Report: Blue Skies Forecast for European Online Retail

Online retail sales in Europe will soar from 2.9 billion euros in 1999 to 175
billion euros in 2005, according to a new industry report.

This growth, combined with the onset of the euro in 2002, will dramatically
reshape Europe’s retail landscape, says the report from Forrester Research’s European Research
Center in the Netherlands.

The report also predicts that the Internet’s arrival as a viable sales
channel will accelerate the evolution of pan-European retailers that
aggressively sell across borders both online and off.

“Over the next five years, both Internet pure plays and traditional retailers
must develop cross-border strategies that culminate in pan-European sales, or
their businesses
will be eroded by competitors who do,” said Matthew M. Nordan, senior analyst
at Forrester.

“The resulting industry consolidation will shrink the number of
pure plays to a few pan-European leaders, while traditional retailers,
leveraging their considerable strengths, will claim more than 75 percent of
online sales in Europe by 2003.”

Successful firms will operate with a portfolio of storefronts designed for
each target market, shared sourcing and infrastructure to support the network
of stores, and local
marketing and business development teams to take advantage of local
opportunities, the report says. Meanwhile, service providers will emerge to
solve the cross-border logistics,
payments, and customer service needs of these pan-European retailers.

“Traditional retailers have a huge advantage in a pan- European world,” said
Nordan. “With existing logistics infrastructure, supplier relationships and
know-how, they have the potential to dominate a pan- European retail future.
But they must act now or risk the onslaught of fast-moving Internet pure

By 2005, e-commerce will account for 7 percent of Europe’s retail sales,
narrowing the gap with the United States, the report predicts. In Northern
Europe, Sweden, Germany, and the UK will close the gap entirely, leading the
U/S. in some categories, like
travel in Germany and groceries in the UK. While Sweden will lead Europe with
9.3 percent of its retail sales occurring online, Germany’s huge economy will
account for 26 percent of Europe’s overall online sales. Although Southern Europe
will continue to lag behind the rest of Europe, France will claim 14 percent of
Europe’s online sales.

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