France is the seventh-largest market for ecommerce globally. Yet ecommerce sales only accounted for around 14% of total retail sales in 2021. While that's up 15% on the previous year, it highlights the immense opportunity in France, both for local companies expanding their presence in the digital economy as well as international brands looking for new revenue opportunities.
To learn more about the opportunity, we spoke with, Jean-Marc Nourel, Country Manager, France and Ingrid Lethu, VP Sales, about the forces accelerating growth in the French digital economy.
Ecommerce in France is booming. What’s driving the growth of digital commerce in the country?
Ingrid: I don’t think this will come as a surprise, but COVID-19 has catalyzed the growth of ecommerce in France. Necessity proved to be the mother of invention for many traditional retailers, who prioritized investment in their digital sales channels. We’ve seen a vast number of ecommerce websites emerge as a result. By best estimates, more than 20,000 new web stores went live in France in the last year alone.
On the consumer side, we've obviously seen more people adopt ecommerce in recent years. This is consistent with trends around the world. And they're using it for a wider range of products and services beyond the typical French ecommerce purchases of household electronics and fashion items. For instance, there's been a steady rise in the number of people buying groceries and other FMCG items online – often through click and collect services that serve as a bridge between offline and online commerce.
Jean-Marc: The government has also done a good job of helping businesses enter the digital economy. Selling online requires businesses to work with new partners and introduce new processes. So the government created a 'matchmaking' service to allow the enablers of the digital economy, such as payment providers like Checkout.com, to connect with businesses and articulate how they could support them to sell online.
What are the main areas of focus currently for ecommerce businesses today and why?
Ingrid: The user experience is very much a focus for many businesses this year. Brands are particularly looking at ways to extend the lifetime value of customers by investing in loyalty programs and personalization tactics. This is because while many ecommerce sites have seen more visitors during the pandemic, most customers are not necessarily loyal to any one brand at the moment.
Brands are also investing in the subscription economy to deepen customer loyalty and lock-in recurring revenue. Tied to this is the idea of sustainable commerce, which is growing in France. The top ecommerce retailers are launching recycling initiatives. Our research shows that 33% of French merchants believe that the ecommerce sector will have done much to improve its sustainability credentials by 2026.
Finally, businesses are looking at ways they can reach more customers. We're seeing many begin to explore social commerce and build a presence on large marketplaces, such as Amazon and Veepee. The most ambitious brands are also exploring the metaverse. They're trialing augmented reality, virtual showrooms and other ways customers can try on or try out products from home. Many businesses are only at the beginning of this journey, and this is something they will keep exploring.
How is the payments landscape in France evolving? What are the key challenges that online businesses are looking to solve?
Jean-Marc: Some exciting trends are emerging. Historically, payments isn't a role with many businesses. Probably only a handful of the largest ecommerce merchants have a payments team. Instead, various people usually own payments across the business. And as a result, it's treated as a commoditized process.
However, that's starting to change. We're seeing a growing awareness of the importance of payments, especially regarding the user experience. This is naturally leading businesses to start thinking about payments more deeply.
Businesses are asking more questions about topics such as payment orchestration because they realize that a single payment service provider (PSP) may not necessarily offer them the best experience or set-up across every market in which they are active.
Strong Customer Authentication (SCA) is another big topic. Although the rollout of SCA is still not complete in France, we're encouraged to see many merchants thinking about how best to meet the regulatory obligation while also using the 3DS protocols to improve authorization rates and the overall customer experience. And this work is paying dividends; 49% of merchants told us they've noticed significantly improved authorization rates as a consequence of SCA. This is higher than their European counterparts.
Ingrid: If we look at payment methods, there are some interesting shifts in the market. Firstly, any business selling in France must accept Cartes Bancaires – the local scheme - branded cards. These account for upwards of 90% of the online card transactions in France.
But businesses should also look to explore offering alternative payment methods, especially digital wallets. As more commerce moves onto mobile, there's growing consumer demand for the simplicity and security wallets provide at the mobile checkout. Buy now, pay later (BNPL) is also increasing in popularity and is something merchants may wish to consider offing this year.
Ultimately, this all puts into perspective the need for businesses to ensure that they're working with payments providers that grant them the flexibility to adapt quickly and without creating additional complexity. While this is true in all markets, it's essential in France where consumer loyalty is still up for grabs.
How is Checkout.com supporting businesses in France?
Jean-Marc: As discussed, there's a growing focus on payments and a rapid maturity in the industry underway. But payments is a complex topic and not every organization has, or can afford, a team of payment experts in-house. So businesses are really looking to their PSPs to manage and optimize payments.
The fact that Checkout.com has a large presence in France, a local acquiring license and understands the local ecosystem resonates well with customers. And once they see how we can help them really optimize their payments with our technology, granular payments data and expert insights, they quickly see the benefits of working with newer, next-gen payment service providers.
Then there's the global factor as well. French companies are more likely than most other Europeans to be selling into the US and the Middle East. And Checkout.com can support them in those markets, and many others, as they look to expand their presence around the world.
What's your top prediction for the French digital economy in 2022?
Jean-Marc: I'll be watching the development of BNPL closely. We're seeing this payment method take off in other countries, and I expect it to make its mark in the French market this year.
Ingrid: There is so much. But, to sum it all up, I'll say it's the growing appreciation of just how critical payments are to a business looking to thrive in the digital economy.