Online channels have increased in importance for the European smartphone market over the last few years. Even though the pandemic forced many consumers to buy devices online, the online purchasing push is continuing post-pandemic. In contrast to during the pandemic, the main driving factors are macroeconomic and cost-of-living pressures that have sent many consumers online in search of transparent information and the best deals. As this shift continues over the next decade, channel partners must adjust to remain relevant and keep up with the competition.

Retail partners have started adjusting business models to reach new consumers. For many, this includes embracing online channels by setting up better digital and physical infrastructure suited to large-scale online business. The newest developments focus on adapting the customer experience and offerings. As part of this, consumer electronics channels are no longer trying to solely be a product reseller. They are increasingly bundling in insurance, tech support, data services, extended warranties and, in many cases, selling mobile subscriptions for MNOs.

In Europe there are several examples is this. Mediamarkt/Saturn offer insurance and support services with each device sold as part of a solution bundle option – on top of selling devices with operator subscriptions. Similarly, Portuguese player Worten diversified its business into repairs in a bundled service through the acquisition of a local repair services company. Some retailers have even converted their e-commerce shops into open marketplaces for third party vendors in exchange for a commission, which FNAC-Darty has done in France. The channel is focused on offering customers service choices through bundled solutions to create channel user stickiness and to attract new customers. Online channels have been key to bringing these initiatives forward to customers.

To understand what will come next for online channels, it is also important to consider what currently drives consumers online. Among the top factors include:

• A wide selection of models and accessories compared to what may be feasible offline
• Easy access to information and reviews allows customers to research and compare devices
• Low prices are more feasible with online retailers often having a lower cost structure. Canalys’ research has identified price as significantly more important to consumers preferring online channels than those who prefer offline
• Online retailers often offer fast and convenient delivery options as well as flexible payment terms.

Canalys' Consumer Insight research shows online channels have increasingly been preferred by respondents over the last two years. Still, they remain mostly popular for low-to-mid-range devices. High-end device buyers continue to be drawn offline (particularly to operator and vendor stores). Bundles, expanding current subscriptions and the possibility of connecting closer with the brand are key factors for users going offline.

Moving forward, online channels will only increase in importance as a route to market. It will be particularly important for channel partners to invest in digital capabilities to remain competitive and adapt to an upcoming wave of automated personalization. Canalys expects the following trends to define online consumer electronics stores in the next decade:

• Personalization and customization: As automation, machine learning algorithms and AI develops, customers will experience a tailored shopping journey. The biggest challenge for the channel is to understand how customers shop and how each customer can find the most convenient shopping journey. In addition, AI and chatbots increase in relevance providing customers with a personalized experience. The use of video selling, shared cart, face recognition payments and image/voice search are technologies that will tailor the shopping experience further to individual needs.
• Mobile shopping: Customers will increasingly research and purchase products on their smartphones. Channel partners must ensure their online stores are optimized for a seamless mobile shopping experience. In addition, easy payment facilities will also become a differentiator through e-wallets, EMIs, and payment gateways are also a competitive differentiator.
• Loyalty schemes: Channel partners must offer schemes to increase user stickiness while also collecting key data points to improve the shopping journey. Large merchandisers such as John Lewis and Amazon have sophisticated loyalty programs either through point building schemes or subscriptions. Loyalty schemes will be essential to build a loyal customer base in the online dominated market.
• Sustainability: The growing importance of sustainability is changing how smartphones are manufactured and sold. In the future, trade-in programs and eco-friendly products and packaging will be minimum requirements. This will create challenges and opportunities for the channel. On the one hand, meeting sustainability requirements may require significant capital investments and third-party partnerships. On the other hand, it should give retailers opportunities to differentiate offerings and identify new revenue streams and areas where consumer loyalty can be built. Retailers should also consider what circular initiatives and subscription models can be added to their business models.
  Device packaging also has potential to be sustainably improved. Amazon’s “ships in own container” program could be an example of what might define packaging next. Given the ecommerce industry’s continued growth, SIOC packaging is a cost-effective way for socially conscious channels to implement eco-friendly packaging and reducing waste.