e-commerce in europe 2016

E-commerce in Europe 2016

2 | E-commerce in Europe 2016

E-commerce in Europe 2016

Following the success of our E-commerce in Europe 2015 study last year, Twenga Solutions

has analysed the latest online retail trends to anticipate what e-retailers can expect from

the industry in 2016. What do European consumers buy? Who are the top European

retailers? What are some of the challenges retailers face? We reveal all…

Contents

1. An overview of e-commerce in Europe

1.1 Great online potential for the European market

1.2 Continual and regular growth in Europe

1.3 Top European e-retailers

1.4 The effect of online on bricks and mortar

2. Online retailers and their e-commerce strategies

2.1 The omnichannel experience in Europe

2.2 Multi-channel strategies in Europe

2.3 Europe and cross-border trade

3. Consumer behaviour and expectations per European market

3.1 What are Europeans buying online?

3.2 Delivery preferences in Europe

3.3 The importance of easy returns

3.4 Payment preferences in Europe

4. Online advertising and m-commerce in Europe

4.1 M-commerce in Europe

4.2 Online video – the advertising format of the future

4.3 Social media and e-commerce in Europe

4.4 Digital advertising spend per European market

4.5 Advertising channel distribution

5. Conclusion

5.1 What challenges are e-retailers to face in 2016?


An overview of e-commerce in Europe

Great online potential for

the European market

With a population of over 821 million of which

73.5% use the Internet1, the potential for e-

commerce in Europe is huge. What’s more,

these users are certainly fans of the online

shopping scene: it is estimated that nearly

two thirds made purchases over the Internet

in 2015, with clothes and sports-related

products being the most popular type of

goods and services².

Within Europe, we find that Internet use and

purchases online vary significantly amongst

the different countries. The United Kingdom

leads the way with 81% of individuals buying

online in 2015, followed by Denmark and

Luxembourg with 79% and 78% respectively.

In terms of Twenga’s main markets, Germany

and France come in 6th and 10th place with

73% and 65% of individuals shopping online.

Spain, Poland and Italy on the other hand

actually rank lower than the European

average of 53% with 42%, 37% and 26%

respectively.

0% 20% 40% 60% 80% 100%

United Kingdom

Denmark

Luxembourg

Norway

Germany

Netherlands

Finland

Sweden

France

Estonia

Austria

Belgium

Europe

Ireland

Malta

Slovakia

Czech Republic

Spain

Slovenia

Latvia

Poland

Hungary

Greece

Lithuania

Croatia

Portugal

Italy

Cyprus

Bulgaria

Turkey

Romania

Macedonia

81%

79%

78%

76%

73%

71%

71%

71%

65%

59%

58%

55%

53%

51%

51%

50%

45%

42%

39%

38%

37%

36%

32%

32%

31%

31%

26%

23%

18%

15%

11%

11%

Proportion of individuals who purchased online within the last 12

months

Source: Eurostat


Continual and regular growth in Europe

The online retail sector is the main driver of growth in European retailing. While e-

commerce growth rates hit 18.4% in 2014 and 18.6% in 2015, growth is not expected to

cease in the coming years with Retail Research predicting 16.7% growth in 2016 and 15.7%

in 2017³.

The UK, Germany and France dominate the online market in Europe: They do not only hold

the largest online share of retail trade in their respective markets, but are also together

responsible for 81.5% of European sales.

Online Share of Retail Trade

United Kingdom Germany France Europe

14%

10%

7% 7%

15%

12%

8% 8%

17%

14%

9% 9%

2014 2015 2016

Source: Retail research


Top European e-retailers

As well as being responsible for a large majority of sales in Europe, 70% of the top 10

retailers with the most sales in Europe are also originate from these 3 mature markets,

while the remaining 3 are actually US-owned businesses. According to Internet Retailing’s

Top 500 2015⁴, the US-owned Amazon tops the list for the most online sales, followed by

German Otto Group and the UK giant, Tesco Stores. The fastest growing company in the

top 10 is Zalando SE, founded in Germany and present in 14 European countries, which saw

a 25.7% growth. However the honorary title for fastest growing company overall goes to

the Turkish clothing and accessories retailer Morhipo, whose sales increased by an

impressive 116.7% over a one-year period!

