Western Europe Experiences Significant
E-commerce Growth…
If you are engaged in business-to-consumer E-commerce your biggest market opportunity is the United States, where more than half of the population - around 149 million people (CyberAtlas, 2001), have access to the Internet and engaged in online spending that was estimated at $51.3 billion in 2001 (Forrester, 2002).
According to International Data Corporation (IDC), the U.S. accounts for approximately 40 percent of all money spent online, but that percentage is expected to decrease to 38 percent by 2006 as Western Europe and Asia increase their online spending.
Barriers that prevented Europe from moving forward in E-commerce activities are weakening, enabling the region to take a larger piece of the online market and close the E-commerce gap between itself and the U.S.
One of the largest obstacles that prohibited E-commerce growth in Europe was a regulated telecommunications sector, which made it expensive and inefficient to use the Internet. In 1999, the sector became de-regulated, opening the doors to fierce competition, bringing with it more efficient networks that have greater Internet and information technology capabilities, and better prices.
A second barrier that blocked E-commerce growth in Europe was different currencies. However, this year, adoption of the Euro was completed, phasing out local currencies and blurring borders between countries in the European Union. By enabling better price comparisons, increasing competition and improving deals for online buyers, the Euro is making it easier to conduct business in the European online market and providing better entry by non-European companies.
With better access to the Internet and an improved environment in which to do business, Western Europe is expected to experience significant E-commerce growth over the next several years. Research from IDC indicates that Internet usage in Western Europe increased to approximately 40 percent in 2001 – comprising around 151 million people, and that consumers spent an estimated US$18.9 billion online in that same year. E-commerce is expected to rise by 68 percent this year contributing to total online worldwide sales of US$1 trillion.
Regions in Europe that will experience the fastest E-commerce growth include Germany, France and the UK. According to the International Telecommunication Union, Germany, the UK, Italy and France will comprise 63 percent of Europe’s Internet users. With the highest population of Internet users - approximately 30 million people, Germany is expected to dominate E-commerce sales with $20 billion in 2002, followed by the United Kingdom with $9 billion and France with just under $4 billion (GartnerG2).
Online Selling in Germany, the UK and France…A Snapshot
To successfully sell online in Europe it is not only necessary to consider various legal, regulatory and trade issues, but is also particularly important to understand your potential customers. Who makes up the growing online market in Germany, the UK and France? How do consumers in these countries shop online? What do they tend to buy? How do they make purchases?
Demographics:
Worldwide, men are still the dominant online purchasers, particularly in Germany and France where they make up more than 60 percent of the online population, and have tended to be young, educated and affluent. But, this number is slowly changing as women become more familiar with the Internet. The UK has the second highest percentage of women online at 42 percent after Sweden. Research also indicates that younger women are the primary market except in Germany where women over the age of 50 spend the most time online. (Jupiter MMXI) According to The Boston Consulting Group (BCG) “the Internet population in most advanced countries is rapidly becoming more middle class, more female and older.” This will have an impact on common purchase categories such as computer hardware and software, which will likely decrease in popularity.
What does this mean?
Understanding the demographics of the market will enable you to improve your web site to better meet the needs of your market, determine the most effective methods of marketing and promotion, and evaluate the types of products or services that will bring success in the regions you would like to sell. For example, since women are making progress in the European market, it is important to consider their growing needs and plan ahead to meet demand. As relative newcomers, they will appreciate simple navigation and transaction tools and will most likely seek out brands that are familiar to them in the offline world.
Language:
According to Global Reach, a company that specializes in driving Web traffic from other countries, non-English-speakers outnumber native English speakers on the Internet, representing 59.8 percent (338.5 million) of the total online population. Of this percentage, 33.9 percent (192.3 million) account for speakers of European languages. European languages represented most online are Spanish, German and French at 40.8 million, 38.6 million and 22 million respectively.
What does this mean?
Companies that have web sites that cater to these languages will have an opportunity to solidly position themselves in more than one region. Therefore, it may be better to target those who speak the language rather than the country itself. In this way, a larger audience can be reached and money spent on marketing and advertising can be stretched to a number of markets where the language is spoken. For example, German is the principal language in Switzerland and Austria as well as Germany, which opens the door to approximately 100 million people (Global Reach).
