European Digital Divide E-Commerce Markets in Europe Opportunities and Prospects

EUROPEAN DIGITAL DIVIDE: E-COMMERCE MARKETS
IN EUROPE OPPORTUNITIES AND PROSPECTS

November 2011
INTRODUCTION
INTERNET RETAILING AND EUROPE: IN
CONTEXT
INTERNET RETAILING IN EUROPE A
PRODUCT VIEW
THE IMPORTANCE OF CROSS-BORDER
SALES
BARRIERS TO CROSS-BORDER SALES
THE FUTURE OF INTERNET RETAILING IN
EUROPE
INTRODUCTION
Scope
All values expressed in this report are in US dollar terms, using a fixed exchange
rate (2011).
2011 figures are based on part-year estimates.
All forecast data are expressed in constant terms; inflationary effects are
discounted. Conversely, all historical data are expressed in current terms;
inflationary effects are taken into account.
Retailing
Store-based Retailing
Non-store Retailing
Internet Retailing
Euromonitor International
RETAILING: INTERNET RETAILING
Disclaimer
Much of the information in this
briefing is of a statistical nature and,
while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
companies opinions, reader
discretion is advised.
Internet shopping has been a

disruptive force in retailing in
developed markets for a number
of years. With the enlargement
of the EU, increasing internet
speeds, consumers growing
acceptance of buying over the
web and retailers looking to
internationalise, consumers
have looked to shop across
borders, exporting trends from
Western Europe into Eastern
Europe. In the future, the
internet and cross-border sales
are likely to mean that
competition throughout retailing
will increase.
PASSPORT 3
INTRODUCTION
Objectives and parameters of global briefing

This global briefing will look at the interaction between demand, infrastructure and supply in internet
retailing, and the differences between Western and Eastern Europe.
Demand will be shown in terms of sales data for countries and regions, and will be provided and analysed
both in terms of the internet retailing channel and at a product level.
The report does not claim to be comprehensive, but rather seeks to offer high-level insight into key
changes and developments taking place in the retailing industry in 2011 and in the period to 2016.
Demand
Infrastructure
Supply
PASSPORT 4
INTRODUCTION
Key findings
Western Europe competes In 2011, Western Europe was the second largest region, after North America, in
for place as leading
terms of sales generated over the internet. Eastern Europe was fourth, but is
internet retailing market
likely to lose this position to Latin America, which is enjoying faster sales growth.
Broadband penetration
holds back sales in a
number of markets
The ease with which consumers access the internet is a driving factor in whether
they will do so. Comparatively low penetration rates for broadband internet
access in some countries in Europe limits growth opportunities for the channel.
Product sales differ

markedly by region
The prevalence of broadband access in Western Europe means that

downloading of digital goods is easier and more widespread than in Eastern
Europe. Apparel and housewares sell better in the former region as well.
Cross-border sales grow

in importance, pointing to
positive future online
Greater levels of travel and growing confidence in the legal framework in the EU
has led to consumers increasingly shopping across borders. In future, the
internet should boost the amount of spending generated between countries.
Internet retailing continues As internet retailing matures, new business models (flash sales, group buying
to evolve
and member-only sites) have emerged. This evolution, coupled with crossborder sales, will ask further questions of retailers pricing and delivery options.
Channel set to account for By 2016, internet retailing is expected to account for 3.5% of total retail value
increasing share of retail sales in Eastern Europe and 5.7% in Western Europe, up from 1.1% and 1.8%
in 2006. The pace of growth is going to be disruptive to existing retailing
industrys sales in future
business models, limiting the need for a huge number of stores in certain
product areas, or removing their need almost entirely, for example book stores.
However, while the channel provides threats, it also provides opportunities to
retailers and manufacturers alike.
PASSPORT 5
INTRODUCTION
CONTEXT
INTERNET RETAILING IN EUROPE A
PRODUCT VIEW
SALES
EUROPE
INTERNET RETAILING AND EUROPE: IN CONTEXT
Internet retailing and Europe 2011: In context

In 2011, North America is expected to maintain its lead over Western Europe, remaining the region
generating the most sales through the internet retailing channel.
The growth in value sales over the last five years has pointed towards the US, which accounts for 97% of
North America's internet retailings sales, becoming a more mature market, while many countries in
Western Europe are continuing to grow very quickly. As such, the difference between the value of sales
generated over the internet in Western Europe and North America, which stood at US$27.9 billion in 2006,
and US$6.5 billion in 2011, will continue to shrink in future.
Eastern Europe is a distant fourth, competing with Latin America. Between 2006 and 2011, Eastern Europe
enjoyed stronger growth in value sales (27% CAGR) compared to Latin America (24%). Eastern Europes
growth has been boosted by trends deriving from, and companies operating in Western Europe. However,
in the future, Latin America is forecast to enjoy stronger growth (14% CAGR versus Eastern Europes 12%),
so the gap between the two regions will close.
Retail Value RSP (US$ bn)
Internet Retailing Sales by Region in 2011

160
120
80
40
0
Asia-Pacific
Australasia
Eastern Europe
Latin America
Middle East and

Africa
North America
Western Europe
PASSPORT 7
Internet retailing and Europe 2011: The country view

