While Covid-19 has forced consumers in southern Europe to shop online, new research from Capital Economics suggests that e-commerce penetration will remain lower in Italy and Spain for structural reasons, keeping prime retail rents in these markets at resilient levels long-term.
Lockdown measures have forced rapid consumer shifts in southern Europe, where online shopping has to date lagged behind the rest of the continent. According to Nielsen data, online shopping turnover grew by a sizeable 142% year-on-year in the week beginning 16 March in Italy, while turnover has increased by around 50% year-on-year in Spain.
However, Capital Economics suggests that this may not be a 'permanent shift'. The reasons for this include current shopping patterns reflecting 'necessity rather than choice', in the wake of non-essential stores closing everywhere. Vulnerable members of society have been instructed to remain indoors, while media images of empty shelves have triggered the stockpiling of supermarket goods.
Second, structural reasons that have held back southern Europe are unlikely to change in the short-term, the report says. Indeed, on the UNCATD’s B2C e-commerce index, which tracks bank account ownership, internet usage, postal reliability and security of internet servers, the four southern European countries rank the lowest in the euro-zone.
What’s more, according to the OECD, there is a low share of firm participation in e-commerce in southern Europe. Finally, consumers in southern Europe strongly prefer to shop in person and this preference is unlikely to change overnight.
While the retail sector in southern European markets is set to face the same short-term headwinds as the rest of Europe, Capital Economics is cautiously optimistic about the territories' long-term prospects. The immediate effects are negative, with some of the continent's strictest lockdown measures and typical economic dependence on tourism making for a bumpy ride this year.
But further out, beyond the recovery in 2021, Capital Economics suggests that the reluctant adoption of e-commerce will be one of the factors supporting prime retail in southern Europe for the longer haul.