the value chain. Within this, product delivery is one of the most critical factors as consumers want to wait very little after having paid for goods at order electronically. They demand to be able to pick up their order at the most convenient point, and at the earliest time as possible. Hence, firms must make sure to have in place an adequate web of logistical options that can address a large number of orders instantaneously. Lag times are unacceptable.


Currently, more than ~80% of surveyed consumers use and/or plan to opt for delivery to their home
& workplaces, as opposed to only ~40% choosing to collect in-store. Cost of delivery is the most critical factor as per 72% of consumers; this is followed by delivery place and speed at 62% and 43% respectively. However despite the importance, majority of consumers (66%) are not subscribed to an express delivery service. Amazon is the only leading player in this space, with a subscription rate of 25%. Hence, players need to assess the gap between these statistics, seeking out the reason for the low subscription rate (i.e. whether improvements needed in quality of services etc.) and work their way out by employing a variety of consumer-centric channels (online and offline). Not being able to meet consumer demands, especially at product delivery levels and after-sales services, can prove to be challenging in the future in terms of maintaining an adequate user base. Concurrently, doing so will also help France boost its ranking in the Omnichannel Retail Index, which lags behind at 34.
 

Keeping Fraud & Cyber Security at Bay

Security has and will remain a key issue when dealing in the e-sphere, given that many cybercrime incidents in the past have had catastrophic consequences. The sophisticated cyber veil has also made it quite difficult to differentiate between genuine and fraudulent users; even the existence of a single loop or vulnerability in an e-merchant system can easily be arbitraged upon. Hence, merchants often end up implementing very strict policies that can restrict even potentially “good” customers as well. Players in this field are often times left in a viscous dilemma – whether to limit fraud or business.
However, this does not have to be the case. Adopting and integrating a multi-factor authentication system, payment verification framework and accounts management is key. 62% of e-shoppers consider safety a priority and hence are willing to become well-verse on using advanced technological solutions such as biometrics; their main demand is to have identities and information secure.

Building upon Consumer Awareness

Providing online services is futile if consumers have limited understanding of all the options around them. Hence, firms must pay extra attention in taking adequate steps that keep consumers abreast with the latest technological trends, buying mechanisms, payment platforms etc. For French retailers seeking success (who are wishing to eliminate large time gaps between platform launches and breakthrough sales), a pivotal factor is to reshape consumer habits through new technologies and online interaction. This needs to be improved upon as currently 53% of mobile users either do not know or have not used voice command; along with this, 49% of consumers are not even used to buying with a phone. The reasons for such limited understanding needs to be deciphered and firms must act upon to make the average consumer more informed.

4. Way Forward

On the whole, digitization – specifically ecommerce – in France is an inevitable trend. Rising internet usage coupled with a young, tech-savvy population will only carry this market forward in the coming time. Artificial intelligence, robotics and big data will steadily transform the realm of data from traditional ledgers to electronic platforms, making e-sales even more paramount.


However, a key aspect that can be altered is the pace of this dynamic industry – i.e. taking extra steps to skill and refine the current labor market, as well as building public awareness on latest developments, which will further push the exponential growth of online retail.
 

Download the report: