The Retail Industry
To better overcome the risk of a more and more fragmented European scenario in terms of legislation, the European Digital Initiative strategy aims to provide clear guidelines and common practices in order to align member state legislations and measures at the different industry level, retail in one of them. Geo-political events such as Brexit as well as international and supra-national regulations, as in the case of PSD2, 5G, and GDPR challenge the retail sector. However, at the same time, they also represent a concrete opportunity to ask for a more harmonized, transparent and responsible personal data management.
Business management procedures
By working together on common goals definition projects, SMEs can effectively achieve their digital transformation objectives while competing at the international level next to pure ecommerce players such as Alibaba and Amazon
In the last two years, the European Commission is encouraging digital transformation of small and medium enterprises. Under these premises, the idea is to create a retail community at the European level where small and medium enterprises can partake and share with their peers general and specific problems while supporting digital transformation. By working together on common goals definition projects, SMEs can effectively achieve their digital transformation objectives, while competing at the international level next to pure ecommerce players such as Alibaba and Amazon.
In the COM(2018) 219 – A European retail sector fit for the 21st century, the EC clearly envisaged the need for SMEs to collaborate:
“The 3.6 million companies active in the retail sector (mainly SMEs) interact with other economic sectors such as wholesalers and product manufacturers as well as transportation and logistics and other business services. A better performing retail sector will as a result generate positive spill-over effects on the entire economy.”
SWD(2018) 237 final – Public consultation on “retail regulations in a multi-channel environment” synopsis report, listed some of the requirements that European companies have to face in their the day-to-day operations. Particularly, stakeholders participating to the study conducted by the European Commission highlight the need for the EU to intervene on fragmentation issues:
- Flexible shop opening hours. This can represent, on the one hand, an additional opportunity for large and medium companies to compete in the global market. On the other hand, it would require small businesses more flexible shop opening hours for which they cannot guarantee the right instruments (and staff) availability.
- End-of-season sales, discounts, end-of-business sales. Customers looking for special offers and discounts tend to search products online. This, in turn, constitutes a concrete opportunity for SMEs to compete at the international level. According to IDC Retail Innovation Survey 2018, for more than 60% of European retailers, ecommerce will represent one of the top three revenue generation sources over the next three years.
- Specific distribution channels. This aspect specifically relates to pharmacies for selling non-prescription medicines outside pharmacies for public health and safety reasons. However – according to the Portuguese association of pharmacies – the reform in Portugal did not produce the expected positive economic effect. In particular, SMEs appears to be more reluctant to sell non-prescription medicines due to the risk of transportation and the higher risk of counterfeit/noncompliant
- Restrictions on sourcing. This refers to national regulations which limit, directly or indirectly, retailers’ possibilities to buy products from anywhere in the EU. For this reason, retailers ask for a more harmonized and coherent legal framework at the European level.
- Territorial supply constraints. Distribution systems need to be in line with competition law. Significant differences still existing between EU member states. This, in turn, the impact that those constraints have on retailers and consumers, especially concerning raising pricing for consumers while limiting the full range of products (e.g. groceries, fast moving consumer goods and medicines) that multinational suppliers can easily sell cross-borders.
- Taxation schemes. European retailers ask for national regulatory frameworks that provide equal treatment between online and offline retail. With a specific focus on regulations in the ecommerce sector to reduce the risk of frauds.
- Compliance. Implementing legislations on data protection regulations, environmental taxes, consumer rights regulations, packaging taxes/fees, restrictions on sales periods requires SMEs to invest on time and sources.
The Commission proposals on geo-blocking, cross-border parcel delivery services, modernization of the VAT system, digital contracts rules and the forthcoming initiative on on-line platforms will help retailers to seamlessly operate on-line as well as offline while overcoming national and local frictions (see COM(2018) 219 final for more details).