In terms of the countries that generate the largest value of sales over the internet, markets within Western
and Eastern Europe dominate, accounting for nine of the 15 largest internet retailing markets globally.
The size of the US internet retailing channel overshadows all others, accounting for 33% of sales
generated over the internet globally in 2011. The country is home to a number of the largest internet
retailers, such as Amazon, eBay and Apple, which are also leading the way in terms of advancing the
manner in which consumers interact with them. Amazon has expanded its product range and touch points
with consumers with the addition of the Amazon Fire, eBay has moved strongly into mobile-based internet
retailing, and Apple has tied consumers into purchasing more downloadable content from it through the
introduction of iPods, iPhones and iPads.
In a number of cases, US-based companies are amongst the largest internet retailers in the other markets
shown below, but local champions have also emerged. GS Holdings Corp in South Korea and Merlin.com.pl
Sp zoo in Poland have shown how trends started elsewhere have been adopted in markets globally.
Leading Countries: Internet Retailing Sales 2011

150
125
100
75
50
25
0
US
GB
JP
FR
DE
CN
KR
BR
RU
NL
CA
IT
PL
FI
SE
Key:
US = United States;
GB = United Kingdom;
JP = Japan;
FR = France;
DE = Germany;
CN = China;
KR = South Korea;
BR = Brazil;
RU = Russia;
NL = Netherlands;
CA = Canada;
IT = Italy;
PL = Poland;
FI = Finland;
SE = Sweden
PASSPORT 8
Internet retailing and Europe: The country view in per capita terms
Although the US is the largest internet retailing market
globally, analysis of spending in per capita terms
highlights how retailers can target countries where
individual consumers are spending the most.
Leading Internet Retailing Markets:

Sales Per Capita in 2011
United Kingdom
Finland
While a number of countries are among both the

highest overall spenders and the highest per capita
spenders, such as the UK, France and Japan, sales
per capita data highlight smaller markets like Austria,
Switzerland and Norway, where consumers are
spending an average of US$300 each.
Denmark
South Korea
USA
France
Sweden
Japan
Austria
Germany
Netherlands
Switzerland
Norway
Belgium
Czech Republic
0
200
400
600
800
These markets are likely to provide internet retailers

with opportunities in the short term. Consumers are
already purchasing goods over the internet, and thus
are apparently willing to input personal and bank
details online. This is one less barrier for retailers to
overcome when trying to push online, and so both
locally-based retailers and companies expanding their
online operations abroad should seriously review the
opportunities provided by such markets, as, despite
their small populations, they provide short-term gains
to build sales and brand awareness online, which will
provide long-term support to sales growth.
Per Capita Sales (US$)
PASSPORT 9
Spending by market through internet retailing

Share of Internet Retailing in Western and
Eastern Europe in 2011
In the combined market of

Western and Eastern Europe,
the UK, France and Germany
dominate, accounting for 64% of
total value sales.
The UK is the most mature
internet retailing market, having
benefited from the early
adoption of e-commerce
strategies by Tesco and Next,
and the arrival of US-based
retailers like Amazon and
latterly eBay.
United Kingdom
France
Germany
Russia
Netherlands
Italy
Poland
Finland
Sweden
Denmark
Other European markets
In a number of cases, the steps

taken by companies in the UK
and US are being adopted by
start-up companies in other
markets. From France emerged
Vente-privee, while from
Germany came Zalando, a
footwear retailer based on a
business model made popular
by US-based Zappos.com.
PASSPORT 10
Spending over the internet: The other markets in Europe

Outside of the leading markets in Europe, the development of internet retailing is markedly different from
country to country. Western European markets are the most developed, with Austrian consumers spending
almost US$298 each, while Eastern European consumers spend a lot less.
300
40
Per capita
250
2011 Growth
200
150
30
20
100
10
50
0
0
AT
CH
NO
BE
CS
IE
SK
SV
HU
LT
PT
ES
GR
CR
UK
TR
Year-on-year growth in
value sales (US$ mn
Fixed 2011 Exchange Rates)
Sales per capita (US$)
Within the second tier of internet retailing markets in Europe are countries like Spain, Portugal and Greece,
Western European markets that are lagging per capita spending of other countries within the region. In
these four markets, broadband penetration rates are lower than the Western European average,
underlining the importance of high speed internet access as a support for internet retailings growth.
Broadband penetration in Western Europe reached 64% of households in 2010, but in Spain the share was
58%, in Greece 52%; in Italy 53% and in Portugal only 47%.
This low penetration of broadband is likely to be a limiting factor for these countries sales growth into the
medium term.
Varied Spending Over the Internet in Europes Other Markets in 2011
RO
Key: AT = Austria; CH = Switzerland; NO = Norway; BE = Belgium; CS = Czech Republic; IE = Ireland; SK = Slovakia; SV = Slovenia; HU = Hungary;
LT = Lithuania; PT = Portugal; ES = Spain; GR = Greece; CR= Croatia; TR = Turkey; UK = Ukraine; RO = Romania
Note: Belarus, Bosnia-Herzegovina, Bulgaria, Estonia, Georgia, Latvia, Macedonia and Serbia are present in Euromonitor Internationals data but per capita
spending is less than US$100 and, therefore, do not appear on the chart.
PASSPORT 11
INTRODUCTION
CONTEXT
INTERNET RETAILING IN EUROPE: A
PRODUCT VIEW
SALES
EUROPE
INTERNET RETAILING IN EUROPE: A PRODUCT VIEW
Sales by product: Western versus Eastern Europe

