Europes eCommerce:

The Next Five Years

by Hellen K. Omwando

Helping Business Thrive On Technology Change

MARKET OVERVIEW

March 1, 2004

MA RK E T O V E R VIE W

Includes a forecast and Consumer Technographics data

March 1, 2004

Europes eCommerce: The Next Five Years

Forecast: Europes Online Retail Sales, 2004 To 2009
by Hellen K. Omwando
with Jaap Favier, Tim van Tongeren

EXECUT I V E S U M MA RY
This year, European Net shoppers will spend an average of 223 online, bringing Europes online retail
market to 40 billion. As both consumers and Net retailers get smarter about using the Web, online
retail growth will continue unimpeded, taking 8% of total retail sales by 2009. For the next four years,
the UK will dominate Europes eCommerce market, but Germany will catch up by 2009. Travel will keep
generating the most online sales.

TABLE O F CO N T E N TS
2 Supply And Demand Factors Fuel Online
Retail Growth
2 Online Retail Will Quadruple To 167 Billion
Between 2004 And 2009
Country Highlights: Germany Will Catch Up
With The UK
Category Highlights: Travel Continues To
Add The Most To The Till
RECOMMENDATIONS

N OT E S & R E S O U R C E S
Related Research Documents
Online Retail Europe: Consumer Technographics
Data Overview
January 2004
The Best of Europes Online Retail
October 2003
US eCommerce Overview: 2003 To 2008
July 25, 2003

7 Next Steps For European eCommerce

8 Supplemental Material

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Market Overview | Europes eCommerce: The Next Five Years

SUPPLY AND DEMAND FACTORS FUEL ONLINE RETAIL GROWTH

Both consumers and retailers are fueling the growth spiral of online retail.

More than half of European adults will shop online regularly. Continuing historic

growth trends, 96 million European adults will shop online by the end of this year
an increase of 22% on 2003.1 Three in four of these shoppers will come from the UK,
Germany, France, the Netherlands, and Italy. Yes, Italy.

Online shoppers have shortened their learning curve. Net newbies are leap-frogging
their pioneering counterparts in buying online. By year-end 2003, 29% of Europeans
were regular Internet shoppers in their rst year online; three years earlier, only 17%
of Net newbies were shopping online that soon.2

Retailers are rising to the challenge. Many European retailers still have a long way

to go in becoming customer advocates doing whats right for the consumers, and
not just whats good for the bottom line.3 But leaders like Argos.co.uk and SNCF.fr are
paving the way and reaping the value of eCommerce by providing consumers with the
right Web site user experience, the right customer service, and the right product choice.

ONLINE RETAIL WILL QUADRUPLE TO 167 BILLION BETWEEN 2004 AND 2009
Consumers keep spending more online despite macroeconomic uncertainties, contractions
in countries like Germany, and global political tensions. This year, retailers in Western
Europe will generate 40 billion in online sales a 47% increase on 2003 and 2% of total
retail sales (see Figure 1). In the next ve years, eCommerce will grow by a healthy CAGR
of 33% to reach 167 billion in 2009, 8% of total retail sales.
Country Highlights: Germany Will Catch Up With The UK
Even as eCommerce soars in Europe, it will remain in the shadow of the US, lagging by
about three years.4 But progress in online retail in Europe varies markedly by country.

The UK sets the pace for the rest of Europe. Europes largest eCommerce economy

will generate 14 billion in 2004 more than a third of total European online retail
and will grow its eCommerce revenues to 40 billion by 2009. As the traditional
bastion of US eCommerce investments in Europe and one of the most competitive
European markets, the UK has closely followed US eCommerce and has overtaken the
pioneers in some cases; Tesco, the UKs largest supermarket, is the most successful
online grocer in the world. At 442, the UKs Net retail spend per online capita is
almost at parity with that of the US.

March 1, 2004

2004, Forrester Research, Inc. Reproduction Prohibited

Market Overview | Europes eCommerce: The Next Five Years

Figure 1 Forecast: Europes Online Retail Sales By Country, 2004 To 2009

The spreadsheet detailing this forecast is available online.
175,000
Rest of Europe
Benelux

150,000

Nordics
Spain
Italy

125,000
Online retail
sales
( millions)

