Search engines and other e-retailers lose share as shoppers increasingly turn to Amazon for product searches, a Bloomreach survey finds.
Web retailers based in the U.S., and Canada, once more target Europe as a land of e-commerce opportunity.
It took seven years, two acquisitions and plenty of experimentation, but Coastal Contacts Inc. now understands what it takes to take on the tough local online retail competition in Europe.
In 2004, Coastal Contacts acquired Lensway AB, a Swedish contact lens manufacturer, gaining a local supply chain and a European fulfillment center. But the acquisition didn't come with a manual of how selling eyewear online in Sweden, Denmark and Norway would be different from selling in North America.
"In Scandinavia, consumers don't always like e-mail and they won't use their credit card to shop over the Internet unless they really know and trust the brand," says Coastal Contacts CEO Roger Hardy. "We had to learn to sell online over there in a whole new way."
Today Coastal Contacts has several European e-commerce sites with content and payment options tailored for each local market. Bilingual service agents answer calls and e-mails in the customer's preferred language and the retailer offers alternatives to credit cards such as paying an invoice by check or money order 30 days after an order has shipped.
The strategy is producing significant results. Europe accounted for about 35% of Coastal Contacts' 2010 sales of US$138.5 million, and could reach 40% this year as the web-only retailer, which is based in Vancouver, Canada, expands into such large markets as the United Kingdom and Germany.
Coastal Contacts is one of a growing number of U.S. and Canadian retailers investing in selling online in Europe. In fact, 28 North American retailers ranked among Europe's 300 leading e-retailers by web sales in Internet Retailer's new Top 300 Europe guide. They captured 26.9% of the 57.5 billion euros (US$79.4 billion) that the 300 largest e-retailers sold online in 2010 in eight of the largest European markets, and 11.6% of all European online retail sales.
Those 28 North American retailers increased their e-retail sales in Europe 24.8% to a combined 15.5 billion euros (US$21.4 billion) in 2010, from 12.4 billion euros (US$17.1 billion) in 2009. Amazon.com Inc., the leading e-retailer in Europe by sales as it is in North America, accounted for a big portion of the growth, as Amazon's European sales jumped 39.7% to $12.92 billion last year from $9.25 billion in 2009. But the other 27 North American retailers also registered combined growth of 11.5% in 2010.
They're growing by recognizing that Europe is not a single market, despite the whittling down of tariff barriers within the European Union. Language, delivery and differences in how consumers pay from one country to another all make it complex to sell online in Europe, even for European merchants. An EU study in late 2009 found that while 50% of European retailers were selling online, only 21% sold to consumers outside their home countries.
The North American retailers succeeding online often establish themselves in one country before moving to another, and most of them are tailoring their web offerings to each market.
"A cookie-cutter approach to Europe won't work," says Dennis McEniry, president of the online division of cosmetics manufacturer and retailer Estée Lauder Cos. "We're successful because we study very carefully what consumers expect online in each country and then refine our e-commerce presence to meet those expectations."
More growth ahead
Retailers crossing the Atlantic can expect to find a steadily growing online retail market. Research firm eMarketer predicts European retail web sales will increase 13.2% to 133.9 billion euros (US$184.8 billion) this year from 118.3 billion euros (US$163.3 billion) in 2010. Forrester Research Inc. projects 10% annual e-commerce growth in Europe through 2015.
That opportunity is driving many big North American web and multichannel retailing companies to invest in building their online business in Europe. They include Amazon, Buy.com Inc. (now a unit of Japan's Rakuten Inc.), Estée Lauder, Gap Inc., Vistaprint N.V., Coastal Contacts and others.
But success is no sure thing, as the experience of web-only retailer eBags.com attests. The e-retailer pulled back from Europe in 2009 after investing four years and millions of dollars in building a U.K. site that it hoped would serve as a springboard into Europe. The economic downturn contributed to the decision to retreat, as did the unexpectedly high operating costs, language barriers, the complexity of international payments and other issues.
"As you roll out country by country, you need translation, you need customer service in the appropriate language, you need to file taxes in individual countries and you need a local supply chain for each market," says Peter Cobb, co-founder and senior vice president of eBags. "Each country becomes its own exclusive business and it gets expensive."
There's another significant obstacle facing e-retailers from overseas: powerful local retailers that are well versed in selling in their home markets. In the U.K., the top four online retailers after Amazon are all British companies—Tesco PLC, Home Retail Group, Dixons Stores Group and J Sainsbury plc—and they account for 38.5% of e-retail sales in that country, according to the Internet Retailer Top 300 Europe. In Germany, the two biggest web merchants after Amazon are Otto Group, which owns all or part of more than 100 e-commerce brands, and Neckermann Gruppe, and they account for 48.4% of web sales in that country. It's a similar story in France where the five largest web merchants—PPR SA, 3 Suisses, Cdiscount.com, Carrefour Group and Vente-Privee.com—account for an estimated 57.2% of web sales, according to the Internet Retailer Top 300 Europe.
"A big obstacle for U.S. retailers looking to generate e-commerce business in Europe is the already ultra-competitive markets in countries like the U.K., France and Germany," says Karin von Abrams, a European Internet analyst with eMarketer. "Many U.S. retailers entering Europe for the first time or out to build a bigger base in Europe will be under lots of pressure from the home-grown retailers."
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