Differences exist between Western and Eastern Europe
The different paths of development of internet retailing in Eastern and Western Europe have affected the
share of sales accounted for by different products.
The presence of higher speed broadband has enabled consumers in Western Europe to download digital
media products much more quickly than those in Eastern Europe, to the extent that slow paced internet
connections in the latter region are limiting growth in downloadable content. As such, media products
account for only 9% of internet retailing sales in Eastern Europe, compared to 16% in Western Europe.
Apparel and food and drink struggle to make headway in Eastern Europe
Other product areas that account for a much larger share of sales in 2011 in Western Europe than in
Eastern Europe include apparel and food and drink, which require more developed supply chains than
those for other non-grocery products. For apparel, the need to be able to take back unwanted goods is
something that retailers have struggled with in many instances, while food and drink necessitates
warehousing and/or delivery vans that have the ability to keep fresh, chilled and frozen food in a state that
is acceptable to consumers. In both instances, the maturity of the channel in Western Europe has benefited
the retailing of these products, while further development is required in Eastern Europe.
But some products do not sell over the internet in either region
Beauty and personal care, consumer healthcare and consumer appliances account for comparatively small
shares of sales through the internet in both Eastern and Western Europe, representing no more than 6% of
total internet retail sales in either region. Consumers shopping habits, which centre on wanting to gain
advice, trial and/or see the physical products, in respect of each item inhibits their sale over the internet,
and is likely to continue to do so in the medium term.
PASSPORT 13
Sales by product: A regional comparison

Internet Retailing: Sales by Product 2011
Eastern Europe
100%
Other Products
100%
Toys and Games
90%
90%
Media Products
80%
80%
Housewares and Home

Furnishings
Home Care
60%
Food and Drink
50%
DIY and Gardening
40%
Consumer Healthcare
30%
Consumer Electronics
70%
Share of value sales
70%
Share of value sales
Western Europe
60%
50%
40%
30%
20%
Consumer Appliances
20%
10%
Beauty and Personal Care
10%
Apparel
0%
2011
0%
2011
PASSPORT 14
Western Europe: Sales added 2006-2011

Apparel, media products and consumer electronics added the most sales between 2006 and 2011 in
Western Europe, generating a further US$12.4 billion, US$11.8 billion and US$11.3 billion, respectively.
Together, the three product areas accounted for nearly 50% of all new sales generated over the internet
during the period.
Apparel built on its heritage of being a product that has traditionally sold well through catalogues, garnering
significant sales growth. Sales were boosted by the launch of internet-only apparel retailers, like Asos in the
UK and Zalando in Germany, as well as by the expansion of product ranges to include clothing and
footwear products by established internet retailers, like Amazon, Otto and Tesco.
Despite the fast pace of growth enjoyed by all product areas, for many this occurred from a small base,
meaning that the value of additional sales generated was low. In the medium term, those product areas that
have thus far struggled to gain traction online are likely to continue to suffer.
20
18
16
14
12
10
8
6
4
2
0
12
10
8
6
4
2
0
APP
MP
CE
F&D
HHF
CA
BPC
DIY
CH
Sales added 2006-2011
Value growth 2006-11 CAGR %
T&G
Value growth 2006-11

CAGR %

(US$ bn)
Sales Performance by Product Category 2006-2011

14
HC
Key: APP = Apparel; MP = Media Products; CE = Consumer Electronics; F&D = Food and Drink; HHF = Housewares and Home Furnishings;
CA = Consumer Appliances; BPC = Beauty and Personal Care; DIY = DIY and Gardening; CH = Consumer Healthcare; T&G = Toys and Games;
HC = Home Care;;
PASSPORT 15
Eastern Europe: Sales added 2006-2011
Sales Performance by Product Category 2006-2011

3.0
45
40
2.5
35
2.0
30
25
1.5
20
1.0
15
10
0.5
0.0
Sales added 2006-2011 (US$ bn)
The difference in the size of sales added over the internet between Western and Eastern Europe was
marked between 2006 and 2011, underlining how much potential for growth there is in the latter region.
While there were differences in size, the same three products added the most sales in Eastern Europe as
in Western Europe, albeit in a different order. In both regions, consumer electronics, apparel and media
products added the most sales between 2006 and 2011, underlining how easily the products can be sold
through the channel and how ready consumers are to shop for them through the medium too.
As broadband speeds pick up in Eastern Europe and household penetration rises, so sales of media
products are likely to shift from physical products to digital ones. As this occurs, media products are
expected to generate further sales over the internet.
0
CE
APP
MP
HHF
CA
DIY
BPC
F&D
CH
T&G
HC
Key: APP = Apparel; BPC = Beauty and Personal Care; CA Consumer Appliances = ; CE = Consumer Electronics; CH = Consumer Healthcare; DIY = DIY
and Gardening; F&D = Food and Drink; HC = Home Care; HHF = Housewares and Home Furnishings; MP = Media Products; T&G = Toys and Games
PASSPORT 16
Apparel internet retailing: Value of sales, 2006 and 2011

In 2011, the value of sales by region for apparel retailing reached US$21.9 billion for Western Europe and
US$2.1 billion for Eastern Europe.
The UK was the largest market for apparel internet retailing in Europe in 2011. Between 2006 and 2011,
the country added a further US$5.1 billion in sales, with the country accounting for 37% of Western
Europes apparel internet retailing sales in 2011, up from 33% in 2006.
Russia was a notable market in that it added just under US$1 billion between 2006 and 2011. This made it
the fifth largest market for apparel internet retailing in Europe in 2011.
Apparel Internet Retailing: Value Sales 2006/2011
9
Key:
8
GB = United Kingdom
2006
DE = Germany;
2011
FR = France;
NL = Netherlands;
RU = Russia;
4
FI = Finland;
IT = Italy;
SE = Sweden;
DK = Denmark;
AT = Austria
0
GB
DE
FR
NL
RU
FI
IT
SE
DK
AT
PASSPORT 17
Apparel internet retailing: The opportunity remains

