trends and strategies of the european retail - siicex · examples of lifestyle diseases are: ......

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Trends and strategies of the European retail

Markets are continuously changing and as exporter to the EU it is important to understand what

is happening and how European market players see the future. In particular, the European retail

is an important sector that defines the trends for several products. This document provides

insight information on 8 majortrends identified for the European retail sector for the coming 10

years and theforecasts and strategies expected for the following market segments: apparel, DIY

products, food (ingredients), furniture and natural ingredients for cosmetics.

Introduction A trend is about a general direction in which something tends to move. This ‘movement’

results of influences, such as growing population, scarcity of resources, political landscape,

developed technologies, and economic changes. A

trend tells what is happening on a global scale but can

also be looked from a regionally (e.g. Europe) or local

point of view. A trend has the ‘power’ to influence the

behaviour, demands and needs of consumers. For

example, economic instability can lead to more price-

quality conscious consumers. The actual impact of a

trend depends on the size, location and characteristics

of the market.The impact can also differ from market

segment to market segment. For example, a health

trend may have more impact in the food and cosmetic

segment than in furniture.

If a trend is noticed or expected to influence the demands and needs of consumers, retailers

have to adapt their strategies to at least maintain their market shares and preferable make

profit. For companies in developing countries (DC) supplying the European market, it is

important to take notice of those trends, because they will probably been translated into

requirements that EU buyers will ask from their suppliers. On the other hand, these trends

can offer new market opportunities in the EU market.

This document provides information on trends influencing or expected to influence

European retail strategies in the following market segments:

1. Apparel

2. DIY ( Do- It –Yourself)

3. Domestic furniture

4. Food (ingredients)

5. Cosmetics

Section A provides information on the 8 major trends that are estimated to impact the

aforementioned retail segments in the next 10 years. Section B provides information on

strategies that the retail segments may choose to implement with a view to face these

trends.

Trends in and strategies of the European retail industry


A. Trends Based on large, completed surveys on trends from 2010-2020, 8 major trends have been

identified to be of relevance for suppliers wishing to export products to the European

market).1 These are:

1. Adoption of supply chain technologies

2. Changing competitive landscape

3. Demographic shifts

4. Growing consumer concerns about sustainability

5. Increased importance of health and wellbeing

6. Increase in consumer service demands

7. Increase in regulatory pressure

8. Scarcity of natural resources

It is important to understand that these trends represent the most important ones. One

major trend can consist of several sub trends that are interrelated. Trends also influence

each other and the combined effect of trends can result in new trends being identified.

1. Adoption of supply chain technologies

Supply chain and logistics systems enable retailers to produce, purchase and sell products

worldwide. In terms of effectiveness and efficiency retailer strategies can focus on:

Supply chain and cost cutting;

Information sharing and data transparency;

Collaboration, partnerships and inter-organisational communication;

Globalisation and cross-border supply chains with multi-tier structures;

Technologies for tracking, protecting and managing cargo flows (e.g. RFID, bar codes).

Example: Ahold’s new supply chain for online business

Ahold, a major multinational supermarket chain of the Netherlands, is about to test a new

supply chain model for online business with the purpose to cut costs associated with

transportation and give their online sales a boost. In this new supply chain the so-called

‘fulfilment factories’ and ‘pick up points’ play a crucial role. Especially the pick up points

can lead to considerable savings on operational costs associated with distribution as

customers themselves have the option to pick up their groceries purchased online.

Retrieved from website G1, December 2011

‘DC’ stands for Distribution Centre

1Example of sources used: 2020 Future Value Chain - Building strategies for the new Decade (link),

Retail 2020 - Re’Structure (only available in Dutch) (link) and The Consumer goods forum “Top of Mind

2011”.

http://www.gs1.nl/opinie/rubriek/nieuws/462-aholds-nieuwe-supply-chain.html

http://www.futurevaluechain.com/downloads/

http://www.retail2020.nl/websites/cbwmitex_retail2020/docs/Rapport_Retail2020.pdf



2. Changing competitive landscape

Moderate growth with inflation and insecurities lead to cautious consumers. As a

consequence retailers need to find strategies that allow them to differentiate from their

competitors within their retail segment. Strategies can relate to:

Availability: Related to the activity-square metres ratio, locations and opening hours.

Benefits: Consumer loyalty programmes, including special discounts, promotional

offers, awareness of products and services and third-party offers.

Features: Service.

Price: High-end pricing, low-end pricing (hard discounts), medium pricing.

Quality: Branding and private labels.

