A host of issues — ranging from inflation in food service and energy prices to reduced consumer spending driven by the cost-of-living crisis, as well as the increased operational expenses — have significantly impacted the retail and food sector in Europe in recent years.
Research by Savills indicates that the European household savings rate appears to have shifted to a permanently higher level since the COVID-19 pandemic, due to a prolonged period of high inflation.
However, the study notes that the European Central Bank’s successive interest rate cuts could provide modest support to household spending.
As Europe seeks to recover from inflationary pressures amid ongoing geopolitical tensions, ESM examines key trends that will shape the way Europeans shop and eat in the coming year.
Hyper-Personalisation Using AI
With the adoption of artificial intelligence accelerating globally, retailers are likely to join the bandwagon of companies integrating AI tools to drive operational efficiencies and enhance consumer experience.
For instance, UK’s supermarket giant Tesco is planning to expand its application of AI to customer data as it seeks to personalise how people shop.
At the Financial Times’ Future of Retail summit in London in September, Tesco chief executive, Ken Murphy, said the move could nudge shoppers to make healthier choices and reduce waste.
“It can help to bring your shopping bill down, reduce waste and improve the outcome and the power of that Clubcard,” he said.
E-commerce Market Set To Drive Retail Sales
The European e-commerce market is projected to grow by 49% between 2024 and 2028, with a high penetration rate in established markets such as the UK, Germany and France, and significant growth prospects in smaller economies, according to research by Savills.
While online retail usage varies throughout Europe, evolving trends increasingly nudge consumers to shop online. This has been accelerated by the rapid growth in social media users, as shoppable links make online purchasing more accessible.
Demand For Same-Day, Next-Day Delivery Grows
Retailers are increasingly exploring ways to satisfy consumers’ desire for speed with faster online delivery.
Grocery chains are experimenting with same-day pick-up options, such as Belgian retailer Colruyt Group’s Collect&Go platform, which uses refrigerated lockers to offer same-day pick-up and delivery services.
This trend highlights the growing preference for convenience in food retail.
Increasing Penetration of Quick Service Restaurants
The Quick Service Restaurants (QSR) market forms a significant part of the food and beverage (F&B) sector in Europe, driven by franchising and the arrival of new entrants that cater to consumers’ growing preference for affordable, on-the-go dining options.
US fast food chain Wendy’s, which entered the UK market in 2021, is seeking franchises across Europe.
Having announced the signing of two new agreements with franchisees in Ireland and Romania, Wendy’s is planning to enter the Polish market as well.
Similarly, the US doughnut and coffee chain Krispy Kreme has partnered with ISH Foods to enter the German market in early 2025, with its first store scheduled to open in Berlin.
Rise Of Experiential Dining And Culinary Experiences
The growing demand for experiential dining and unique culinary experiences has driven the success of premium brands as European consumers are increasingly seeking high-quality food and beverage options.
As per the Savills report, businesses are focusing on key drivers such as exceptional service and unique experiences to appeal to both local residents and tourists.
Big Mamma Group, the Italian restaurant chain, is an example of affordable experiential luxury, and currently runs 23 restaurants across France, England, Germany and Spain.
It is expected to expand further within the existing markets and beyond with the recent investment from McWin.
Developing Omnichannel Strategies
In the wake of digitisation, the grocery retail sector is witnessing growth in the integration of physical and digital distribution channels, with potential for retailers to implement artificial intelligence.
According to Savills' research, physical stores will continue to play a key role in food distribution despite the growth of the online grocery market, with several e-commerce models, such as click and collect, being linked to physical stores.
With that in mind, the report points out that operators will continue to craft omnichannel strategies to meet customers’ needs online and in-store.
Eye On Sustainability
Sustainability has become a core value for many retail customers, with big players in the grocery and food industry committing to achieving net-zero carbon emissions in their supply chains by 2050.
Policies such as tackling food waste, embracing circular economy practices, and maintaining good animal welfare standards will continue to be implemented in the coming years to minimise environmental impact while securing consumer loyalty and trust.
Retailers are equally looking toward the environmental impact of their suppliers, aiming to ensure transparency and traceability along the supply chain.
