Retail Recap: Q1 2021 in Europe, the Middle East and Africa

Innovation abounds in Europe, while Africa and the Middle East are more nuanced in their adoption of ecommerce

Q1 in EMEA saw retail sales go down – then back up, and now (in some places) down again. Europe, the Middle East and Africa make up a large section of the globe, and just as unique as each country is, consumer behavior and the countries’ responses to the pandemic have varied greatly, as well.

P.S. We recently put together an overview of the North American retail landscape over the first three months of this calendar year. If you’re interested in that recap, catch up here.

European retail sales were pretty much in lockstep with lockdowns

The medical community sounded alarm bells about new waves and variants of the coronavirus after holiday gatherings. This led to both preemptive lockdowns in mid-December and shutdowns enacted at the start of the new year.

Despite many retailers already having adapted to the challenges of retailing in a pandemic, new shutdowns contributed to falling retail sales across Europe. The ebb and flow over the course of Q1 2021 naturally followed lockdown activity.

In the UK, January retail sales “fell 8.2% compared with December,” which was the “second largest drop on record after the fall in April 2020,” as reported by CNBC. The UK’s January footfall also decreased by 76.5% – the largest drop since May 2020. The Office for National Statistics found that sales volumes “leapt by 5.4% in March from February.” Then, in early April, “the number of people heading to shops across Britain jumped 87.8% as non-essential stores reopened.”

Germany’s Federal Statistics Office, Destatis, reported an overall 4.5% decline in monthly retail sales in January. Interestingly, the early 2021 lockdown in Germany contributed to a 31.7% increase in online retail sales. Because supermarkets and convenience stores remained open, grocery sales were up 4.3% year over year. In February, Germany noted a 1.2% increase in retail sales. However, even as restrictions are eased now in Q2, some German cities require proof of a negative COVID test before a shopper is allowed in stores.

France and Italy are riding similar waves. In Italy, sales were down 2.7% in January, then up 6.6% in February. Sales are expected to be down again, with big cities like Rome and Milan reimposing lockdown measures in mid-March. In March, France was reporting its highest number of COVID-19 cases since November, and non-essential retail stores are still shuttered.

Grocery impacted by shifting consumer behavior and innovative tech in Europe

In February 2021, shoppers in the UK broke records when they spent £1.5 billion on online groceries, according to Nielsen IQ. Nielsen also found that 41% of households in the UK used online supermarkets “at least once” in February, which was more than double the number in early 2020. This behavior continued when in March, “shoppers made 117 million fewer trips to the supermarket…compared with those fraught weeks in March 2020,” as quantified by Kantar.

With the skyrocketing use of online grocery services, some UK retailers didn’t find themselves on the receiving end of those sales. Tesco’s market share rose in February 2021 for the first time in five years thanks to its ecommerce offerings. However, Aldi and Lidl both lost share for the first time in a decade, largely because they don’t sell online, or just recently rolled out curbside and home delivery options on a limited basis.

Another interesting movement in the competitive landscape was when Sainsbury, the second largest grocer in the UK, announced plans to redeploy 650 employees in its London-based online fulfillment center to area supermarkets. Even with the rise in online grocery shopping, the retailer is banking on shoppers’ desire to return to stores.

Finally, Q1 brought attention to the tremendous amount of capital being raised by online grocery platforms and retail startups. Flink, a Berlin-based grocery delivery company raised $52 million in seed financing, as reported by TechCrunch. PYMNTS also put together a nice summary of other funding announcements, reaching from the Czech Republic, Hungary and Austria to Germany, the Netherlands and the UK.

African retailers are going direct to consumer

As diverse as Africa is, a subtle “shift in mindset” has been observed in response to COVID-19 lockdowns, as discussed in a recent session during Business of Fashion’s VOICES 2020 event. Editor-in-chief Imran Amed spoke to the growing adoption of Jumia, often called the Amazon of Africa, and how the adoption of ecommerce is resembling changes that once took place in consumers’ financial behavior:

“The formal retail sector on the African continent is still early in its development…This means many brands and retailers are actually leap-frogging physical retail and going direct to consumer, just as African customers did with banks and mobile money a decade ago. Jumia is by far the biggest player on the continent, operating across 12 different countries. The pandemic has proven the long-term potential of African ecommerce, and the rise of platforms like Jumia, plus the surge in mobile payments and peer-to-peer selling, are all driving an ecommerce boom.”

Looking at sales trends specific to the first quarter of 2021, South Africa’s insights rose to the top. In January, data from Statistics South Africa revealed a 3.5% year-over-year slump in retail sales, which was “the tenth straight month of decline.” To add to the gloomy outlook, Reuters reported in March 2021 that South Africa’s retail sales were “last in positive territory in annual terms in March 2020,” noting the strict lockdown’s direct impact on retail at the start of the pandemic.

But things are starting to look up. Reuters reported that in February, South Africa’s retail sales rose for the first time in eleven months, increasing by 2.3%, with the biggest turnaround coming from the food and beverage category.

eCommerce use in the Middle East is just getting off the ground

In many places around the world, ecommerce became an easy go-to alternative when physical retailing was dialed back. Not so much in the Middle East. In fact, postal codes are non-existent in the United Arab Emirates (U.A.E.), which makes ecommerce delivery a real challenge. According to Practical Ecommerce, “Delivery companies have to resort to electronic messages to consumers, which also captures their GPS coordinates.”

Here are a few pieces of intel from Practical Ecommerce’s analysis of the Middle East’s “immature digital infrastructures and inefficient logistics,” with the pandemic in mind:

• Curbside pickup and BOPIS offerings are “generally not available” in the Middle East, since retailers have only recently launched their ecommerce presence in response to COVID-19.
• Many residents in the U.A.E. made an online purchase for the first time during the pandemic.
• Few consumers in Saudi Arabia use debit or credit cards to transact with a retailer, due to skepticism of online payments, plus the country’s conservative regulations around what can be sold online.

More to come

It will be interesting to see how retail sales continue to fluctuate as countries emerge from lockdowns and vaccination rates improve. Logic says that we’ll see growth in retail with a return to somewhat-normal life, although at a category or channel level there may be downward movement with switching behavior.

As a reminder, our North American Q1 recap is already live. Still to come, we’ll have summaries of Q1 retail dynamics in LATAM and APAC markets.