Variety: Merchandise range

3. Demographic shifts

Demographic shifts (changes is the composition of the population) determine essential

aspects of retail as they influence or change consumers’ needs and demands. Demographic

shifts open up new niche markets and can require retailers who do not want to loose

market share or want to expand their business to start new brands, widen or deepen their

product assortment, adapt their pricing philosophy and service policy and change the

design and layout of their shops and commercial signage.

In Europe, demographic shifts include the following sub trends:

Aging population: There is a large number of older people already. Moreover, life

expectancy keeps growing in Europe and the fertility rate is staying low. This sub trend

is expected to have a significant influence on retail as it is a long term trend. This

group has a high purchasing power and thus an interesting target for the retail. Needs

of older people include, for example, healthy products, readable product information

(labels) and comfort/leisure. This group is often loyal to brands and quality is an

important purchase decision aspect.

Increase flow of immigrants:Europe attracts large numbers of immigrants, including

people from lower developed and developing countries wanting to escape from

poverty, natural disaster, oppression or war situations. Since the accession of Eastern

European countries (e.g. Poland, Romania and Bulgaria), important movement of

population within Europe takes place. People from the ‘new’ European countries

moved and are moving to the more established parts of Europe (Northern and Western

Europe). Needs of immigrants can, for example, include demands for ‘ethnic’ and

exotic products, but also other kind of services.

Increased urbanisation:Urbanisation is a global trend. Urban consumers tend to be

more daring, liberal, tolerant, experienced and more prone to trying out new products

and services. As well they do not want to travel a long distance to buy their products.

Other sub trends identified are: the increase of smaller households(especially increasing

the demand for discretionary purchases, such as domestic items and household appliances)

and; the increase of young people becoming independent.All sub trends result in a less

homogeneous population in Europe and thus more opportunities in niche markets.

4. Increased importance of health and wellbeing

Health, safety and wellbeing has increasingly been important in Europe for some time and

will likely become more important due to the increase of ‘lifestyle diseases’. Lifestyle

diseases are diseases which frequency seems to increase as countries become more

industrialised and people live longer (see trend ‘demographic shifts’ as this is the case in



Europe). Examples of lifestyle diseases are: cancer, diabetes, heart diseases, asthma,

obesity and depression.

The result is that consumers in Europe will adjust their lifestyle (e.g. diet, leisure) leading to

changing demands in personal care categories (including healthier foods, probiotics and

neutraceuticals, beauty and mood products), technology-advanced products and easy-to-

use consumer solutions (e.g. assisted living products for older people).In this perspective

design and innovation can become an important competitive differentiator for some

market segments (see example Philips), as well as other marketing aspects, such as product

information and product labelling (see example Tesco). Consumers who pay more

information on the health and safety aspects of product will want to be able to make

informed choices.

Example: Product development and marketing by Philips

‘The newly designed Philips Wake-up Light is an innovative light simulator that gently wakes the body in the early hours of winter mornings, ensuring a sense of relaxation and well-being.’

Retrieved from website Philips, December 2011

Example: Product marketing and labelling

“Spot our new health logos at the top of packs”

“Look out for new Healthy Eating ‘wave’ design on the front of Tesco packaging. Designed to make it easier for you to make healthier choices, a Healthy Eating wave immediately tells you a product is better for you and your family as it meets strict nutritional guidelines for fat, saturates, salt and sugar.”

Retrieved from website Tesco ‘About Guideline Daily Amounts (GDA)’, December 2011

Example: UK Public and Private initiatives for healthy food

The UK government have recently launched a nationwide campaign to help supermarkets

to plan affordable healthier meals. Change4Life’s (initiative to promote healthy life) with

its “new super meals” campaign will offer money off healthy ingredients, such as fruit and

vegetables and low fat yoghurts, across over a thousand supermarket stores in the UK.

Further, Asda, Co-op and Aldi supermarkets have signed up an agreement to offer

discounts on products such as fish, fruit, vegetables and fish.

It is also likely to increase the awareness for the wellbeing of the planet requiring more and

new energy & environmental technologies (e.g. energy efficiencyand cleaner technologies).

Finally, political pressure can accelerate this process as national governments need to deal

with potential political risks of a burdened health care system.

5. Increase in consumer service demands

Technology adoption requires new service models, offered via the internet and moving

beyond selling individual products. Consumers will expect and demand services 24/7.In

Europe the increase in consumer service demands includes the following sub trends:

http://www.philips.com/about/company/businesses/consumerlifestylehighlights/index.page

http://www.tescorealfood.com/our-food/guideline-daily-amounts.html



Individualisation/personalisation: International trend watchers see the

individualisation, focusand personalisation of products and services as a promising

retail strategy for the future. Modern EU consumers are confident, mobile and well

informed. They have individual wishes and needs and demand to be taken seriously.