Proposals on geo-blocking, cross-border parcel delivery services, modernization of the VAT system, digital contracts rules and the forthcoming initiative on on-line platforms will help retailers to seamlessly operate on-line as well as offline
As reported in COM(2015) 550 final – Upgrading the Single Market, more opportunities for people and businesses, the Commission focuses on “set[ting] out best practices for facilitating retail establishment and reducing operational restrictions in the Single Market”.
Among the practices suggested at the EU level there is specific focus on the following points:
- Data collection and analysis enabling retailers to monitor major retail-specific trends and development. However, managing the right data represent an important challenge for retailers. This, without excluding the substantial relevance of public databases provided by public institutions and local associations such as Chambers of Commerce. By using structured and unstructured contextual data and innovative enabling technologies, retail organizations can significantly improve sales, operation KPIs, as well as the customer experience.
- Marketing campaigns and, more specifically, content definition is a central dimension that retailers have to consider for personalizing marketing campaigns. Related to this, social media and online search engine are central interfaces. According to IDC, retailers have exerted effort to become more relevant to customers’ location.
- Facing the global demand for digital talents, retailers need to digitally transform culture, organizational structures, and accessibility to actionable information, synchronized around company and customer journey. The retail workforce transformation has many dimensions, among them there is the to support skills development through training and workshops on the usage of mobile devices. In other words, as the customer changes, the workforce needs to respond, from staffing level to engagement techniques.
- Sharing best practices and main challenges among European retailers is the central step to overcome major problems that businesses face during the DX journey. A broader dialogue among retailers – as well as the direct involvement of local actors – allows to set the basis for creating strong networks in which different partners can share ideas, responsibilities of common project. At the same time it an opportunity to organize events and contribute to the creation of online platforms where everyone can collaborate. For instance, in certain commercial areas, local authorities can also promote the creation of Business Improvement District (BID), where SMEs can participate.
- Investing on digital tools such as 5G and Wi-Fi connection in private and common areas, social media presence as well as on physical infrastructures to enhance and ameliorate the quality of the shopping experience. Important, in this case, is also financial support provided by local stakeholders in order to minimize costs and increases returns.
- Retailers can re-define their business model by prioritizing innovation missions with the assessment of their business innovation maturity level. The introduction of new technologies (e.g. Artificial Intelligence / Machine Learning foundations), the integration of new solutions to existing ones, the direct involvement of SMEs and tech startups, facilitate the innovation process in retail and encourage the creation of partner ecosystems. Moreover, ecosystem transformation is essential for customer experience transformation.
The EC identified successful stories while suggesting the best practices retailers and, particularly, SMEs are expected to follow. Under the principle of “Think Small First”, the EU promotes and finances small and medium entrepreneurship through the “Start-up and scale-up initiatives”
The EC identified successful stories while suggesting the best practices retailers and, particularly, SMEs are expected to follow. Under the principle of “Think Small First”, the EU promotes and finances small and medium entrepreneurship through the “Start-up and scale-up initiatives” and the capillary presence of networks, such as [companies] Europe Business Portal, Enterprise Europe Network, SME Internationalization support, portal on Access to Finance.
In Portugal, good examples of this are the cases of
- IshopBraga: an online platform launched in 2016 that supports the municipality of Braga in facilitating the entrance of local enterprises in the global market
- And the Academia de Commercio de Lisboa that, in collaboration with private actors, launched a pilot aiming at supporting local enterprises with workshops and local initiatives on best practices and legal advice on business development and digital transformation.
Furthermore, local strategies need to be supported through adequate incentives by legal experts and institutions that have also encourage peer-to-peer exchange.