Despite the growth in internet retailing of apparel, the internet still accounts for only a small share of total
apparel retail sales: 2% of Eastern Europes US$101 billion industry, and 5% of Western Europes US$427
billion total sales.
The small share of total apparel sales accounted for by the internet suggests that there might be long-term
growth opportunities. Department stores in both regions have yet to leverage their online presence, while
brands, especially in the luxury sphere, have further opportunities to grow their sales by utilising the
strength of their names to sell across borders and in markets where they do not have a retail presence.
The disparity between the regions also highlights the opportunities for growth for apparel to be sold over
the internet in Eastern Europe in particular. If the regions internet retailers enjoyed the same level of
penetration as those in Western Europe, then an additional US$5 billion of sales would have been
generated over the internet as compared to in stores, underlining how the growth of the internet provides an
opportunity, but also a significant threat to store-based channels.
Distribution of Apparel Products:

Western Europe 2005-2020
Distribution of Apparel Products:

Eastern Europe 2005-2010
100%
Retail Value RSP
(% breakdown)
Retail Value RSP

(% breakdown)
100%
75%
50%
25%
0%
2005
2006
2007
Other channels
2008
2009
2010
75%
50%
25%
0%
2005
Internet retailing
2006
2007
Other channels
2008
2009
2010
Internet retailing
PASSPORT 18
Food and drink internet retailing: Value of sales, 2006 and 2011
In 2011, the value of sales generated by food and drink
internet retailing reached US$12 billion in Western
Europe and US$658 million in Eastern Europe.
However, its lack of widespread growth highlights how

the UK trend is far from universal in Europe. Although
growth is becoming apparent in some markets, the
channel still accounts for only a small share of sales.
France, though, may provide a view of where the
market may be heading. Retailers like Auchan,
Carrefour and Casino are adopting a different business
model to retailers in the UK by encouraging consumers
to pick up products at stores rather than having them
delivered. This gives retailers the chance to leverage
their store base and the opportunity to sell on-the-go
products or items they had forgotten to consumers who
had completed the majority of their shopping online.
6
The product area generated much lower levels of sales

compared to apparel in both regions, despite emerging
earlier as a business model in a number of countries.
The UK is the largest market by far, accounting for over
half of the additional sales generated in Western
Europe between 2006 and 2011.
Food and Drink Internet Retailing:

Value Sales 2006/2011
2006
2011
0
GB
FR
NL
DE
BE
IT
CH
ES
SE
IE
Key: GB = United Kingdom; FR = France; NL = Netherlands;

DE = Germany; BE = Belgium; IT = Italy; CH = Switzerland;
ES = Spain; SE = Sweden; IE = Ireland
PASSPORT 19
Food and drink internet retailing, is there further growth to come?

Distribution of Packaged Food Products:
Eastern Europe 2006-2011
Retail Value RSP
(% breakdown)
100%
75%
50%
25%
0%
2006
2007
2008
Other channels
2009
2010
2011
Internet retailing
Distribution of Packaged Food Products:

Western Europe 2006-2011
Retail Value RSP
(% breakdown)
100%
75%
50%
25%
0%
2006
2007
2008
Other channels
2009
2010
Internet retailing
2011
As with apparel, strong growth for food and drink

internet retailing has not impacted greatly on the
distribution of packaged foods, which is one of its
main constituents.
Overall, internet retailing has gained only limited
penetration in both Eastern and Western Europe,
accounting for a negligible share of sales in the
former region, while in Western Europe, despite
the influence of the UK, only 1.5% of sales are
generated over the internet.
As with apparel, though, if Eastern Europe were to
enjoy the same penetration rates for internet
retailing as Western Europe, it would mean that an
additional US$2 billion of sales would have been
generated over the internet and not in stores.
The low penetration rates in Western Europe after
a long period of development, especially in a
market like the UK, suggest that internet retailing
may not a development that consumers want.
However, to remain competitive, it is likely that
retailers will feel they have to offer such a service if
one of their rivals does.
PASSPORT 20
INTRODUCTION
CONTEXT
PRODUCT VIEW
SALES
EUROPE
THE IMPORTANCE OF CROSS-BORDER SALES
Number of consumers undertaking cross-border purchases grows

The growth of the EU and consumers ability to
move freely within its borders has increased the
share of sales made by shoppers across
borders.
Percentage of Consumers, At Least One

Cross-border Purchase 2006-2010
2010
Much of this growth in cross-border sales has

come from consumers travelling abroad, with
only a small proportion coming through distance
sales channels, including the internet.
2009
However, the growing propensity for consumers

to shop across borders highlights an increasing
realisation that buying from another country can
provide lower prices and a wider range of
products or brands, aided by the fact that EUwide laws provide protection when they do so.
2008
2006
22
24
26
% of consumers
28
30
Note: Data for graphs on slides 21 and 22 come from the 5th edition of the
European Commissions Consumer Conditions Scoreboard, March 2011
The internet as a channel is likely to benefit

greatly from this growing consumer awareness
of cross-border purchasing. As a channel, the
internet enables consumers to purchase easily
from another country, and as shoppers move
purchases online to local retailers, so the
opportunity for companies in other countries will
emerge.
PASSPORT 22
Cross-border purchases highest in small retail markets