This not only applies when buying special products in specialty stores (niche markets)

but also for everyday shopping in supermarkets or department stores. This demand is

already met by some product providers. They can also involve their customers actively

in the design and specification of their products2 (see box below for examples).

Example: Personalised products

Some fashion and shoe manufactures allow customers to choose the colour, shape

and decorative design of their new shoes online (e.g. Nike).

Ritter sport, a German chocolate company, opened a store in Berlin where visitors can

have their chocolate prepared by chocolatiers based on their own ideas and thus

experiment with new flavour variations (link). Also muesli buyers can have their mix

created and delivered by an online provider in the UK (link).

The IKEA family live programme allows consumers to share their own furniture

creations, give home decoration and home furnishing tips and interior design advice,

rate their projects, etc. (thus working as an online IKEA show).

Mobile phones, computer game consoles and even small cars can be adapted to suit

personal tastes and moods by means of exchangeable covers or panels.

E-commerce: The exponential growth and adoption of consumer technologies drives

new levels of services demand by consumers. Web-based services have given

consumers greater choice of shopping options and has improved transparency. In a

12-month period in 2009/2010, 40% of EU consumers purchased products and services

online. Between 2005 and 2010 this figure doubled from 20%. This growth mainly

occurred in countries where e-commerce was already widespread in 2005. Moreover,

consumers in Southern and Eastern Europe are much less likely to purchase products

and services online. Internet access via computers, mobile phones and tablets is a key

facilitator. Online purchases are more directed towards the domestic market of the

consumer. In 2010, of all making online purchases, 23% did so from a seller based in

another EU Member States.3 Even less from a non EU country.

Example: E-commerce leads to multichannel integration

Separation between different channels (cross channels) can disappear via e-commerce. For

example, Dutch supermarket concern Ahold sells groceries through their supermarket

chain ‘Albert Heijn’, personal care products through their store format ‘Etos’ and wine and

other alcoholic beverages through their store format ‘Gall & Gall’. IT and internet made it

possible to opt for a single online web shop through which products of all three channels

can be purchased.

6. Increase in regulatory pressure

Regulatory pressure presents the extent to which regulators (governments and economic

areas) threaten or actually limit a company’s operations based on their overall performance

2The so-called ‘prosumer’. A prosumer is an individual who not only acts as a consumer but also

decides how the product looks or tastes. - Retail 2020 - Re’Structure (only available in Dutch) (link) 3From ‘Consumer behaviour in a digital environment’ of DG for internal policies of the European

Parliament, Policy Department A: Economic and scientific policy (2011) – (link)

http://jump.dexigner.com/news/4749

http://www.lighting.philips.co.uk/projects/ritter_sport_flagship_store.wpd

http://www.healthysupplies.co.uk/muesli.html

http://www.retail2020.nl/websites/cbwmitex_retail2020/docs/Rapport_Retail2020.pdf

http://www.europarl.europa.eu/document/activities/cont/201108/20110825ATT25258/20110825ATT25258EN.pdf



or certain type of performance (e.g. environmental performance) and the extent to which

they define the characteristics of products. There are a few issues that are increasingly

and/or regularly put on the political agenda for discussion within the EU. These are:

Animal health Occupational health and safety

Biodiversity Subsidies

Energy consumption Social and worker issues (e.g. employment standards and unionisation)

Emissions Taxes

Food and product safety Traceability

Import quota Use of natural resources

Import tariffs Waste

Information disclosure/labelling

7. Growing consumer concerns about sustainability

Consumers are more aware of what products they buy and what they consume. They are

better informed (due to internet) and want to be better informed about products, processes

and stores. Furthermore, they hold retailers responsible for the social and environmental

impact of the products they sell, the production processes used, who manufactured the

product (e.g. a company which is known for violating environmental regulations) and

where the product comes from (e.g. does the product come from a country where child

labour is known to take place). Growing concerns about sustainability require retailers to

develop new strategies, such as:

Innovation: Develop, potentially together with suppliers, new and improved products and production processes.

Choice influencing: Marketing strategies with product labels referring to some sustainable theme, such as ‘efficient’, ‘environmentally friendly’, ‘fair (trade)’, ‘healthy’, ‘locally grown’, ‘low impact’, ‘organic’, ‘sweatshop-free’, ‘sustainably sourced’.

Choice editing:Removal of “unsustainable” products and processes (in partnership with other actors) or alter the composition of traditional products (e.g. reducing the amount of fat, salt and calories).