100,000

France

75,000
UK

50,000
25,000
Country
breakdown
Germany

Germany
2004

2005

2006

2007

2008

2009

CAGR

10,632

15,237

20,620

14,116

18,882

23,988

27,449

35,115

42,765

32%

29,045

33,979

40,003

23%

France

3,585

5,573

8,443

12,313

17,229

22,448

44%

Italy

1,922

3,073

4,794

7,355

11,060

16,188

53%

823

1,282

1,967

2,949

4,304

6,087

49%

1,263

1,856

2,643

3,592

4,653

5,764

35%

Norway
Denmark

713
712

1,034
1,029

1,416
1,452

1,992
1,961

2,617
2,534

3,206
3,138

35%
35%

Finland

474

697

1,003

1,399

1,895

2,488

39%

2,459

3,295

4,229

5,214

6,245

7,316

24%

652

948

1,328

1,789

2,343

3,009

36%

54

82

118

159

203

252

36%

1,718

2,498

3,492

4,519

5,673

6,794

32%

Austria

742

1,089

1,539

2,129

2,846

3,658

38%

Ireland

294

441

630

873

1,171

1,520

39%

Portugal

195

308

477

723

1,070

1,488

50%

Greece

104

174

288

468

738

1,118

61%

40,458 57,498 78,472 103,928 133,675 167,241

(numbers have been rounded)

33%

UK

Spain
Nordics
Sweden

Benelux
Netherlands
Belgium
Luxembourg
Rest of Europe
Switzerland

Total Europe
( millions)

Source: Forrester Research, Inc.

2004, Forrester Research, Inc. Reproduction Prohibited

March 1, 2004

Market Overview | Europes eCommerce: The Next Five Years

Germany, the sleeping giant, awakes. Europes largest economy has yet to really

contribute to eCommerce. By year-end 2004, it will yield 11 billion in online

retail sales, a quarter of the European total. It will take until 2009 for the Germans
to outspend UK consumers online, with 43 billion in online retail sales. By then,
Germany will have more than 9 million more online shoppers than the UK and will
migrate online the key eCommerce revenue generators like travel Germans spend
more on this oine than any other European consumers do.

France: Minitel fades; long live the Net. Three years ago, more French consumers

bought via Minitel Frances closed, phone-based information and commerce

system than did via the Internet.5 With a slew of pure plays like priceminister.
fr and traditional retailers like FNAC operating Web sites that have user shopping
experiences superior to that of Minitel, the trend has now reversed making France
Europes third largest eCommerce economy. By year-end 2004, it will yield 3.5 billion
in eCommerce sales and will grow by a CAGR of 44% to 22 billion by 2009.

The Netherlands keeps the Benelux on the eCommerce map. Collectively, the

Beneluxs 2004 online retail sales will be just shy of Frances. This is mainly due to the
Netherlands, which will claim 78% of the regions eCommerce 2.5 billion in 2004.
This will rise to 7 billion by 2009, with an assortment of online travel companies ready
to feed the bargain-hunting habits of the Dutch who are the most eager online travel
buyers in Europe.

The Nordics: tech acionados; eCommerce holdouts. Although 80% of the Swedes

have been online for more than three years a higher percentage than in the UK
only 46% of Net users shopped online in 2003, compared with 64% of online UK users.
In 2004, the Nordics will spend about as much online as the average European does
223. But increased credit card usage, among other factors, will lift the eCommerce
glass ceiling, letting the Nordics collectively grow online retail from 3 billion this year
to 15 billion by 2009.6

Italy stands out in Southern Europe. Southern Europe wont catch up with Northern
Europe even by 2009 the rest of Europe is too far ahead.7 But eCommerce will heat
up in Italy. The Italians have made big leaps in PC and Internet penetration over the
past three years, taking advantage of lower hardware and ISP prices. In 2004, 47% of
Italians will be regular Net users compared with 30% of the Spanish and 25% of
them will shop online. By 2009, Italy will become Europes fourth largest eCommerce
market, yielding 16 billion in revenues and with a CAGR of 53%.

March 1, 2004

2004, Forrester Research, Inc. Reproduction Prohibited

Market Overview | Europes eCommerce: The Next Five Years

Category Highlights: Travel Continues To Add The Most To The Till

While online buying varies strongly by country, it varies even more dramatically by retail
category (see Figure 2).

Leisure travels intangible nature retains its appeal. About 17% of European consumers
buy leisure travel online today. With no logistics costs or product damage to worry
about, these consumers will have few qualms about spending 10 billion online for
leisure travel in 2004, a quarter of total eCommerce sales in Europe. As Internet-only
air fares and dynamic holiday packages proliferate, travel will remain the biggest
eCommerce revenue generator through 2009, when it will add 47 billion to the total.

Event tickets piggy-back on travels success. In many ways, events tickets are the

perfect online sell for both consumers and retailers. The logistics involved are simpler
than for most products and, compared with travel, tickets are low-spend items: This
wards o the reservations that consumers have about spending lots of money per
item online. As more retailers like lastminute.com add event tickets to their product
portfolios, they will generate 11 billion in online sales by 2009, more than three times
as much as in 2004.