Although 36% of all EU citizens have made a purchase over the internet from a retailer in their own
country, only 9% have made a cross-border purchase. Nevertheless, business-to-consumer internet
retailing generated sales worth US$131 billion in 2011, thus an estimated US$12 billion of sales occurred
across borders.
The incidence of cross-border sales is highest amongst consumers in smaller countries who potentially
have less access to certain brands or products, those with geographical or linguistic links with larger
countries, and those where there is a high penetration rate for broadband access.
Ultimately, the high share of consumers from markets like Malta, Luxembourg and Ireland does show that
consumer concerns regarding cross-border shopping can be overcome and, therefore, retailers will need to
be increasingly aware of both the opportunities and threats that it provides.
Cross-border Purchases by Consumers with Internet at Home (%) 2010
60
% of individuals
50
40
30
20
10
0
MT
LU
IE
AT
CY DK
FI
CS
BE
SE
NL
FR
SK GB GR EE
LT
LV
SI
DE
ES
PT HU
IT
BG
PL
RO
Key: MT = Malta; LU = Luxembourg; IE = Ireland; AT = Austria; CY = Cyprus; DK = Denmark; FI = Finland; CS = Czech Republic; BE = Belgium;
SE = Sweden; NL = Netherlands; FR = France; SK = Slovakia; GB = United Kingdom; GR = Greece; EE = Estonia; LT = Lithuania; LV = Latvia;
SI = Slovenia; DE = Germany; ES = Spain; PT = Portugal; HU = Hungary; IT = Italy; BG = Bulgaria; PL = Poland; RO = Romania
PASSPORT 23
Amazon.co.uk highlights opportunities of cross-border sales

Unique Visitors to Amazon.co.uk: July 2011
Amazon.co.uk benefits from being a strong

brand operating in a market where
consumers are used to purchasing over
the internet.
Despite this, almost 22% of consumers
who visited the site in July 2011 did so
from markets outside the UK.
The highest share of consumers from
abroad came from Germany and Ireland,
but there was a broad number of countries
whose shoppers visited Amazon.co.uk
during the month.
UK
Germany
Ireland
Netherlands
Spain
Other markets
Note: Data for graphs on slides 23 and 24 come from panel data taken in October
2011 for July
The breadth of countries highlights the

threat of cross-border sales to locallybased retailers. Companies from other
countries immediately become competitors
and, therefore, retailers need to be aware
of a whole new range of rivals. They will
also need to be aware of their new
competitors pricing, product range,
delivery times and offerings, and react in
order to remain competitive.
PASSPORT 24
Amazon.co.uk: Where visitors from other markets come from

3.3 million consumers from markets outside the UK visited Amazon.co.uk in July 2011, with a third of those
coming, combined, from Ireland and Germany.
The presence of Germany as supplying the third largest number of visitors underlines the attraction of
Amazon.co.uk specifically, given that Amazon also operates a site based in Germany. The different range
of products available on the UK site, which includes a wider range of English language movies and books,
is augmented by the third party sellers that market products through it, again enlarging Amazons range,
while German consumers buying presents for people in the UK add another boost to Amazon.co.uks visitor
numbers.
As Amazon looks to add country-specific sites in Europe, it is clear from the number of consumers visiting
Amazon.co.uk that there is likely to be an appetite for such a site in a number of markets.
Number of unique visitors
Number of Unique Visitors to Amazon.co.uk by Country: July 2011

600,000
400,000
200,000
0
NL
IE
AT
SE
DK
BE
DE
FR
FI
ES
GR
IT
CS
PT
SL
HU
PL
RO
BU
Note: The graph shown above gives data on countries contained in other markets on the previous slide
Key: NL = Netherlands; IE = Ireland; AT = Austria; SE = Sweden; DK = Denmark; BE = Belgium; DE = Germany; FR = France; FI = Finland;
ES = Spain; GR= Greece; IT = Italy; CS = Czech Republic; PT = Portugal; SL = Slovenia; HU = Hungary; PL = Poland; RO = Romania;
BU = Bulgaria
PASSPORT 25
INTRODUCTION
CONTEXT
PRODUCT VIEW
SALES
EUROPE
Internet retailing: The importance of infrastructure

There is strong and growing demand from consumers
for internet retailing solutions that enable them to shop
conveniently for a wide range of products at competitive
prices.
In a number of markets, these same consumers are
shopping across borders, using the internet to
purchase from retailers products or brands that they
are unable to buy in their own market, or at prices
unavailable elsewhere.
Demand
Retailers have reacted to this growing demand for

internet retailing by launching fully transactional
websites either in a single country or across multiple
markets.
However, not every consumer is taking this step,
especially in respect of cross-border sales. Much of this
is down to the capacity of infrastructure to support
consumers ability to make a purchase either online or
across borders.
Infrastructure
Supply
In the medium term, retailers will have to address

consumers concerns regarding cross-border sales. In
relation to Europe, some help will come from legal
changes in the single market of the EU.
PASSPORT 27
Infrastructure: Positives exist from recent years

