Monday, June 9, 2008

The Economy and European E-Commerce

JUNE 9, 2008

The economic downturn is starting to slow e-commerce growth in continental Europe, but much less so than in the US and the UK.

In France, for example, online buying revenues during the post-Christmas sale period were high. In the first five days of these sales, French trade group FEVAD noted a 25% rise in revenues from nine leading online retailers in 2008, compared with the same period in 2007.

The group predicts that B2C e-commerce will grow 30% this year. That is down from 35% in 2007, but still quite healthy.

French consumers have a generally high opinion of online buying. More than 85% of French respondents to a Benchmark/Brandalley survey said online retailers offered better prices and reductions than offline stores. More than one-half also said online shopping helped them avoid crowds.

A survey by DirectPanel in May 2008 found that over one-half of 12,000 French shoppers polled had bought books, CDs, DVDs or software online. A similar number had bought train or plane tickets online. One-half had also bought clothing and shoes or other leather goods—traditionally a tough sell online. All these purchases indicate a major commitment to online shopping.

In France, another significant trend is the growing revenue for sales of luxury goods online. Responses to an online questionnaire circulated by Benchmark in 2007 indicated that 80% of French female Internet users had already bought clothes, shoes or accessories in the "luxury" bracket. This may not affect many buyers, but it is an excellent index of the confidence both sellers and buyers have in the market that the Internet is taking increasing amounts of sales in this category.

Germany is now a healthy market too, thanks to its large population as well as the efficiencies of major online retailers.

eMarketer estimates that more than three-quarters of German Internet users are already buying online, and this percentage should continue to rise. Nielsen thinks the number is already higher, at 97%.

Major retailers are leading the charge. For example, Amazon does extremely well throughout Europe.

Another reason e-commerce is expected to remain strong in Europe despite economic woes is that online buying has reached critical mass and is being adopted by very large numbers of Europeans in a variety of categories. The very strong underlying growth in this phase of the expansion cycle should help e-commerce do well, even though some offline stores will struggle.

This is more true in France, Germany and Scandinavia than in Italy and Spain, where infrastructure weaknesses and cultural habits have generally discouraged e-commerce on a large scale.

There is also every reason for online comparison shopping to flourish in Europe. The desire to compare prices when budgets are tight plays directly into the strengths of these offerings, although comparison sites that are well-organized and user-friendly, with good security, will benefit more than those that are not.

Learn how online merchants in the US will fare this year. Read eMarketer's US Retail E-Commerce: Slower But Still Steady Growth report today.

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