Clothing benets from mail-orders decline. Forresters Consumer Technographics

Q4 2003 European Study shows that 15% fewer consumers buy clothing via catalog
in the UK today compared with a year ago, while the number of consumers buying
clothing online has almost doubled.8 With more women now shopping online
and with retailers improving the online apparel buying experience with interactive
tools, clothing will yield 4 billion in Net sales in 2004, contributing 10% of total
eCommerce, and will grow to add 20 billion to the total in 2009.

Groceries thrive in the UK alone. The tough economics of selling food items online,

coupled with the underexploitation of oine channels, has dampened the growth of
online grocery sales in Europe. While pure groceries will yield 2.3 billion in Net sales
at the end of the year, more than three-quarters of this amount will come from the
UK home of most of online grocery shoppers. As grocers integrate their oine and
online channels and diversify into nonfood items, Europes online grocery market will
rise to 16 billion by 2009.

Books, videos, and DVDs remain the favorite low-ticket item. US invader Amazon.
com is the Net retailer with the largest mindshare among Europeans.9 Why? Not only
can consumers get the best deals on the latest Harry Potter, but they also have the
exibility to buy books, videos, and DVDs across borders. DVDs, a key add-on to
online bookselling, have beneted from the explosive growth of DVD sales oine

2004, Forrester Research, Inc. Reproduction Prohibited

March 1, 2004

Market Overview | Europes eCommerce: The Next Five Years

Figure 2 Forecast: Europes Online Retail Sales By Retail Category, 2004 To 2009
The spreadsheet detailing this forecast is available online.

Media
Computer software
Books
Music
Videos/DVDs

Event tickets
Flowers
Apparel
Clothing
Footwear
Jewelry/watches
Other accesories
Recreation
Toys
Video games
Sports goods

Electronics
Computer hardware
Consumer electronics
Groceries
Pure groceries/beverages/
household supplies

2004

2005

7,238
1,031
3,170
1,522
1,516
3,542
477
5,926
3,922
884
345
774
2,239
506
1,306
426
4,290
2,717
1,573
5,070
2,332

9,526 11,914 14,026 16,135 19,157

1,155
1,251
1,319 1,371 1,407
4,352
5,644
6,925 8,098 9,091
1,767
1,980
2,174 2,338 2,467
2,252
3,039
3,608 4,328 6,192
4,950 6,543
8,226 9,883 11,349
652
855
1,083 1,333 1,594
8,893 12,935 17,792 23,378 29,427
5,995
8,794
12,201 16,079 20,185
1,354
2,093
2,976
4,070
5,381
507
725
1,005
1,346
1,735
1,037
1,324
1,610
1,882
2,126
3,212 3,549
4,321 5,090 5,653
1,045
1,856
761
1,354
1,664
1,789
2,610
1,884
2,098
2,396
567
715
870
1,030
1,187
5,905 7,780
9,891 12,204 14,584
3,579
4,426
5,234
5,965
6,577
2,326
3,354
4,658
6,238
8,007
7,373 10,455 14,557 19,877 26,394
3,482
5,166
7,634 11,134 15,817

Alcohol
Health/beauty

1,447
1,291

Home appliances
Household goods
Furniture
Garden/tools/DIY

Home products

Leisure travel

Europes total online retail sales

( millions)

1,993
1,898

2006

2,635
2,654

2007

3,406
3,516

2008

4,322
4,420

2009

% of 2009
retail
24%
30%
24%
23%
23%
27%
14%
8%
8%
10%
6%
15%
15%
11%
30%
11%
16%
24%
13%
3%
2%

5,307
5,269

6%
7%

2,362
819
783
326
434
9,635

3,560 5,251
7,538 10,477 14,008
1,201
1,721
2,384
3,185
4,075
1,161
1,671
2,329
3,128
4,041
507
775
1,162
1,697
2,387
692
1,084
1,662
2,468
3,505
13,935 19,965 27,602 36,769 46,896

5%
11%
7%
3%
4%
21%

40,457

57,498 78,472 103,928 133,675 167,241

8%

(numbers have been rounded)

Source: Forrester Research, Inc.

March 1, 2004

2004, Forrester Research, Inc. Reproduction Prohibited

Market Overview | Europes eCommerce: The Next Five Years

with year-on-year growth of more than 50% in the UK. Collectively, books, videos, and
DVDs will yield 15 billion by 2009, up from 5 billion at the end of 2004. The bulk of
these revenues will continue to come from books.