Although the penetration rate of reliable, high speed internet access is not uniform across Eastern and
Western Europe, the number of homes with such access has risen in recent years, making it easier for
consumers to shop over the internet.
This rise in the penetration of broadband access has been met by an increase in the number of retailers
offering consumers e-commerce solutions. However, what has made consumers increasingly happy to
shop online is the fact that retailers have improved their supply chains to enable shoppers to send back
products with more confidence than previously. Returning products bought online was traditionally quite
difficult, but following investment retailers have made it easier for shoppers to send back products and get
refunds. Armed with the confidence that they will get their money back if they do not like the items for
whatever reason, consumers have become more willing to shop online.
Broadband
penetration
Improving
returns
policies
Easier
shopping
environment
PASSPORT 28
Penetration of broadband internet connections in Europe

Share of households
Eastern Europe: Share of Households with Broadband Access in 2010

70%
60%
50%
40%
30%
20%
10%
0%
BL
BO
BU
CR
EE
GG
LT
MO
PO
RO
RU
BS
SK
SV
UK
Key: BL = Belarus; BO = Bosnia; BU = Bulgaria; CR = Croatia; EE = Estonia; GG = Georgia;

LT = Lithuania; MO = Montenegro; PL= Poland; RO = Romania; RU= Russia; BS = Serbia;
SK = Slovakia; SV = Slovenia; UK = Ukraine
Western Europe: Share of Households with Broadband Access in 2010

Share of households
100%
75%
50%
25%
0%
AT
BE
CY
DK
FI
GR
IC
IT
LU
NL
NO
PT
ES
TR
GB
Key: AT = Austria; BE = Belgium; CY = Cyprus; DK = Denmark; FI = Finland; GR = Greece; IC = Iceland;

IT = Italy; LU = Luxembourg; NL = Netherlands; NO = Norway; PT = Portugal; ES = Spain;
TR = Turkey; GB = United Kingdom
Broadband access differs

greatly across Europe. About
64% of households in Western
Europe have broadband
access, but in Eastern Europe
this falls to 31%.
However, as noted previously,
there are differences within
each region which will make
some countries easier to target
for retailers attempting to
globalise or regionalise their
internet retailing presence than
others.
Within Western Europe,
Austria, Greece, Italy, Portugal
and Turkey lie below the
regional average, while in
Eastern Europe, Slovenia lies
about the Western Europe
average, with Estonia and the
Czech Republic close behind.
PASSPORT 29
Infrastructure: Large number of negatives remain in 2011

Despite the positive elements highlighted, there
are still a number of factors holding back the
expansion of internet retailing in a number of
markets, especially across borders within Eastern
and Western Europe.
Pricing and
payment
Language:
site and
customer
service
Shipments
Hindrances
to sales
Copyright
Lack of a
legal
framework
Localisation
of marketing
needs
Localisation
of product
choices
The lack of a legal framework that protects

consumer rights in the same way from country to
country acts as a drag on cross-border sales. Also,
due to specific country delivery options, retailers
have to face differing consumer expectations:
some require one hour delivery slots, while others
are happy to wait in all day. Retailers will have to
be aware of these differences before extending
their internet retailing offer into a new market.
One of the biggest hurdles that a retailer will have
to overcome is in relation to the local differences
required of their web site, in terms of language, the
product offering, the need for different sizes,
colours or designs, and in relation to customer
service, where a retailer may have to converse with
consumers in a foreign language. Localisation of
offering will require a lot of thought.
PASSPORT 30
Amazon.de and Amazon.fr underline the importance of language

Consumers ability to understand the web site they are shopping through is highlighted by the differences in
where the users of Amazon.fr (France) and Amazon.de (Germany) are based. The majority of people
visiting Amazon.fr or Amazon.de come from the sites local market. In both cases, the domestic share is
much higher than that for Amazon.co.uk, which is written in English and is thus more widely understood.
For both Amazon.fr and Amazon.de, the leading countries for non-domestic customers are neighbouring
markets with cultural and linguistic similarities. For France, this has led to Belgium being the most important
market for visitors, while for Germany the number of shoppers visiting from Belgium is negligible.
As retailers expand their online presence, translating their web site into local languages appears to be a
necessity. Given differences in terms and understanding, this translation will need to be done from the
bottom up, rather than through relying on consumers using automated online translation services.
Amazon.fr
Unique Visitors to Amazon.fr and

Amazon.de in July 2011
Amazon.de
France
United Kingdom
Germany
Switzerland
Belgium
Austria
Other markets
Note: Data for pie charts comes from panel data taken in October 2011 for July
PASSPORT 31
Different models for growth: Bricks and mortar brands

The use of the internet to expand either globally, eg US-based
businesses targeting Western or Eastern Europe, or regionally, asks
different questions of the company, depending on their starting point
eg with or without stores and will vary according to whether the
company is a retailer or a manufacturer.
For those companies that are existing retailers with stores in a given
market, using the internet as a way to broaden their presence
appears like a good strategy. It enables the company to expand
where consumers have a knowledge of their brand or products, and
where demand is present. This can allow the retailer to work out
where to open stores in future, or where to invest their marketing
spend in order to continue to increase brand awareness.
However, for UK- or US-based retailers, consumers knowledge of a
brand may be limited to the expatriate community and, therefore,
while demand may be present in a given market, the opportunities for
growth may be limited.
Extending a companys online presence, while cheaper than opening
stores, is not a decision that can be taken lightly, given the
importance of language, the need to lengthen supply chains, the
requirement that returns can be made easily, and the need to invest
in marketing. As such, while expanding geographical presence using
the internet is positive, retailers will have to be careful when
identifying the markets to expand into.
PASSPORT 32
Different models for growth: Pure e-commerce

