In its second-largest acquisition, Amazon buys the company for $970 million.
A third sell only in Italy, missing out on growth, a report says.
Online retail sales in Italy continue to grow faster than offline sales, analyst Davide Caseleggio said during a recent presentation on Italian e-commerce in Milan. However, he added that retailers in the country need to expand their reach into other countries.
“The Internet is definitely the sales channel that now offers the greatest potential for growth,” the senior partner from e-commerce consultancy Casaleggio Associates said.
Caseleggio presented findings from the report ‘E-commerce in Italy 2012’, released by Casaleggio Associates and Adobe Systems, a provider of digital presentation and analytics software. The report, which surveyed 3,000 e-commerce businesses in Italy, finds online retail sales in Italy increased to 19 billion euros (US$25.1 billion) in 2011—up more than 35% from 14 billion euros (US$18.5 billion) in 2010.
However, while online sales in Italy continue to grow in the double digits, at a time when offline retail sales are declining, retailers need to do a better job of expanding into international markets, the report finds.
“Compared to the past, there is now a much greater need (for retailers) to expand sales abroad, not only to increase revenues, but also to create economies of scale sufficient to counter the international competition,” the report says.
33% of Italian Internet retailers sell their products only within Italy, while 67% sell internationally in some fashion, according to the report.
54% of Italian Internet retailers manage their overseas sales themselves through their web sites: 24% sell through their Italian-language sites, 25% sell via multilingual sites and the remaining 5% are not accounted for in the report.
5% of Italian e-retailers have facilities or offices abroad, while 13% operate on an international level as part of a multinational group.
Italy’s e-retailers have their strongest presence in Germany, France and Switzerland, followed by Spain, the United Kingdom and other northern European countries, the report finds.
Very few of the retailers polled sell in Japan, China, Southeast Asia, Africa or Latin America.
The report identifies several obstacles to selling abroad—including marketing, bureaucracy, infrastructure, payment methods and language. It also outlines some key steps retailers can take when breaking into international markets:
• Create local language sites. Nearly a quarter of Italian e-retailers that sell abroad do not have foreign-language sites tailored to specific markets. Lack of local sites is keeping international e-commerce sales between just 1% and 5% of total online sales in Italy, and that figure has the potential to be much larger, the study states.
• Focus on customer service for international customers. The report encourages online retailers to consider opening local or dedicated customer service teams in valuable markets.
•When deciding on which counties to focus on, retailers should be mindful of customs duties and other cross-border costs. These can vary significantly and eat into profit margins, particularly for countries where a retailer has very low sales volumes. The report says such fees are “a very important point in evaluating the choice of countries in which to operate.”
The report also highlights a few retailers who are doing well in marketing and selling to overseas consumers.
For example, Milan-based Kiko Cosmetics offers local language sites for shoppers in Portugal, Spain, France, Germany and the United Kingdom that consumers can access from its main web site, www.kikocosmetics.com.
Fashion retailer Diesel suggests paying close attention to duties fees. For example, it says Russia has very high duties for bringing in goods from foreign countries, so it delivers items ordered online in that country through its local stores.
The report also includes tips from other retailers and trade associations. The Italian Institute for Foreign Trade (ICE), for example, says one common mistake Italian merchants make is to assume that what sells well in Italy will sell well in other countries when that is not necessarily the case.