Retailers shift their ad spending from TV, radio and print ads to digital ads.
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In order to compete with local retailers, North American web merchants are providing localized merchandise and service, making acquisitions and partnering with European companies.
In the case of Amazon, it's been a process that began when the big online retailer began selling books to web shoppers in the U.K. in 1997. Amazon made local order processing and fulfillment an early priority, says Scot Wingo, a longtime Amazon observer who is CEO of ChannelAdvisor Corp., which enables retailers to sell on web marketplaces like Amazon and eBay and through comparison shopping sites.
Amazon now has a centralized operation in Europe, including nine fulfillment centers in the U.K., France, Germany and Iceland, a customer contact center in Germany, and a research and development center in Great Britain. "They've built an entire European business model on understanding what makes shoppers in each county tick and then developed an infrastructure that offers lots of local web shoppers plenty of merchandise with good prices and affordable delivery," says Wingo. "They didn't become the dominant European e-commerce brand by trying to conquer the continent in one move. They built up their market share one country at a time."
And Amazon continues to grow in Europe by acquisition. The e-retailer in January bought LoveFilm International Ltd., a London-based video rental and streaming company with annual sales of about 116.4 million euros (US$160.6 million), and last fall acquired BuyVIP, a fashion and lifestyle online buying community with more than 6 million members in Spain, Germany and Italy.
Estée Lauder is also expanding in Europe. The cosmetics company sells online in 11 countries, including Russia, and has plans to expand into Eastern Europe this year. In each country that it sells in, Estée Lauder has a dedicated web marketing and merchandising team that develops unique content written in the local language. Search engine marketing strategies, both paid and natural, are driven by the specific keywords and phrases of shoppers in each country.
Estée Lauder also pays attention to how payment preferences vary from one country to another. For instance, in Germany, where consumers are less prone to pay with credit cards, about 60% of Estée Lauder's web shoppers use a "promise to pay" service, or pay for merchandise when they pick up their package at the post office, McEniry says.
Another strategy for gaining local expertise is to partner with European companies, a strategy that Buy.com and Vistaprint.com are pursuing.
Buy.com is a relative newcomer to Europe that only began selling online in France, Germany, Italy, Spain and the U.K. in October 2009. Now Buy.com, which was acquired by Japanese Internet marketplace operator Rakuten in May 2010, is planning to expand by working with another of Rakuten's recent acquisitions, French private-sale site and online marketplace PriceMinister SA, which has an established European base of more than 21,000 merchants and 160 million products. PriceMinister's 2010 online sales amounted to about 61 million euros (US$84.2 million), estimates the Internet Retailer Top 300 Europe.
Buy.com and PriceMinister later this year will launch a joint e-commerce and marketplace strategy that leverages Buy.com's U.S. inventory of more than 12 million SKUs and base of 35,000 merchants and PriceMinister's consumer and merchant network. Both companies will retain their separate brands and e-commerce sites, but combined marketing, merchandising and supply chains will enable Buy.com to accelerate its European plans with an established partner.
Buy.com and PriceMinister also can offer shoppers in multiple European countries more local shipping options, a bigger selection of merchandise from a broader network of retailers and suppliers, and new customer loyalty programs. "Partnering with PriceMinister gives us a chance to launch a multi-tiered e-commerce strategy that includes our own online retail site and a broader network of marketplaces," says Buy.com chief operating officer Greg Giraudi. "This arrangement will make us pretty unique in what we will offer the online retailing market in Europe."
Vistaprint, an online retailer of printing services for consumers and small businesses, set up shop in Europe in 2001, and was selling in more than 10 European countries by 2008 when the e-retailer formed an alliance with Viking Direct, a unit of Office Depot Inc. Viking Direct, a direct marketer of office supplies with a 20-year history of selling in the U.K., France and other countries, committed to setting up microsites under its own domains for Vistaprint in several European markets and to creating specific content in the language and currency of each country. In turn Vistaprint provides its technology and product templates to create custom print materials. Vistaprint processes and fulfills each order.
Vistaprint credits its relationship with Viking Direct—and its own decade-long development strategy—as key reasons Vistaprint.com is now selling online in 17 European countries and generated Internet Retailer-estimated European sales of 100.5 million euros (US$138.8 million) in 2010.
Vistaprint now has a regional headquarters in Barcelona, Spain, with several hundred employees from 27 nations, and Europe accounted for more than 20% of its total revenue of $670 million in its most recent fiscal year. "We have proven that our business model is portable to a wide array of markets and cultures in Europe," says Vistaprint European business unit president Nick Ruotolo.
Along with web-only retailers like Vistaprint, Amazon and Coastal Contacts, U.S. retail chains like Gap Inc. are out to grow their European web sales. Gap has steadily expanded to 22 the European countries it will ship to from its European site. As of last month, Gap.eu was shipping to consumers in Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Spain, Sweden and the U.K. Most orders arrive in three days, the retailer says.
While those shoppers can now only shop English-language sites, Gap says it plans to launch e-commerce sites with content written in the local language and local currency payment options. To make it easier to shop all brands—Gap.com, BananaRepublic.com, OldNavy.com, Piperlime.com and Athleta.com— Gap also will eventually add to its European sites its universal shopping cart technology that lets a shopper buy from any of Gap's sites and check out once. "We're excited to accelerate Gap's global online expansion and extend our online experience to more European customers," says Gap Europe and strategic alliances president Stephen Sunnucks.