As with store-based retailers expanding into new markets, pure ecommerce companies need to be aware of the pitfalls that can come
from entering new countries without a strategy that supports this growth.
Building a brand presence online requires less investment than building
stores, but in a crowded marketplace pure e-commerce players will
need to market themselves strongly, spend on search engine
optimisation to make sure they come as close to the top as possible,
and target the next country market which has the potential for the
addition of a country-specific web site.
The strategy employed by Amazon.com Inc and Asos Plc, as they have
expanded their presence in Europe, is instructive in showing how
successful retailers have undertaken this development in recent years.
In the case of both companies, they built a presence in the UK, Asoss
home market, and through the wider use of English in Europe gained
insight into which countries consumers were interested in their
products. This step, allied with analysing which countries would provide
the strongest medium term growth opportunities, enabled them to then
establish country-specific web sites in markets like Germany, France,
Italy and Spain. As Amazon and Asos expanded into the new markets,
they translated the web sites in full to make sure that locally-based
consumers would be able to shop through the web sites as easily as
possible.
PASSPORT 33
Different models for growth: Manufacturers selling to consumers

Mirroring the steps taken by pure e-commerce retailers, the internet has enabled
manufacturers increasingly to sell directly to consumers. Dell highlighted the
opportunities for manufacturers to extend their supply chains to deliver directly to
consumers, cutting out third party retailers, a step that a number of companies have
taken since.
Apple has taken Dells development online a step further by enabling consumers to
download digital content, from music to films, alongside selling its hardware over
the internet. Although digitising content is not a step that every retailer can take,
Apple approached the selling of a product in a different way, using the internet to
make it more convenient for consumers to purchase goods than was traditionally
the case.
For product areas where margins are very thin, such as consumer electronics and
appliances, and where the number of specialists operating such stores is dwindling,
manufacturers will have to find ways to use the internet to sell directly to
consumers. Not only does this channel provide a way for brand owners to generate
better margins, but it will also enable them to identify which customers are loyal to
their brand and allow them to target them on an on-going basis as and when new
products are launched.
However, this step is not only for manufacturers of non-grocery products. The
success of Diapers.com in the US shows that consumers are happy to shop for a
range of products on line, if there is an advantage in doing so. This step will ask
new questions of manufacturers supply chains and require them to think in new
ways, but with others already doing it, the benefits clearly outweigh the negatives.
PASSPORT 34
INTRODUCTION
CONTEXT
PRODUCT VIEW
SALES
EUROPE
THE FUTURE OF INTERNET RETAILING IN EUROPE
Internet retailing to account for growing share of industrys sales

The internet retailing channel will account for an ever larger share of the total retailing industrys sales in
the future. In 2006, internet retailing accounted for 1.1% of sales in Eastern Europe and 1.8% in Western
Europe. By 2016, these shares are expected to rise to 3.5% and 5.7%, respectively.
However, in markets like Finland and the UK, the share is set to be much higher, with internet retailing
accounting for more than 10% of all sales.
The performance of the channel is not set to be uniform across all product areas, but the trend towards
internet retailing accounting for an ever higher share of value sales is evident. The growth of the channel
will provide retailers and manufacturers with new opportunities and new threats. On the positive side, it will
enable them to improve the way they sell to consumers and to build stronger ties with shoppers by building
up knowledge about them. However, on the downside, there is the threat of a growing number of
competitors, such as grocers, selling a wider range of products online, and retailers selling across borders,
that companies will have to deal with.
Share of Total Retail Sales Accounted for by Internet Retailing 2006/2011/2015
Key:
Share of sales
12%
CS = Czech Republic;
10%
HU = Hungary;
8%
LT = Lithuania;
PL = Poland;
6%
AT = Austria;
4%
FI = Finland;
FR = France;
2%
DE = Germany;
0%
CS
HU
LT
PL
AT
2006
FI
2011
FR
DE
2016
NL
GB
NL = Netherlands;
GB = United Kingdom
PASSPORT 36
Influence of mobile technology set to aid growth of internet retailing

Mobile technology, in terms of smartphones and tablets, has permeated very quickly into the consumer
base. By 2015, annual sales of smartphones in Europe are predicted to reach 150 million, while 40 million
tablets will be purchased, from a standing start in 2009.
The launch of the Amazon Kindle Fire tablet in September 2011, the continued evolution of Apples iPhone
and smartphones from other handset manufacturers is widening consumer adoption, leading many
shoppers to have such technology with them at all times.
The growing presence of these technologies in consumers pockets will enable them to research products
and to check prices in stores, but it will also allow them to purchase the items from the cheapest retailer
through the same internet access. This change in how and where consumers access the internet will
provide the internet channel with further growth opportunities and is likely to give sales growth added
momentum in the medium and longer term.
Number of Smartphones Sold by Year
2009-2015
Number of Tablets Sold by Year

