Can the success model of discount be put online?

E-Commerce FRC

In recent years the acceleration of e-commerce has brought especially Western hypermarkets under pressure by making their non-food products less attractive to consumers. Online retail is today the cheaper and more convenient alternative for buying electronics or bulky household products. This is painful for the hypermarket format as its profitability heavily relied on the high-margin non-food assortment.

The situation is very similar with discount. Non-food used to be a great contributor to a store format’s success and is now more and more jeopardized by online retail competition. The question is: can discounters that have been such a force in regular retail with full physical presence replicate their model in e-commerce?

The answer in our opinion has to be- not with the tools that it uses today. The concepts that define a discounter and give it an advantage against the competition cannot be transferred  online.

The minimalistic staffing of the stores and the organization at the expense of the “shopping adventure” isn’t relevant online.

The pace of the shopping trip that consumers get due to the discounter’s limited assortment is still sought after by consumers but can be achieved by all retail competitors through a very well structured web shop with an even larger assortment.

Nevertheless the strength of all successful discounters doesn’t limit itself to a reduced but very efficient store concept. It lies deeper within the organization: a good discounter has the understanding and willingness to ensure the greatest efficiency in all areas of the business by strict cost control and yet having the courage to experiment. Exactly this attitude is highly asked for in online retail taking into account that most retailers have not yet found a way to transfer their business online in a profitable way.

Online represents a significant challenge to the discounters traditional model, more so than it’s supermarket rival! However the smaller, tighter ranger is still an advantage and those companies with an experimental culture will find the most efficient logistic solutions.