The European Commission is working to set up the basic standards and guarantee a convergence among IoT devices and services used anywhere in the EU. In retail, this means that measures related to data ownership, rules on access and re-use of non-personal data would aim to create a trusted IoT cloud and, subsequently, an IoT ecosystem demonstrating compliance to current privacy and security standards. Particularly, the Commission has identified four steps of evolution of the Internet of Things:
- Data driven innovation in vertical sectors
- Actuation and semi-autonomous behavior based on smart connected objects
- Data exchange and service creation across large vertical applications
- The age of the digital nature
Retailers are expected to redesign the whole value and supply chains, including connected sensors to collect data from objects (e.g. a car, a phone etc.), integrating device- and service providers to deliver IoT solutions – e.g. at home, in cities, between industries. This, therefore, would imply for retail companies to define the basic design – and the related technology – that is intended to meet the needs and preferences of customers.
Furthermore, a great potential to change business models and value chains is represented by 5G –i.e. the next (and fifth) generation of wireless networks able to go beyond current 4G LTE networks. Companies may need data connectivity not only internally to their own organization – aiming at better managing their operations – but also by embedding it within the products and services offered to their customers (such as connected devices and products leveraging AI technology).
Data protection really matters. The European effort to harmonize data protection across industries and countries has been very clear, especially after the entry into force of the new EU General Data Protection Regulation (GDPR) on 25 May 2018. Under the GDPR, companies need to adequate their policies to the principles of confidentiality, transparency, data minimization, appropriation, authorization. According to the GDPR, businesses needs to appoint a data protection officer, responsible for monitoring GDPR compliance and support internal enquiries. However, this would affect companies with fewer than 250 employees unless these process personal data as a regular activity. All companies need instead to respect and implement all other requirements that are explicitly listed by the Commission:
According to the GDPR, businesses needs to appoint a data protection officer, responsible for monitoring GDPR compliance and support internal enquiries. However, this would affect companies with fewer than 250 employees unless these process personal data as a regular activity
- Establish documentation processes for handling personal data
- Set up a list of processing operations
- Establish communication methods for any customer inquiries on data protection
- Consult with the head of [companies] technical department and the data protection officer to determine whether the current technical measures for data protection are sufficient. Under certain circumstances, further measures may have to be undertaken or existing measures may need to be better integrated into the IT infrastructure
- All personal data collected which violates the coupling of consent rules must now be collected differently and seen as voluntarily provided data
- If [companies] have commissioned external service providers to be in charge of handling [companies] company’s personal data, [companies] should clarify with them whether the agreements made correspond to the data protection reform. If necessary [companies] can adjust the agreements to the new specifications. Check how [companies] obtain the consent of [companies] customers in [companies] online shop and adapt the procedure to the GDPR
Under the principle of “Think Small First”, the EU promotes and finances small and medium entrepreneurship through the “Start-up and scale-up initiatives”
- Stay up to date when it comes to e-privacy regulation. This will legislate how online retailers deal with analysis and tracking tools in the future.
- If [companies] are at all unsure about anything, make use of relevant professional advice
This, in turn, would require companies, especially SMEs, to invest in the short-term part of their budget while concentrating technical expertise. IDC reports that only 29% of European small businesses and 41% of midsize businesses have taken steps to prepare for GDPR. Among non-European SMEs, the share of prepared firms declines to 9% among small businesses and 20% of midsize businesses.
Finally, on the European Cloud Initiative, the Commission estimates that Horizon 2020 funding as well as other public and private investments – of €6.7 billion – will be allocated to the European Cloud Initiative in the period of 5 years. The aim of this initiative is to enforce competitiveness and cohesion among companies across different industries and segments by guarantee free access to data-drive innovation researches. Under this initiative, the European Data Infrastructure (EDI) will provide access to researchers and professionals to the European Open Science Cloud (EOSC) through adequate networks and supercomputers capacity in order to share, store, and use big data and information. This initiative represents a good opportunity for SMEs and startups to use fresh and updated data for R&D and innovation projects. Moreover, to solve complex computational problems, scientists, engineers and financial analysts can use High Performance Computing and quantum technologies and, together, collaborate to develop a High Performance Computing ecosystem based on European technology.
On the Communication “A European retail sector fit for the 21st century” COM(2018) 219 final, please see: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018DC0219&from=EN. ↑