2009-2015
50
Million units
Million units
200
150
100
50
0
2009
40
30
20
10
2010
2011
Eastern Europe
2012
2013
2014
2015
0
2009
Western Europe
2010
2011
2012
Eastern Europe
2013
2014
2015
Western Europe
PASSPORT 37
Internet retailing is going social and mobile
Mobile
Social
The adoption of tablets and smartphones by consumers, and

emerging business models that utilise the internet in new ways are
leading to an evolution of how internet retailers interact with
consumers.
Mobile internet; m-commerce
Internet retailing on smartphones or tablets is creating a consumer
base that is always ready to shop or interact with retailers. The
growth of mobile apps enables retailers to know when consumers
visit their stores and to provide them with greater level of product
Deals information. Ultimately, this helps blur the line between internet
and store-based channels.
Social internet, social commerce
Selling through portals like Facebook or generating sales over
Twitter is an increasingly social way for companies to sell their
products to consumers.
Deals
Coupon sites like Groupon and LivingSocial are being joined by
flash sales and member-only sites to create new business models
that attract new consumers to the internet by offering discounts or
unmissable deals. These sites also offer consumers products or
brands that have traditionally had a minimal presence online,
which boosts the number of people wanting to shop online.
PASSPORT 38
Success probabilities by product

In Western Europe, internet retailing is forecast to
grow at a CAGR of 9% in constant value terms
between 2011 and 2016, while Eastern Europe will
see sales expand by an annual average of 12%.
Apparel
WINNERS
However, not all products are set to benefit from

this pace of sales growth in Europe. Apparel is
expected to see a greater number of consumers
shop for its products online. Boosted by the trends
being seen in 2011, further retailers are expected
to add apparel ranges online, which will quicken
the pace of sales growth in future.
Products expected to grow sales online
Similarly, items like consumer electronics and

fragrances, which are very brand led, are expected
to sell well over the internet in future.
Fragrances
Non-perishable food and drinks
Media products
Products likely to see limited growth online

Consumer appliances
Consumer healthcare
LOSERS
By comparison, consumer appliances, purchases

of which centre on features, are likely to remain
popular store-based purchases. Mirroring this
difference within a broad product area is the fact
that goods like make-up are not expected to grow
strongly online, as consumers want to try or
receive information about the product before
buying. This factor will limit such products growth
online in the medium term.
Consumer electronics
Beauty and personal goods

Perishable food
Traditional toys and games
PASSPORT 39
REPORT DEFINITIONS
Definitions
According to Euromonitor International, internet retailing is defined as follows:
Sales of consumer goods to the general public from businesses via the internet;
Includes mobile retailing (m-commerce);
Sales data are attributed to the country where the consumer is based, rather than where the retailer is
based;
Payment can be made through a store card, an online credit account or on delivery of the product;
Includes downloads.
Excluded from internet retailing are:
Consumer-to-consumer sales;
Sales of motor vehicles, motorcycles and vehicle parts;
Tickets for events (sports, music concerts, etc) and travel;
The sales of holidays;
Revenue generated by online gambling sites.
PASSPORT 40
Experience more...
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PASSPORT 41

European Digital Divide E-Commerce Markets in Europe Opportunities and Prospects

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EUROPEAN DIGITAL DIVIDE: E-COMMERCE MARKETS

IN EUROPE OPPORTUNITIES AND PROSPECTS

RETAILING: INTERNET RETAILING

Internet shopping has been a

Objectives and parameters of global briefing

RETAILING: INTERNET RETAILING

Product sales differ

The prevalence of broadband access in Western Europe means that

Cross-border sales grow

RETAILING: INTERNET RETAILING

INTERNET RETAILING AND EUROPE: IN CONTEXT

Internet retailing and Europe 2011: In context

Internet Retailing Sales by Region in 2011

Middle East and

RETAILING: INTERNET RETAILING

INTERNET RETAILING AND EUROPE: IN CONTEXT

Internet retailing and Europe 2011: The country view

Leading Countries: Internet Retailing Sales 2011

RETAILING: INTERNET RETAILING

INTERNET RETAILING AND EUROPE: IN CONTEXT

Leading Internet Retailing Markets:

While a number of countries are among both the

These markets are likely to provide internet retailers

Per Capita Sales (US$)

RETAILING: INTERNET RETAILING

INTERNET RETAILING AND EUROPE: IN CONTEXT

Spending by market through internet retailing

In the combined market of

Other European markets

RETAILING: INTERNET RETAILING

In a number of cases, the steps

INTERNET RETAILING AND EUROPE: IN CONTEXT

Spending over the internet: The other markets in Europe

Sales per capita (US$)

RETAILING: INTERNET RETAILING

INTERNET RETAILING IN EUROPE: A PRODUCT VIEW

Sales by product: Western versus Eastern Europe

RETAILING: INTERNET RETAILING

INTERNET RETAILING IN EUROPE: A PRODUCT VIEW

Sales by product: A regional comparison

Toys and Games

Housewares and Home

Beauty and Personal Care

RETAILING: INTERNET RETAILING

INTERNET RETAILING IN EUROPE: A PRODUCT VIEW

Western Europe: Sales added 2006-2011

Value growth 2006-11

Sales added 2006-2011

Sales Performance by Product Category 2006-2011

RETAILING: INTERNET RETAILING

INTERNET RETAILING IN EUROPE: A PRODUCT VIEW

Eastern Europe: Sales added 2006-2011

Sales Performance by Product Category 2006-2011

Value growth 2006-11 CAGR %

Sales added 2006-2011 (US$ bn)

Sales added 2006-2011

Value growth 2006-11 CAGR %

RETAILING: INTERNET RETAILING

INTERNET RETAILING IN EUROPE: A PRODUCT VIEW

Apparel internet retailing: Value of sales, 2006 and 2011

RETAILING: INTERNET RETAILING

INTERNET RETAILING IN EUROPE: A PRODUCT VIEW

Apparel internet retailing: The opportunity remains

Distribution of Apparel Products: