Regional Deep Dive: E-Commerce Profitability Strategies in Europe and Australia

Navigating Regional Realities for Sustainable Digital Growth

E-commerce is now a cornerstone of retail strategy worldwide, but the path to profitability is anything but uniform. Europe and Australia, in particular, present distinct challenges and opportunities shaped by their regulatory environments, consumer behaviors, and operational landscapes. Retailers in these regions must move beyond global best practices and embrace tailored strategies that address local realities—whether it’s navigating GDPR in Europe or overcoming high fulfillment costs in Australia. Here, we explore the unique barriers and actionable solutions for each region, drawing on Publicis Sapient’s deep expertise and real-world case studies.

Europe: Privacy-First, Data-Driven, and Omnichannel by Design

The European Challenge

European retailers are at the forefront of digital transformation, yet profitability remains elusive for many. Nearly half of European retail leaders report that their e-commerce business is less profitable than in-store operations, and a quarter say it is not profitable at all. The reasons are multifaceted:

Strict Privacy Regulations: The General Data Protection Regulation (GDPR) and evolving national laws require retailers to rethink how they collect, manage, and activate customer data. Non-compliance carries significant financial and reputational risks.
Diverse Consumer Behaviors: Preferences and shopping habits vary widely across countries, demanding localized strategies and nuanced personalization.
Omnichannel Complexity: Shoppers expect seamless experiences across digital and physical touchpoints, from mobile apps and social selling to in-store fulfillment and agent-assisted shopping.
Investment Constraints: While 90% of retail leaders know what’s needed to improve e-commerce profitability, nearly half struggle to make the necessary investments—often due to legacy systems and organizational silos.

Solutions and Investment Priorities

European retailers are prioritizing:

Digital Customer Experience: Over half of decision-makers cite holistic, omnichannel digital experiences as the top area for driving profitability. This includes optimizing mobile apps, enabling social selling and live streaming, and delivering agent-assisted shopping.
Omnichannel Commerce: Replatforming, expanding through marketplaces, and dynamic pricing are key focus areas, with grocery retailers also emphasizing supply chain modernization and in-store digitization.
Marketing Technology and Data Monetization: Business intelligence, analytics, and personalization are critical for turning data into actionable insights and measurable results.

Privacy-First Data Strategies

With third-party cookies disappearing and privacy expectations rising, first-party data has become the foundation for sustainable growth. Leading retailers are:

Building unified customer profiles by integrating data from e-commerce, in-store, loyalty, and digital touchpoints.
Activating data across channels using advanced customer data platforms (CDPs) and clean room technologies to orchestrate journeys and segment audiences while respecting consent.
Driving measurable outcomes in conversion, average order value, and customer lifetime value.

Case in Point: Cross-Functional Data-Driven Transformation

A major European retailer, facing fragmented data and inconsistent customer experiences, formed cross-functional pods that brought together brand, merchandising, technology, analytics, and customer support. By focusing on a small set of KPIs—quality traffic, conversion, and average order value—the retailer was able to rapidly test, learn, and scale successful solutions, resulting in improved profitability and customer satisfaction.

Actionable Recommendations for Europe

Invest in privacy-compliant data infrastructure: Prioritize CDPs and consent management tools to unify and activate first-party data.
Localize omnichannel experiences: Tailor digital journeys to reflect local preferences and regulations.
Break down silos: Form cross-functional teams with shared KPIs to accelerate innovation and execution.
Modernize fulfillment: Invest in micro-fulfillment centers, shipping optimization, and inventory visibility to meet rising expectations for speed and convenience.

Australia: Battling High Fulfillment Costs and Omnichannel Complexity

The Australian Challenge

Australian retailers are at a pivotal crossroads. Over half of retail decision-makers report that their e-commerce business is not currently profitable, and 46% say e-commerce is less profitable than in-store. The gap is especially pronounced in grocery and specialty retail. Key barriers include:

High Fulfillment and Logistics Costs: Digital orders require picking, packing, and last-mile delivery—costs that are often absorbed by the retailer. In grocery, the need for speed and freshness adds further complexity.
Returns and Reverse Logistics: Higher return rates, especially in apparel and specialty retail, erode margins.
Price Competition: Online channels are highly price-transparent, driving frequent discounting.
Fragmented Systems: Disconnected systems across channels lead to inefficiencies and missed opportunities for optimization.

Solutions and Investment Priorities

Australian retailers are focusing on:

Supply Chain Modernization: AI-powered inventory management, real-time data visibility, and automated fulfillment solutions reduce waste and optimize stock levels. For example, Woolworths’ investment in AI-driven stock management reduced stock discrepancies by 40% and drove a 55% increase in click-and-collect orders.
Returns Optimization: Using data to identify high-risk return customers, incentivizing in-store returns, and leveraging AI-powered fit and recommendation tools to reduce unnecessary returns.
Data Monetization and Retail Media: Building retail media networks and leveraging customer insights to create new revenue streams through targeted advertising and personalized offers.
Omnichannel Integration: Unified commerce platforms, real-time inventory tracking, and integrated loyalty programs enable seamless customer journeys and operational efficiencies.
Store Digitization: Robotics, digital shelf labels, mobile POS, and empowered associates drive operational efficiency and enhance the customer experience.

Sector-Specific Recommendations

Grocery: Prioritize store digitization, invest in AI-powered supply chain solutions, and integrate loyalty and personalization across all channels.
Specialty: Accelerate omnichannel commerce, deploy AI for hyper-personalized recommendations, and streamline returns and customer service.
Big Box: Unify commerce platforms for real-time inventory and cross-channel fulfillment, scale automation and AI for supply chain resilience, and monetize data through retail media networks.

Case in Point: Omnichannel Integration at Kmart

Kmart’s holistic approach to omnichannel, with a single provider building integrated experiences, is helping bridge the digital-physical divide and deliver on rising consumer expectations. This unified strategy has enabled Kmart to offer real-time inventory, seamless fulfillment, and a consistent brand experience across all touchpoints.

The Path Forward: Regional Expertise, Global Impact

E-commerce profitability is not a one-size-fits-all journey. Retailers in Europe and Australia must navigate unique regulatory, operational, and consumer landscapes. The winners will be those who:

Invest in privacy-first, data-driven strategies (Europe)
Modernize supply chains and digitize stores (Australia)
Break down organizational silos and foster cross-functional collaboration
Leverage AI and automation to drive efficiency and personalization

Publicis Sapient partners with retailers across both regions to unlock new sources of value, combining deep local expertise with global best practices. Ready to transform your e-commerce profitability? Connect with our experts to tailor a strategy that meets your market’s unique demands and positions your business for sustainable, profitable growth.