Consumer Behavior Trends:
Not surprising the most common online top sellers are books, CDs and computer equipment. However, according to the Global Online Retailing Report, the demand for books is much more pronounced in European countries, where they are purchased by almost three out of five online shoppers. Germany leads in the book category.
Online travel reservations and purchases are also becoming increasingly popular. Jupiter MMXI analyzed data from November 2000 to April 2001 and found that the number of unique visitors to travel sites from home increased by nearly 1 million in the three biggest markets of Britain, France and Germany.
While many European consumers are aware of different online sites they tend to confine their repeat purchases to a few sites. This means that customer service is of extreme importance. At the same time, European consumers have a higher tolerance for problems online compared to their North American counterparts, mostly because the Internet has not reached its maturity stage. Nevertheless, according to The Boston Consulting Group, “German and British consumers tended to react more harshly to failed purchases than consumers in other countries – approximately one-third said they would stop buying from the web site in question.”
What does this mean?
Just as in the offline world, a small number of purchasers account for a disproportionately large share of all online spending. As a result, customer loyalty will be even more important to acquire. In Europe this will be a challenge since Europeans tend to stick to a few sites. Although Europeans are generally more accepting of average web sites, as they become more familiar with the Internet and the industry matures, they will expect online purchasing to go as smoothly or more smoothly than offline purchasing. Consequently, those companies that can gain customer loyalty in the early stages, increase their brand presence, provide excellent customer service and successfully extend their offline business into the online environment will have a greater opportunity to solidly position themselves in the European market.
Payment Methods:
Germany, France and the UK have varying payment method preferences. According to Forrester, the French prefer checks, while UK consumers prefer credit cards. Global Reach states that while credit cards are rare in Germany, many new bank customers are given a debit card, which can be used to buy online. Generally, however, Germans tend to want the option to pay by invoice.
Before the introduction of the Euro it may have been unprofitable to offer online payments on a national basis. Now, with the introduction of one currency there is a larger market for online buying and paying. According to a report by the European Commission, summarizing the details of a Conference on ‘Consumer Online Payments: Trends and Challenges for Europe’, there is strong political backing to develop the “Single Payment Area in the Internal Market”. The report states, “this became evident with the adoption of the Regulation for Cross Border Payments in euro, which should indirectly also shape the development of the current payment infrastructure.”
What does this mean?
With the introduction of the Euro, Europeans will likely be more receptive to potential new payment technologies. However, the payment methods preferred by Europeans vary across regions and are not likely to change significantly over time. Consequently, businesses that engage in E-commerce in Europe will need to be able to offer a multitude of payment methods.
Marketing and Advertising:
According to DoubleClick, almost half of European marketers (46 percent) use online marketing tools with the UK in the lead at 73 percent. German marketers are third in line at 43 percent while France lags at 21 percent behind Scandinavian and Italian marketers. The most popular form of online marketing in Europe is e-mail marketing used by 31 percent of marketers, with targeted banners (27 percent) and newsletters (24 percent) following close behind. Marketers in the UK use e-mail marketing the most at 58 percent.
European online advertising is expected to reach approximately US$2.5 billion by the end of 2002, an increase of $US1 billion from 2001, according to eMarketer. This number is expected to rise to US$3.77 billion by the end of 2003. Forrester Research states, “The UK and Germany will account for almost 50 percent of total Web advertising spent in Europe.”
What does this mean?
E-mail has clearly become one of the most successful channels for marketers in Europe, which means that companies interested in selling to the European online market should take advantage of this popular medium. Of course, it is important that this type of direct marketing takes into consideration the cultural differences in each region to build on relationships and gain customer loyalty. To capitalize on this growing marketing trend, it is important to consider acquiring a local partner and use their expertise to tap into the European market more effectively.
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To find out about E-commerce growth in Asia-Pacific, check out "Rising in the East", which discusses the obstacles that E-commerce vendors face, followed by a series of snapshots of the leading markets in the region.