Top European e-commerce retailers (web sales)

Retailer Growth Country Category

20% US Mass Merchant

8.3% DE Apparel/Accessories

11.1% UK Mass Merchant

-2.2% US Office Supplies

7.9% US Computers/Electronics

5.3% UK Housewares

22.8% FR Mass Merchant

25.7% DE Apparel/Accessories

22.7% UK Food/Drug

9% UK Mass Merchant

Source : Internet Retailing


The effect of online on bricks and mortar

Online sales growth is evidently having its effect on store-based retailers. Europe in

general saw a 1.4% decrease in sales for brick and mortar stores in 2015, and a similar

trend is expected in 2016 with the forecast of a 1.5% decrease.

Change in sales of brick and mortar retailers

2015 sales

2016 forecast

United Kingdom -2% -3.4%

Germany -1.8% -1.7%

France -1.7% -1.2%

Spain -0.6% 0.4%

Italy -1% 0.04%

Netherlands -1.4% 0.2%

Sweden -1.2% -0.4%

Poland -0.6% -1.1%

Europe -1.4% -1.5%

Source: Retail Research

The UK has been affected the most by online sales thus far, with a 2% decrease in 2015,

which is expected to reach -3.4% in 2016³.


Online retailers and their e-commerce

strategies

The omnichannel experience in Europe

Despite a decrease in sales for physical

stores, it appears that e-retailers still

place a significant amount of importance

on them. According to a study by Pierre

Audoin Consultants⁵, European retailers

expect digital channels to become more

strategically important by 2020, but not

at the expense of the physical store.

According to Twenga’s Q2 Merchant

Survey, 40% of e-retailers in Europe have

a physical store⁶.

Providing an omnichannel experience is a

clear priority for European retailers and

with more and more sales now taking

place online, physical stores are taking a

on a role similar to a ‘showroom’. When

asked if their company has already or

planned on linking their online sales

channel to their store-based one in the

next 2 years (through click-and-collect or

in-store online shopping for example), a

huge 78% of European retailers replied

‘yes’.

Ninety percent of Spanish and 80% of

Dutch retailers have already linked their

online-to-store channels.

Multi-channel strategies in Europe

With consumers moving to alternative channels for their purchases, retailers are being

forced to adopt a multi-channel strategy. According to Twenga Solutions’ merchant survey,

29% of European retailers sell through 2 or 3 acquisition channels, while half are selling

through more than 3 channels⁷.

Number of customer acquisition channels per online retailer in Europe

50%

29%

21% More than 3 different acquisition channels

2-3 acquisition channels

Only 1 acquisition channel

Source: Twenga Solutions


Europe and cross-border trade

Although 3 percentage points down from 2012, the large majority (88%) of purchases were

national in Europe in 2015. A growing trend on the other hand, is purchases from other EU

member states, which increased from 25% in 2012 to 30% in 2015. This can be an indicator

of the smooth functioning of the single market for e-commerce and the fact that retailers

are successfully providing a wider choice and lower prices, as demanded by the European

market.

Although less popular, purchases from countries outside of the EU are also on the rise,

increasing from 13% to 18%².

National and cross-border online purchases by EU shoppers

2012 vs. 2015

When purchasing within Europe, statistics from Postnord⁷ show that the UK, Germany and

the Nordics are the most popular markets to buy from.

National sellers Sellers from other EUcountries

Sellers from outside theEU

91%

25%

13%

88%

30%

18%

2012

2015

Source: Eurostat


Consumer behaviour and expectations

per European market

What are Europeans buying online?

The same study from Postnord⁷ also goes

into the different types of products

European consumers are buying online.

Due to their strong tradition of being sold

by mail order, clothing and footwear is

generally the most popular product

category, followed by home electronics

and books. The Italian market is the only

exception, where home electronics are on

the top of the list.

Of the markets in the study, the British

and Germans were those that bought

clothes and/or footwear online the most.

Delivery preferences in Europe

In terms of e-commerce deliveries, the Dutch have the highest expectations hoping to

receive their purchase within 1-2 days⁷. The Spanish market on the other hand proves to be

slightly more patient, with one in four willing to wait up to six working days. These

expectations are more than likely also linked to the standard delivery times established by

local postal services, which can vary significantly from country to country depending on

their organisation.

Proportion of respondents who expect deliveries in 1-2 days

Netherlands

Poland

United Kingdom

Germany

France

Spain

Italy

32%

20%

15%

14%

12%

12%

9%

Source: Postnord


The importance of easy returns

Trouble-free returns are considered as an important factor for online shopping, however

the Spaniards and Italians rate this as the most important, despite returning purchases less

frequently than their European counterparts.

Germany, the Netherlands and the UK have the highest proportion of consumers who

returned an item in the past year.

Proportion of consumers who returned an item in the past year

Germany

Netherlands

United Kingdom

France

Spain

Italy

Poland

41%

36%

32%

24%

18%

13%

11%

Source: Postnord


Payment preferences in Europe

While paying with a debit or credit card is a popular option in most of the markets, the

Germans would rather use PayPal or similar services and the Polish have a preference for

direct payments through their banks⁷ using services such as DotPay and PayU.

PayPal is the second most popular choice in the UK, France, the Netherlands, Spain and

Italy, while the second choice for Germans is to pay for their purchases by invoice in

arrears. Payment with cash on delivery (COD) is the second most popular choice for the

Polish, and the third most popular for the Spanish and Italian markets.

Source: Postnord


Online advertising and m-commerce in

Europe

M-commerce in Europe

Besides consumer expectations regarding services, the way to reach new clients also varies

significantly per country. In our most recent m-commerce study, we studied the

importance of mobile and found that while 31.1% of e-commerce traffic is on mobile in the

UK, this rate stood at just 8.3% for Poland⁸.

Mobile traffic share per country

Furthermore, while the majority of countries in the study choose smartphones as their

preferred mobile device for online shopping, the Netherlands is the only country that

prefers to shop on tablet. With the reoccurring trend of larger screens over the past year,

we can expect smartphones to continue to be a device of choice for most European

consumers.

UK DE ES NL IT FR PL

31.1% 29.7% 29.1% 28.5%

27.8%

22.1%

8.3%



Online video – the advertising format of the future

The rise of mobile is also facilitating the growth of more advanced formats such as online

video advertising. With mobile devices being the perfect size to view videos on-the-go and

social media platforms providing the necessary tools to both upload videos quickly and

effectively modify their size to different screens, we can expect this format to increase in

popularity in 2016. So much so that Carat⁹ predicts that online video will see a huge

growth of 34.7% in 2016, which will further increase by 31.2% in 2017.

Online video year-on-year % growth within digital

Social media and e-commerce in Europe

The number of active social media users is increasing year on year with current

penetration rates standing at 59% in the UK and 56% in the Netherlands¹⁰. It comes as no

surprise therefore, that social networks such as Facebook, Twitter, Instagram and

Pinterest are constantly looking for new ways to turn their sites and applications into true

e-commerce platforms.

The launch of buy buttons on Instagram and Pinterest as well as dedicated mobile shopping

platforms such as Canvas for Facebook, will only facilitate the move to social in 2016. In

fact, Carat predicts social media to experience a 29.8% global growth in 2016 and a further

25.5% growth in 2017⁸. However, some countries still have a fair way to go on this channel:

social media penetration stands at a comparably low 36% in both Poland and Germany.

Nonetheless, optimising sales on social media is the most important project to optimise for

European online retailers in 2016⁶.

Social media penetration

2015 2016 2017

+35% +34.7%

+31.2%

Source: Carat

United Kingdom

Netherlands

France

Spain

Italy

Germany

Poland

59%

56%

50%

48%

47%

36%

36%

Source: We Are Social


Digital advertising spend per European market

Social media is just one of the many platforms online retailers are choosing to advertise

their products on and the amount they are choosing to spend on such advertising is

increasing year on year. As a percentage of total media ad spending, Western Europe is

expected to increase its digital advertising spend from 31.6% in 2015 to 33.3% in 2016. A

similar trend is expected in Central and Eastern Europe, where digital ad spending is

expected to rise from 29.3% to 31.6%¹¹.

Of the different countries in Europe, the UK has the largest digital ad spend share at

49.6%, which is expected to increase to 51.9% in 2016.