Computer hardware rolls on, but consumer electronics disappoint. The momentum
that Dells revolutionary model developed online still holds; in 2004, 11% of all
consumer hardware purchases will be conducted online and this will double
by 2009. But TV and hi- sales wont migrate online as fast: 13% of total consumer
electronics sales will come from the Net in 2009, as most buyers still need the
reassurance of sales clerks and want to have a look at expensive plasma screens before
they buy. Consumers buying computer games dont need a store an online demo
can convince them to hit the buy button, pushing online retail sales of games and
software to 4 billion in 2009.

R E C O M M E N D AT I O N S

NEXT STEPS FOR EUROPEAN eCOMMERCE

Today, the bulk of the retail products that can be sold online are being sold online. When
did we last see a serious, new eCommerce startup? Opodo in 2001? This means that even
as new online consumers convert to being online shoppers, Europe wont catch up with
US eCommerce within a decade. Online retailers today could just kick back and enjoy the
33% CAGR; this is as good as it gets. Those with ambition, however, should:

Cross borders. Eurobarometer polls show that at least 13% of all EU consumers shop
across borders; although this is mostly while traveling, 18% of them do so via the
Internet.10 Given the option, more Europeans would shop without frontiers Dutch
wine lovers would be happy to stock up at Virginwines.co.uk if the rm decided to
deliver on the Continent. Retailers should creatively seek new customers beyond
their home turf to minimize the huge costs associated with such a move, such as
sharing fulllment infrastructure with local players. And then there are the 10 Eastern
European countries that will join the EU in May. Eastern Europe is still a virgin market
for eCommerce, with PC and Internet adoption gures similar to those of Southern
European countries ve years ago. They are just waiting for trailblazers to crack the
markets open. Are you listening, KarstadtQuelle?

Move into services. Many online retailers are already raising basket sizes by
diversifying into new categories online Tesco.com sells white goods, for example.
Those that want to break away from the pack should go a step further. They should look
to services not random services like utilities as some grocers have done, but those
where theres clear consumer demand but poor or inadequate supply. Top of the list:
digital services like PC-to-mobile messaging services and movie and music downloads.

2004, Forrester Research, Inc. Reproduction Prohibited

March 1, 2004

Market Overview | Europes eCommerce: The Next Five Years

SUPPLEMENTAL MATERIAL
Online Resource
The underlying spreadsheet detailing the forecast in Figure 1 and Figure 2 is available by
clicking the online Get Data button above the gures.
ENDNOTES
1

By Q3 2003, some 26% of Europeans had shopped online at least once an increase of 20%
on Q3 2002. Ninety-ve percent of these Net buyers had purchased something online in the
past three months. See the January 2004 Forrester Report Online Retail Europe: Consumer
Technographics Data Overview.

With a few years of Net experience under their belt, European consumers are growing into online
shopping. But Net retailers beware: Experienced shoppers dier from the next wave of online
shopping newbies. See the May 20, 2003 Forrester Brief Europes Online Shoppers Mature.

Online merchandizing is now a key part of retail in Europe but suers from growing pains.
Leading retailers like Argos are customer advocates, innovating without jeopardizing the
shopping experience. See the October 2003 Forrester Report The Best of Europes Online Retail.

Fueled by a steady stream of new online shoppers and new product category sales, US
eCommerce will grow at a 19% CAGR over the next ve years. Most signicant, online retail will
reach nearly 230 billion and account for 10% of total US retail sales by 2008. See the
July 25, 2003 Forrester Brief US eCommerce Overview: 2003 To 2008.

France has a unique online landscape Minitel users still outnumber all other forms of access.
However, the next ve years will see this situation change completely as French consumers go
multichannel. See the July 2001 Forrester Report France: Clash Of The Online Channels.

Europeans increasingly use credit cards for online purchases but they prefer alternative payment
methods. Credit card use in Sweden doubled between Q4 2001 and Q2 2003. See the October 29,
2003 Forrester Brief Europes Online Payment Method Potpourri.

When we refer to Southern Europe, we mean Italy, Spain, Portugal, and Greece.

We drew the data used here from Forresters Consumer Technographics Q4 2003 European Study;
weh surveyed 18,865 adults across the ve markets of France, Germany, Italy, Spain, and the
UK. We also used data from Forresters Consumer Technographics Q4 2002 European Study; we
surveyed 23,334 adults across the seven markets of France, Germany, Italy, the Netherlands, Spain,
Sweden, and the UK.

This Data Overview is a graphical analysis of Forresters Consumer Technographics Q2 2003

European Mail Survey. It analyzes trends in European consumers online shopping behavior. See the
January 2004 Forrester Report Online Retail Europe: Consumer Technographics Data Overview.

10

Source: Public Opinion In Europe: Views On Business-To-Consumer Cross-Border Trade,

Eurobarometer, November 2002.

March 1, 2004

2004, Forrester Research, Inc. Reproduction Prohibited

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