Competition Heats Up for Lucrative European Online Market As Retailers Fight to Capture Valuable Market Share
BCG report estimates that European online market will reach
US $44.6 billion ( (euro) 45 billion) by 2002
LONDON, UK, Feb. 9 /CNW-PRN/ - The battle to dominate online retailing in Western Europe begins in earnest this year as the market enters a stage of hyper-growth with three types of players -- European incumbents, European start ups and US online retailers - fighting to capture market share. Unless European retailers become more aggressive in creating innovative e-commerce businesses, they will continue to lose share of their home market to more experienced US competitors. So says a new report from The Boston Consulting Group, entitled "The Race for Online Riches -- E-Retailing in Europe."
"US players have already been able to scoop up 20% of the European market by coming in with large-scale pan-European businesses," says Patrick Forth, BCG Vice President and author of the report. "This approach contrasts with that of typical European incumbents who have focused on their national markets only. US online retailers, however, will also find it difficult to deal with the European online market since it is a conglomeration of regional markets, each at a different level of development."
The BCG study is unique because it is based on comprehensive interviews with 546 European retailers, in addition to other publicly available data sources. Other findings of the report include:
- European retailers' online revenue increased by more than 200% in
1999, outpacing growth in the US market of 145%. Yet, sales online
currently account for 0.2% of total retail revenues in Europe,
compared to 1.2% in the US.
- Total online revenue in 1999 was US $3.47 billion ( (euro) 3.5
billion) and will reach approximately US $8.9 billion ( (euro) 9
billion) by the end of this year.
- Online retailing will continue to grow at exceptional rates over the
next few years. Total European online retail revenue is expected to
reach approximately US $44.6 billion ( (euro) 45 billion) in 2002, a
thirteen-fold increased from 1999.
- Multichannel retailers, those with other existing sales channels, are
taking advantage of their strong existing brands and established
customer service functions and, as a result, account for two thirds of
the online market.
- "Pure-plays," retailers who sell only online, account for the
remaining third of the market and are outperforming multichannel
retailers, experiencing growth rates that are on average 25 percentage
points higher.
- Total exports beyond national borders account for only 7% of European
online retailers' revenue; exports out of Europe generate just 2%.
- Four categories -- travel, computer hardware/software, books and
financial brokerage -- account for three-quarters of the market.
As a whole, European online retailers have preferred to take a narrow focus, generating 93% of their sales in their home-markets. This is partly due to the tremendous differences among online markets within Europe, which pose a significant challenge for retailers trying to span the entire continent. Even established online retailers from the US are finding it difficult to adapt their one-size-fits-all approach to the diverse European market. Some of these differences include:
- Sweden has developed a relatively advanced online market. With an
online retail penetration of 0.7%, second only to the US, it clearly
stands out from the rest of Europe. Its absolute market size, however,
is relatively small.
- Despite lower levels of penetration, Germany and the UK are the most
important markets by virtue of the size of their economies. Already,
they account for 60% of the online market and the majority of market
growth in absolute terms by expanding more than three-fold over the
space of a year.
- In Spain/Portugal and Italy the development of online retailing lags
behind the rest of Europe, as shown by their lower online retail
penetration rates. They do, however, have the potential to become
important markets as their penetration rates rise and they migrate
more of their sizeable retail markets online.
- France's population has been buying direct through Minitel for almost
two decades. These high Minitel penetration rates have yet to be
translated to the Internet-based online retail market.
- Belgium, the Netherlands, Switzerland, Austria, Norway, Finland and
Denmark claim smaller positions in the European online retail market
as a result of moderate online retail penetration rates and small
market sizes.
"European retailers need to step up to this challenge and determine what part of their business can be scaled on a pan-European basis and what part needs to be tailored to appeal to local preferences within the European market," says Forth. "The rewards will be huge for the small number of retailers, either European or American, who find the right balance between the two."
The BCG study examines the online retail markets of the United Kingdom, Germany, France, Italy, Spain, Portugal, Austria, Switzerland, Belgium, the Netherlands and the Nordic countries of Sweden, Norway, Finland and Denmark. Reports focusing on these individual markets have also been prepared to provide further insight into the dynamics at a local level.
The Boston Consulting Group (BCG) is a general management consulting firm, widely regarded as the global leader in business strategy. Since 1963, BCG has worked with companies in every major industry and global market to develop and implement strategies for competitive success. BCG now operates in 32 countries and 47 cities around the world. More information about BCG can be found on its Web site: bcg.com.
SOURCE Boston Consulting Group
CO: Boston Consulting Group
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SU: ECO
02/09/2000 06:00 EST prnewswire.com |