Digital Ad Spending Share of Total Media Ad Spending

United Kingdom

Denmark

Norway

Netherlands

Sweden

Germany

Finland

France

Spain

Italy

49.6%

44.6%

42.6%

36.6%

33.3%

27.8%

25.6%

23.9%

21.8%

18%

51.9%

47%

45.6%

38.4%

34.8%

29%

27.6%

25%

22.6%

19.3%

2015 2016Source: eMarketer


Advertising channel distribution

According to Twenga’s Q1 online advertising study, SEM is the biggest online advertising

channel with a 57% share. What’s more, the average basket size for SEM retailers is 20%

higher than the overall average and 35% higher when compared with retailers using

Display⁶.

This trend is reflected in the rise of e-commerce solutions for Google Shopping and

services to optimise Google AdWords campaigns, both of which are significant platforms for

e-commerce digital advertising. Their rise in popularity is also apparent in terms of

consumer usage: the latest Digital Advertising Report from Adobe¹² shows that although

CPCs declined by 3% on Google between Q4 2014 and Q4 2015, CTR increased by 15% YoY,

indicating that consumers are responding to the ads they are seeing.

CPC & CTR growth YoY

Google remains the dominant search engine and the first choice for the vast majority of

users. This, along with improved click-through rates and decreasing CPCs makes Google’s

advertising solutions an evident choice for online retailers in 2016.

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

CPC CTR

Source: Adobe


Conclusion

There is absolutely no doubt that Europe is a key market in terms of e-commerce. With

significant year-on-year growth, yet much potential still to come, online retailers should

not dismiss the opportunities Europe holds.

While France, Germany and the UK can be attractive markets due to their size and

success, emerging markets such as Spain and Poland should not be forgotten about, both of

which are expected to see significant sales growth in 2016, with 18.8% and 17.8% growth

respectively according to Retail Research³.

What challenges are e-retailers to face in 2016?

However, no matter the market all e-retailers are set to face a range of challenges in the

coming year. Twenga’s 2016 merchant survey recently revealed that European online

retailers consider customer acquisition, business profitability and competition with other

e-commerce sites as their top challenges⁶.

Main challenges as an online retailer

Acquiring customers

Profitability of my business

Competition with other e-commerce site

Brand visibility

Customer support

Technical development and problems on my site

Understanding my online performance with the rightreporting

Logistics

Difficult economic environment

27%

23%

13%

13%

7%

6%

5%

3%

2%



In terms of customer acquisition in particular, Search Engine Marketing is the most popular

channel for acquisition, yet e-retailers are still faced with an array of issues. Bid

management, profitability and keyword management are the top 3 challenges in SEM⁶.

Main challenges in managing Search Marketing campaigns

Thankfully the rise of advanced technologies such as real-time bidding are set to tackle

such issues. What’s more, the power of SEM is also set to help tackle underlying issues such

as basket abandonment and repeat buyer rates.

Want to learn more about e-commerce in Europe? Check out our range of guides and

infographics to get a head start on this market!

Bidding at the right cost-per-click (CPC) level

Search campaigns are too expensive or notprofitable

Keyword management for search ads

Feed management: setting up and updating myproduct feed for Google Shopping

Time spent on campaign management

Efficient reporting and performance analysis

I do not manage search marketing campaignsmyself

Writing and testing new ad creatives

User segmentation and targeting

18%

15%

12%

12%

11%

10%

9%

8%

7%



Sources ¹ Internet World Stats: Usage and population statistics ² Eurostat: E-commerce statistics for individuals ³ Retail research: Online retailing in Briatain, Europe, US and Canada 2016

⁴ eCommerce News: Top 500 European e-retailers generated sales of €124 billion

⁵ PAC – Omnichannel retail in Europe

⁶ Twenga Solutions: Customer acquisition survey 2016

⁷ Postnord: E-commerce in Europe 2015

⁸ Twenga Solutions: M-commerce in Europe 2015

⁹ Carat: Ad Spend Report March 2016

¹⁰ We Are Social: 2016 Digital Yearbook ¹¹ eMarketer: How does global digital ad spending vary by region and industry? ¹² Adobe – Digital Advertising Report Q4 2015

About Twenga Twenga Solutions commercialises advanced audience acquisition solutions on main online advertising

marketplaces, and in particular on AdWords and Google Shopping. These solutions drastically improve the

ROI of online retailers’ advertising budgets.

Established in 2006, Twenga Solutions employs over 150 people in France, Germany, England, Spain and

Italy and has over 4000 clients in 15 different countries.

Twenga Solutions is a Google AdWords Premier SMB Partner, facilitating retailers’ access to this key

advertising platform.

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