8. Scarcity of natural resources

The growth of the world’s population and a rapidly expanding middle class in low- and

middle-income countries with purchasing power have implications for price and

availability of natural resources, like energy, water, natural ingredients and material and

food.Retailers who want to stay on top of this trend need to explore and refine their

product designs, production processes, packaging materials, transportation, impact of the

use of the product and its recyclability.



B. Strategies

Drawing up a solid strategy highly depends on the retailer’s objective for the coming years.

Business in general and most retailers aim to maximise long-term profits. Once determined

its objective, retailers will start to conceptualise and apply strategies that enable themselves

to achieve their long term objectives. This section advocates potential strategies identified

in the different market segments.4

4This section is mainly based on interviewed carried out with representatives of European or national

associations of the sector covered in this document.



1. Apparel

With a view to the CBI target group, CBI has selected the following product groups to fall

under the scope of the market segment ‘apparel’:

Body wear Leather clothing

Knitted and woven clothing Babies clothing

Sports clothing

Trends Strategies

Adoption of

supply chain

technologies

Due to an expected market shrinkage of 5-10%, less retailers and

suppliers and an expected growth of the online sales, activities will be

bundled and collaboration will increase in the future supply apparel

chain. The location of stocks is also expected to move down the supply

chain. As a result more horizontal collaboration between retailers is

expected. Creating effective vertical collaboration and a realistic supply

chain strategy is key for producing countries in the coming years.

Focusing on the cross channel consumer, who combines on- en offline

channels and who will be the largest consumer group in 2015, seems a

sound approach.

Changing

competitive

landscape

Quality, price and availability of products will stay three factors that are

leading the competitive landscape from 2012. The proportion of sales of

goods under own label is expected to increase to 16-20%. The consumer

will stay “King” and can get every article for every price. Adding the

expected increase in horizontal and vertical collaboration indicates how

the competitive landscape will change. Suppliers can react by becoming

logistically more flexible, with shorter (production) lines and quicker

responses to the market. Sharing knowledge, developing marketing

programs and a consumer view together with retailers can result in a

‘win win’ strategy for the future.

Demographic

shifts

Aging population, increasing urbanisation and smaller households are

three main drivers for the future in Europe. Aging population will

demand different product groups and a different type of marketing.

Increasing urbanisation will create under- and overpopulated areas for

households and retail. The expected population growth is round 3 % in

the following 10 years, of which 80% will be ethnic. Also the number of

one person households is increasing which creates extra pressure on

(marketing) expenses. All of this results in a more diverse consumer

group with different ages, ethnic backgrounds, compositions and with

different needs and marketing. Focusing in or integrating these

demographic shifts in production strategies and cooperating in the

development of marketing and sales strategies in the supply chain can be

a first step for producing countries. Economic uncertainty, the market

shrinkage and an increase in online sales will also create less traffic and

will have effect on growing vacancy in shopping area’s outside A1

locations. Already being aware of different customers, households and

outlets in your production strategy might create business opportunities.



Growing

consumer

concerns about

sustainability

Influencing choice through marketing/awareness campaigns will be an

important factor in the apparel segment.Although more in food than in

non food, sustainability has landed by (female) consumers. Fashion

retailers need to get more aware of the (economic) opportunities that

sustainability offers and have to learn how to translate and use this

concept commercially. It is expected that in the future efficiency is of key

importance and around 40% of the sourced goods will be sourced

locally.

Increased

importance of

health and

wellbeing

Education, information and product development are three main items

for the apparel segment. Education and communication is essential to

make the total retail business more professional and efficient.

Furthermore new collective products and services can be developed.

Increase in

consumer

service

demands

The process of individualisation, personalisation is one important factor.

Focusing on niche markets is important in the turnover battle between

big and small retail players aiming at the same consumer. Mass

customisation appears because the interest of large consumers groups

to consume less and cheaper and because of internet. Consumer as

producer (prosumer) are interested in personalised products and are

also able to find suppliers of these kind of products(on internet). In this

way the channel from producer to consumer becomes shorter. Another

important factor is 24/7 accessibility of goods and services. Branded,

convenience, department, discount stores, e-retail (computer/ mobile),

especially E-commerce, mom-and-pop (Individual store), second-hand

and specialty stores are retail formats likely to expand in the next

decade.E-commerce is expected to be the main factor dominating the

future. The estimate proportion of sales of goods sold online within the

apparel segment is expected to grow to 20-30% in the next decade.

