New direction for European eCommerce

After a decade of digital development which has seen annual online retail sales in Europe reach $112 billion (£97 billion), industry commentators are expecting to see some intriguing new developments in the coming years.

Overall sales are set to continue their rapid ascent, but it will be the emerging eCommerce regions such as Italy and Eastern Europe driving this predicted sales rise while the more-established online retail players – typically those countries in Northern Europe – compete on new battle grounds of innovation and differentiation.

Forrester Research, which put forward these theories in its recently published European Online Retail Forecast, is expecting the online retail industry to be worth $191 billion by 2017 and for e-tail sales growth to significantly outpace the growth in offline retail. Indeed, an 11% compound annual growth rate (CAGR) in online retail is forecast over the next five years.

James Roper, CEO and founder of the UK’s e-tail trade association IMRG, told Essential Retail that the UK is a clear leader in terms of cross-border eCommerce, and is viewed as an online retail example to follow by other European nations. At reportedly 160 million parcels a year, the UK is also conducting around the same level of cross-border trading as the rest of Europe put together.

Germany, he notes, has overtaken the UK as the largest online retail market, but due to its specific retail culture, which often involves cash or invoice on delivery, it is more difficult for other nations to gain traction within its borders.

There’s plenty of potential in other markets, too, with Roper highlighting Italy as a particularly strong growth area – a notion supported by Amazon’s recent decision to establish itself there.

“East of Europe is interesting as we’re hearing very bullish reports of trading into Russia,” adds Roper. “You have to do it carefully, but there is a lot of wealth there and the people with cash want to buy luxury items and UK-branded goods. Eastern European countries are less well-off but they don’t have a local supply of luxury goods, so they are buying online.”

You would imagine that this situation should act as a catalyst for local retailers to plug the gaps in their home territories, but they will face a challenge from established markets looking to widen their online retail networks. The next few years should certainly throw up some interesting battles in the competition for eCommerce share.

Further afield

Digital media advisory firm Siemer & Associates recently conducted some research into international online retail, and it appears that the European e-tail sector will be growing at a similar pace to the wider global eCommerce market.

The California-based organisation anticipates that global eCommerce retail sales will expand at 15% CAGR for the next several years, with managing director David Siemer suggesting there will be an upturn in merger and acquisition activity over the next 12 to 18 months “as large offline retailers finally begin to acquire online and mobile platforms and many later-stage eCommerce companies achieve sufficient scale to become acquirers themselves”.

This process is already taking shape, and there are various examples of this happening in the global retail space. One high profile case is leading UK grocery business Morrisons, which in 2011 acquired baby and maternity products e-retailer Kiddicare for £70 million.

Having admitted that it was slow to provide an online offering for its customers, Morrisons’ senior management used its partnership with Kiddicare to learn about the processes required to make a success of its digital services. It has now linked up with online grocer Ocado in a deal that will see Morrisons take advantage of the e-tailer’s distribution network and sell its products online for the first time.

Planet Retail’s eCommerce research director Malcolm Pinkerton agrees that growth is going to get a lot more difficult in maturing markets like the UK.

“In these mature eCommerce markets, it is about being where the customer is, being channel agnostic and leveraging technology to enhance in-store experiences and create truly seamless shopping experiences,” he explains. “Beyond this, it is about using social media to create personalised shopping experiences, and give brands and retailers a real personality.”

Looking at growth areas in the European online retail industry, Pinkerton mentions Eastern Europe and EU members France, Germany and Italy.

“Italy is set to see eCommerce sales grow by over 200% over the next five years, he asserts.

“Retail propositions are getting more sophisticated, while a growing desire for convenience is fuelling demand for online shopping. Consumers are also gaining access to cheaper and better tech and internet connections, while many of the barriers to online shopping – such as fears over fraud, and delivery costs – are being alleviated by more sophisticated operations.”

In a recent blog piece, Martin Gill, VP, Principal Analyst serving eBusiness & Channel Strategy, at Forrester, said that Europe’s leading e-tailers are entering “a new era of competitive tension” and will need to be more aggressive in mapping out their strategies to secure growth.

With this in mind, it will be essential for businesses operating in established eCommerce nations to identify new sources of competitive advantage. Developing cross-border commerce will seemingly play a major role in this process, but so too will innovative social media usage, alternative payment methods and flexible fulfilment offerings such as in-store collection.

For the emerging nations, however, it will be a case of doing the basics right, which Gill quite simply defines as providing convenience, value, and choice.

Over the coming months, Essential Retail will be investigating emerging trends in eCommerce and retail technology in different territories around the world. If you would like to contribute or offer some opinion about your marketplace, get in touch at