Retailers shift their ad spending from TV, radio and print ads to digital ads.
Online retail sales grew 18% in Europe in 2011, even as the region struggled with a financial crisis.
Europe's economic crisis in 2011 took its toll on retail sales, which registered no growth for the year, finishing at an estimated 2.59 trillion euros ($3.35 trillion), says the Centre for Retail Research, a retailing and e-commerce research firm headquartered in the United Kingdom. But online retail was a bright spot amid the gloom.
In 2011, business-to-consumer e-commerce grew 18.2% to an estimated 200.5 billion euros ($259.5 billion) from an estimated 169.6 billion euros ($219.5 billion) in 2010, the Centre for Retail Research says. Among the big winners: the biggest e-retailers, web-only merchants and retailers based in the United States.
The growth at the top is reflected in the web merchants ranked in Internet Retailer's newly published Top 400 Europe. Those 400 online retailers collectively grew their sales year over year about 18.5% to 80.7 billion euros ($104.4 billion) from 68.1 billion euros ($88.1 billion).
Among the Top 400, the biggest grew the fastest: The top 100 grew about 19% to 69.5 billion euros ($90 billion) in 2011 from 58.4 billion euros ($75.5 billion) in 2010. In comparison, retailers ranked 101-200 grew 14.1% to 7.3 billion euros ($9.5 billion), while retailers ranked 201 to 300 grew 11.5% to 2.9 billion euros ($3.76 billion) in 2011 and merchants ranked from 301 to 400 increased their combined sales year over year 15.7% to 921.5 million euros ($1.193 billion).
The 100 largest e-retailers on the list accounted for 86.1% of Top 400 sales and the top 10 alone accounted for 44.3%. Amazon.com Inc. leads the list, as it did last year, and it's joined in the top 10 by two other U.S.-based retailers: Staples Inc., No. 4 in the Top 400 Europe, and Apple Inc., No. 8.
In tough times, European shoppers are looking online "to see who has the most recognizable names, the best deals and lots of selection, and those are advantages Amazon and other American online retailers can bring to the European e-commerce market," says Andrew McClelland, chief operations and policy officer for Interactive Media in Retail Group, a U.K. web retailing industry association.
But that doesn't mean U.S. e-retailers have a clear field, McClelland says. "There's plenty of established local competition," he says, "so the biggest challenge most U.S. retailers still have is creating and sustaining an e-commerce experience that fosters customer loyalty."
Amazon powers ahead
Thus far, that's not been a problem for Amazon.com, the leading e-retailer in Europe as it is in North America. Internet Retailer estimates that Amazon grew its e-commerce sales in Europe 37.2% to 12.9 billion euros ($16.7 billion) in 2011 from 9.4 billion euros ($12.1 billion) in 2010. Amazon's sales in Europe accounted for 16% of all sales among Europe Top 400 merchants and 6.4% of all European e-retail sales.
Amazon was an early player in the European online retail market, having opened its first e-commerce site in the United Kingdom in 1997. It continues to grow through acquisitions, by expanding product selection and by building a bigger e-commerce technology and fulfillment infrastructure than its rivals, says Scot Wingo, a longtime Amazon observer and CEO of ChannelAdvisor Corp., a U.S. online marketing firm that helps retailers sell through online marketplaces such as Amazon and eBay.
Amazon made key acquisitions and investments in 2011 to diversify and retain its market lead. Amazon in July acquired The Book Depository International, a U.K.-based online bookseller that sells to customers in more than 100 countries. That followed Amazon's acquisition in January 2011 of LoveFilm International Ltd., a London-based video rental and streaming company with annual sales of about $158.8 million. Amazon had held a 40% ownership share in LoveFilm since 2008. Amazon did not disclose the purchase price in either deal.
The acquisitions will make Amazon an even more imposing competitor. "In all the markets they serve in Europe they have great prices, a big inventory, a good local user experience online and focused customer service," Wingo says. "That's a hard combination for others to beat or match."
Other U.S. firms also registered strong gains last year. Among the U.S.-based web retailers that grew the fastest in Europe in 2011 were athletic apparel retailer and manufacturer Under Armour Inc., whose European sales grew 71.3% to 40.6 million euros ($52.5 million); fashion merchant Ralph Lauren Media LLC, up 50% to 1.5 million euros ($1.9 million); and Blue Nile Inc., the online jewelry retailer whose European web sales grew 40.9% to 45.1 million euros ($58.4 million), according to the Top 400 Europe guide.
Another e-retailer with deep roots in the United States that's making gains in Europe is Vistaprint Ltd., a specialty web merchant of custom printing and related small business services. For the 2011 fiscal year ended June 30, Vistaprint grew its European web sales 24.5% to 248.6 million euros ($321.7 million) from 199.7 million euros ($258.5 million) in 2010. Vistaprint now operates distinct e-commerce sites for 17 European countries, a printing center in the Netherlands and a European business unit headquarters with more than 300 employees in Spain. Vistapint maintains its original main office near Boston, but now is incorporated in the Netherlands.
To add to its European operations, Vistaprint in October 2011 acquired Albumprinter, a company based in the Netherlands that sells photo books and products, in a deal valued at about 70 million euros ($90.6 million). Vistaprint, which counted on Europe for about 39.4% of total sales of 631.2 million euros ($817 million) last fiscal year, made the acquisition to expand the number of web-based and customizable products it offers to European consumers and small businesses. "We expect to provide a product line and expertise that complement Vistaprint's current offerings and geographic reach in the European market," says Albumprinter CEO Kees Arends.
The biggest challenge facing U.S. web retailers in Europe is learning more about the online shopping characteristics of diverse groups of European consumers. Even subtle differences in how shoppers refer to merchandise, such as the word "trousers" in the United Kingdom versus "pants" in the United States, can make a difference in the results of online search marketing campaigns.