Increase in

regulatory

pressure

The areas of regulatory pressure of most concern (in terms of cost) in the

next decade are: energy consumption, import quota & tariffs,

information/ disclosure and labelling, traceability, use of natural

resources and waste. Potentially increasing import tariffs & quota in

producing countries will affect the export potential of a country.

Following local and EU regulations as well as (potential) regulations on

natural resources and scarce goods is important in this field.

Scarcity of

natural

resources

One expected result of scarce natural resources is increasing resource

prices. As such this is a world wide challenge that needs and will get

serious (international) attention. On the other hand it can also offer

(marketing) opportunities in the retail sector. For example due to the

price increases of cotton and environmental challenges in cotton

production, producers have partly moved to (cheaper & more

sustainable) alternatives as bamboo. Consequently, scarcity of resources

can offer opportunities, it might result in higher price and it will

probably effect the search for more flexible production channels closer

to the home market



2. DIY (Do It Yourself)

With a view to the CBI target group, CBI has not selected separate product groups to fall

under the scope of the market segment DIY. The trends and potential strategies for the

retail segment DIY are summarized below.

Trends Strategies

Adoption of

supply chain

technologies

Retail bundling in central warehouses, further collaboration in the

chain, the bundling & sharing of logistics activities and keeping less

stocks are the main expected supply chain changes. Overall the trade

costs will be reduced due to the bundling of activities. So-called supply

chain turbulence, where supply chains are exposed to external volatility

and uncertainty can also be an advantage. Turning the flexibility in

sourcing and production into something positive as the rising incomes

in developing countries creates their own markets. Producing countries

could expand to more than being just manufacturing hubs.

Changing

competitive

landscape

Price, quality and variety stay central in the DIY segment. Lifestyle is

especially important for the consumer. The future competitive landscape

is challenged around more quality and more (labelled) sustainability.

Low quality products are unacceptable and sustainable labels will be

more and more clearly defined (within the EU). In general most retailers

in the DIY segment have their own label. Currently this accounts for 20%

of the market and it is expected to grow to 50% in the next decade. Focus

on sustainable products, quality and social media appear (also)

interesting tactics for producing countries.

Demographic

shifts

A growing cultural and ethnic diversity and smaller households are

important demographic sub trends in the next decade. The first will

impact the product mix (in breadth and in depth), the latter will

influence the amount and way of packaging.

Growing

consumer

concerns about

sustainability

Innovation and influencing & editing choice are important business

approaches to promote sustainable consumption in the next decade.

Translated into practice this means new and improved product based on

less waste, less material/ input and eventually less products. Growing

awareness of consumers is increasing by increasing knowledge i.e.

through pressure groups. The items raised by the pressure groups

indicate relevant future topics. Examples of current topics are climate

change, scarcity, and sustainable agriculture. Responding to one or more

of these issues can also be a potential successful strategy for producing

countries. Currently the FSC label for wood is the only relevant label for

sustainability. The market share now is less than 2% in the DIY segment

now but is expected to grow. Around 20% is now sourced locally. This is

expected to grow to 35% in Europe. For producing countries new

opportunities are forecasted in their home and surrounding markets.

Increased

importance of

health and

wellbeing

Education, information, labelling and product development are

important issues in the future. Demands for increased importance of

health and wellbeing are also pushed through the supply chain.

Producing countries should be aware of increased demands in this field.

It is expected that the labelling of product will become more clear and

transparent. A flexible approach toward certification demands from the

EU and US is also advised. Product development is (still) concentrated on

‘making life easy’, efficiency and overall production



Increase in

consumer

service

demands

E-commerce will be the most important driver in this field. At the

moment around 3% of sales of goods are sold online within the DIY

segment. This is expected to grow to 20% in the next decade.

Increase in

regulatory

pressure

Biodiversity, energy consumption, emissions, information & labelling,

occupational health and safety, use of natural resources and waste are

areas in which regulatory pressure is expected (in terms of cost) for the

next decade. For producing countries this might imply limits to growth

sparing biodiversity and natural resources. Also international demands

for emission reduction and additional demands of consumers on health

and safety for local workers are expected.

Scarcity of

natural

resources

Using less resources is a key factor for the coming future. Government

(EU) regulation is expected to increase in the field of product disposal

and production processes. In general a trend towards less packaging and

more local goods is observed.



3. Domestic furniture


under the scope of the market segment ‘domestic furniture’5:

Furniture parts Dining and living room furniture

Bedroom furniture Seats

Kitchen furniture

Trends Strategies

Adoption of

supply chain

technologies

In the future, track-and-trace technology may become more mainstream

to determine the place of origin. Especially for timber products, this will

become more important. For example, Oxford based company, Helveta, is

developing software to track timber through its supply chain to verify its

legal source. Bar codes or RFID (radio frequency identification) tags are

attached to trees when they are in the forest and the boundaries of a

permitted area are mapped using GPS devices. It ensures that no illegally

harvested timber is introduced into the supply chain and also that timber

is not being removed through theft, as through the former paper based

systems corruption was possible.

Changing

competitive

landscape

As online sales increase, there is the expectation that the surface area of

domestic furniture shops will decrease by 30%.The economic recession as

well as the increase of online sales have formed the competitive landscape

in the domestic furniture sector into an marketing action-oriented

market. Businesses often sell their products based on once-off offers (e.g.

‘two-for-one’-offers) and consumers shift from one marketing action

towards the other. This puts margins for exporters under pressure. Some

exporters have adopted similar strategies: they offer their importers

special offers too.

Private labels are not yet very common in this market, but they may be in

the future as a response from the retailer to bind their customers to

buying at their shops in stead of following the marketing offers.

Demographic

shifts

Consumers in their 30’s are the most important buyers of domestic

furniture. As Europe’s population is ageing, this will have a negative effect

on sales. It is expected that in the next two decades, the number of people

in Europe in 20-29 age band will fall by 20%, whereas the number in the

50-54 age group will increase by 54%.

The retail landscape will change. Large compartment stores (with large

bulk orders, cheaper products) will be more manifest in the countryside,

whereas smaller shops (small orders, small stocks of specialised items,

room for niche products) will concentrate in the urban areas.

There is a decrease of households with three generations co-residing. In

Europe, this form of family solidarity is still much more widespread in

Southern countries than in Northern and Central European countries but

less widespread than in Eastern Europe. As the household sizes are

smaller, there is a changing demand for smaller couches, tables etc. Also,

there is a trends towards ‘multipurpose’-furniture, such as extension

tables and beds or couches with internal storage space.

5Made from wood and other materials (metal)



Growing

consumer

concerns

about

sustainability

Sustainability concerns in the domestic furniture sector are:

environmental friendly materials such as sustainable produced timber and

organic cotton; sustainable produced products such as the CO2 footprint;

fair-trade products and waste-management.It is expected that these

sustainability criteria will only become of substantial importance no

sooner than four to five years from now. Environmental friendly

production and ‘sweat-shop-free’ production will be the most important

factors.

Increased

importance of

health and

wellbeing

There is some attention for beds and couches that have a good effect on

healthy positioning of the body, but this is mostly in the higher segment

and for branded products.

Increase in

consumer

service

demands

Online sales of domestic furniture increase drastically. Online sales offer

buyers more consumer rights (such as the right to a full refund within 30

days of cancellation). As online sales are becoming more mainstream,

consumers are expecting the same kind of service in regular shops too.

Guarantee certificates will become more important and retailers will want

to recoup the damage from the producers.

Increase in

regulatory

pressure

From 2013 onwards, the EU will implement a new regulation regarding the

legality of timber. This law prohibits illegally harvested timber from all

countries. There are two scenarios on how the new timber regulation may

impact the market share of sustainable certified timber in the

future:1.Either European buyers will accept legal timber and demand for

more expensive sustainable and certified timber will decrease (likely in

Eastern and Southern countries).2.Or implementation will lead to

increased demand for certified sawn wood, as the price of non-certified,

legal timber will be close to the price of certified timber (likely in Western

European countries).

For textiles, there is no such regulation regarding sustainable production,

but there is an increased attention for harmful substances in dyes.

Scarcity of

natural

resources

Recycling will become more important. Currently, European retailers are

trying to prevent consumers to sell their old domestic furniture as a

second hand product, because they want to sell them new products.

The attention for sustainable harvested timber is much more manifest

than its is for textiles.



4. Food


under the scope of the market segment ‘food’:

Food ingredients (incl. coffee, tea, juices, jams, herbs, nuts, oils, rice, etc.)

Fishery products

Fresh fruit and vegetables Wine

Overall, it is expected that the market will remain relatively stable in the next 10 years,

meaning that is expected that changes will not exceed 2%. All trends will influence food

retail, however the most influencing trend is indicated to be ‘increased importance of

health and wellbeing’.

Trends Strategies

Adoption of

supply chain

technologies

Collaboration and information sharing networks seem to be most

important in food retail. Especially the type of data that is communicated

will change. Now, data on origin and delivery is associated with barcodes.

It is expected that also the content of a product will become associated

with bar codes. Especially, as manufacturers and retailers are cooperating

to establish international standards (GS1) in this area. RFID technology

has been in the spotlights for already 10 years. So far, it has not become

main stream and it is unsure how this will develop in the future.

Changing

competitive

landscape

The competitive landscape differs from EU country to EU country. For

example, in The Netherlands there are more or less three large players.

Competition than focuses on square metres of shopping area with

subsequent price pressure. In Germany on the other hand, there are a lot

of players, 50% consists of hard discount channels. E-commerce may be

big influence on the competitive landscape for many countries as it offers

new sales opportunities that are much more cheaper than square metres.

Price is and remain the most important criteria when selecting suppliers.

It can be possible that in countries where private label has won a lot of

market, the ceiling has been reached (e.g. the UK and The Netherlands).

This has mainly to do with the fact that a retail label competes with a

brand and not with another retail label (e.g. Tesco ketchup competes with

Heinz ketchup and not with Sainsbury’s ketchup). For retailers, it is

important to market their brand format successfully and much less

important to brand their private labelled individual products. The market

for private label will stagnate in these countries. In other countries (e.g.

Eastern and Southern Europe) there is still a lot of space for growth. With

regard to the expansion of European retailers to Eastern Europe and non-

EU countries (e.g. Asia and South America), retreating movements are

identified (e.g. Ahold from Malaysia and South America).

Demographic

shifts

All kinds of demographic shifts influence the food retail sector. The most

influencing trend seems to be ‘urbanisation’. Urbanised consumers want

to have easy and quick access to food (supermarkets need to be available

to them). As a result urbanised areas have made a relatively lot of m2

available for food. Aging population leads to smaller proportion (as well

as smaller households), easy-to-open packaging and readable labels.

Growing ethnic and cultural diversity will lead to the retail adopting a



more diverse assortment.

Growing

consumer

concerns

about

sustainability

Food retailers will primarily focus on making, in cooperation with

suppliers, the whole supply chain for a particular product or ingredient

more sustainable, especially the environmental impact of processes and

transportation issues (social impact to a lesser extent). Innovation will

focus more on process development than on product development.

Business decisions to improve social and environmental impact of

processes will be based on pragmatism. Access to information on a

retailer’s objectives, its suppliers, processes and accomplishments will be

very important to consumers (even more than it already is). This is also a

result of the abundance of different labels on environmental and social

responsibility labels. Organic and slow food movements will continue to

grow but remain relatively niche markets.

Increased

importance of

health and

wellbeing

The composition of products will be adjusted more and more, e.g. lesser

salt, calories and fat but more fibres. Purity and authenticity of flavour is

very important too. Moreover, within the framework of EU legislation on

the nutritional aspects more attention will be paid to clear and

informative labelling on energy, fat, proteins, sugar and carbohydrates,

including information on Guidelines Daily Amounts (GDAs).

Increase in

consumer

service

demands

Food is often a composite of many ingredients and therefore not an easy

subject for the personalisation/individualisation trend. However, 24/7

accessibility is a big issue. More and more supermarkets will open online

sales opportunities (e-commerce). Success in this area however, depends

on how supermarkets will succeed to include fresh foods in their online

assortments.

Increase in

regulatory

pressure

All aforementioned regulatory topics remain important in food retail. A

big issue is fat taxes (taxes related to the amount of fat in a product). In

Denmark and Hungary fat taxes have already been implemented and it is

expected that it will be put on the agenda of more EU countries. Fat taxes

are usually passed on the customers. Animal health used to be specifically

an issue in countries like The Netherlands but is going to be made part of

the EU agenda. Moreover regulatory pressure will be focussing on

sustainability and the environmentally friendliness of production

processes (carbon footprints, CO2 emissions). There are already some

legislations regarding the origin, the manufacturer and the processes used

(traceability of the product). With ongoing technology development it is

expect that the baseline for required origin information will be set higher,

including information on all ingredients of a product.

Scarcity of

natural

resources

Again, the food retail will focus on make processes more sustainable, find

uses for every component of a raw ingredient and possibilities for

recycling of waste and packaging will be explored.



5. Cosmetics


under the scope of the market segment ‘food’:

Essential oils Waxes

Seaweed and algae Medicinal and aromatic plants

Shea nuts and butter Saps and extracts

Trends Strategies

Adoption of

supply chain

technologies

Because of the notification requirements of the new cosmetic legislation, it is expected that collaboration and information sharing will be important strategies in the sector. Since the consumerspreference for natural and organic health and beauty products continues to grow, companies are looking for new channels to reach their target customer. This has led to a significant shift in outlet patterns towards mass market retailers where they can easily reach a much wider demographic

group. The increased demand for natural ingredients have however some

consequences that can be seen as opportunities from natural ingredients producers: possible shortage, higher prices and variations in quality and consistency of ingredients. Buyers will therefore paid more attention to raw materials specifications at the time they select their suppliers.

Changing

competitive

landscape

Due to the financial crisis consumers will seek out small luxuries in

difficult times. Products that can quickly make a difference to an

individual’s well-being and self esteem are those that are most likely to be

prefer by consumers.Also consumers will look for brands that they trust

and are in tune with their needs. Fragrance and colour cosmetics are the

most important segments in the last yearsand together with sun care

protection products are expected to have an important contribution in the

market. The awareness of consumers on the ingredients used and the

impact they produce on the environment, is forcing companies to move

forward more natural and sustainable ingredients.Eco-labels and private

labels are also moving the sector in the same direction and offer new

opportunities for producers of natural ingredients. The demand of sun

care protection products is driving as well the sector to develop new

formats ( i.e. spray instead of greasy thick creams) and broader added

value products (i.e. foundations with SPF).

Demographic

shifts

Social media is proving to be a prime opportunity to target under 25s. Also

provides great opportunities to position beauty products, in particular

fragrance and toiletries, to a male audience who is harder to engage

thorough traditional platforms. Anti-aging creams and anti-cellulite skin

care products are in high demand among the aging population of Europe.

Growing

consumer

concerns

about

sustainability

Innovation is the most common strategy used by companies to create

competitive advantages from their competitors. Around 20% of the

turnover of the cosmetics sector is gained through improved or new

formulas often with less amount of chemical and more natural

ingredients. Free-from formulas (e.g. paraben-free) have been a trend

since 2010 and it is expected to continue in this way. On the other hand,

the organic market segment is growing in Europe at aclip of roughly 20%

per year even though these products are often more expensivethen more



traditional products.

Increased

importance of

health and

wellbeing

Due to consumers health awareness companies are investing in new

products containing natural ingredients. It is therefore expected a

growing market for natural and organic cosmetics (using natural

ingredients) to replace cosmetics where chemicals are used as raw

materials. EU consumers organisations are also demanding more clarity

on when and how health claims are used. Companies of the sector

therefore are working on criteria on how to use and what kind of

information is required in order to make product-related claims.

Awareness on skin cancer and the risks associated with the exposure to

harmful rays is leading to a growing use of sun care and anti-aging

products. The promotion of positive self esteem and being confident will

be part of campaigns of the sector as a response to the critics generated

from the unreal image of beauty used for the marketing of cosmetics.

“Natural supermarkets” are also including cosmetics and toiletries in their

assortment with natural products. Natural products are also related to

higher standards of quality. This enables companies to charge high prices,

thereby injecting value into the market. The concern on health will also

result in more awareness campaigns on skin allergy and sun care

promoted by the EU cosmetic sector.

Increase in

consumer

service

demands

As other retail segments, E-commerce is expected to be the main factor dominating the future. Mobile technology is also starting to be used for cosmetic products where consumers are scanning QR codes to get information on the product and ingredients used.

Increase in

regulatory

pressure

The new cosmetic legislation of 2009 will make it easier the entrance of

cosmetics and natural ingredients to Europe because of the

harmonisation of requirements in all EU countries and also the electronic

notification system consider for all products put in the European market.

Although a ban of all products tested on animals must come into force as

of March 2013, the EU is working on a new proposal of this legislation

which will presented in 2012. The private sector and government are

working on funding new alternatives for animal testing. It is expected thus

that this deadline of 2013will be postponed. Contrary to what happened

last years, nanomaterials are now also regulated in the new cosmetic

regulation and the requirements regarding these materials are limited to

notify the presence of them whenever present in cosmetics products. ISO

is also developing a standard for cosmetics that it is expected to be

published in 2013.

Scarcity of

natural

resources

Other trends that to rise more in the coming years are a renewed emphasis on sustainable packaging to minimize waster and eco-footprint.



Producers and exporters in developing countries All and all for producers and exporters in developing countries who want to apply these

trends and make some money from the innovations they generate, it is important to ask

themselves if they have the potential to (and if so, how):

Influence or shape their company’s vision;

Inspire themselves to come up with a new business concept, new venture, or even

brand;

Add a new product or service to their product lines

Speak the language of those retailers already applying the trend.

This document was compiled for CBI by CREM B.V.

Disclaimer CBI market information tools: http://www.cbi.eu/disclaimer

http://www.cbi.eu/disclaimer

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