Target also leads the pack when it comes to paid search spending, a new report finds.
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Despite a common currency used by 17 European countries and the fact that 27 countries participate in the European Union, an economic and political confederation, European e-commerce remains a fragmented market. "U.S. retailers will have to develop web strategies for most individual European countries for the foreseeable future and develop a local value proposition that tells shoppers they understand who they are," says Christine Bardwell, research manager for research and advisory firm IDC Retail Insights. "The mature e-commerce markets of the U.K., France and Germany are as different in nature from the growing, but far less developed e-commerce markets in Southern Europe."
Top European players
In addition, U.S. e-retailers confront European rivals who are hardly standing still. In 2011 leading e-retailers in Europe's three biggest and most mature online retailing marketsÑthe United Kingdom, Germany and FranceÑtook steps to grow through acquisitions, launching new brands and expanding into new markets.
Tesco PLC, No. 3 in the Top 400 Europe and the largest e-merchant in the United Kingdom, grew its e-commerce sales about 10.5% year over year in 2011 to an Internet Retailer-estimated 4.2 billion euros ($5.5 billion) as it targeted other countries for online growth. Tesco opened a web store based in Prague, Czech Republic, that offers shoppers access to about 20,000 grocery items and such merchandise as toys and stationery. Tesco, which says it serves more than 1 million customers online through its Tesco Direct e-commerce unit, also expanded its online apparel business to build more specialty web stores in Spain and elsewhere. "Our loyal online following told us they want to buy fashionable and good value clothes from us outside of the U.K.," says Tesco clothing director Jill Easterbrook.
In Germany, Otto Group, No. 2 in the Top 400 Europe, used a mix of new business development and better customer service to grow its e-commerce revenue 26.3% in its 2011 fiscal year to 4.8 billion euros ($6.2 billion). In January, Otto Group, which says e-commerce now accounts for almost 50% of its total revenue, launched Yalook.com as a fashionable apparel site for younger online clothes shoppers. Otto Group followed that in April by unveiling Quelle.de as a new online marketplace with an inventory of more than 1 million products that offers multiple international payment options. "Online retail is our most important sales channel and the trends are very promising," says Otto vice chairman Rainer Hillebrand.
For the biggest online retailer in France, PPR, which operates Redcats and its multiple e-commerce sites, such as Puma.com and BottegaVerte.com, 2011 was a year of transition for its online channel. In August, PPR announced that it was selling the Redcats brand and in its 2011 year-end earnings report PPR listed Redcats as a discontinued operation.
But PPR still operates the brand. With Redcats included, web sales for PPR grew year over year about 21.7% to an Internet Retailer-estimated 2.8 billion euros ($3.6 billion). Redcats represented about 64% of total e-commerce revenue for PPR in 2011, compared with 63% in 2010. Without Redcats, PPR says its e-commerce portfolio generated about 1 billion euros ($1.3 billion) in sales in 2011. Redcats operates more than a dozen e-commerce brands such as OneStopPlus.com and SportsmanGuide.com. PPR is looking to sell Redcats as it retools the company to focus on its luxury and lifestyle brands.
Consolidation lies ahead in European e-commerce, says Karin Von-Abrams, a senior analyst with Internet research firm eMarketer Inc.
"In tough times, consumers shopping online want the best price and product availability, but they also want convenience and a great experience," Von-Abrams says. "There will be more of a fight among the biggest brands to keep attracting and retaining those consumers."
Stores and the web
Looking at the Top 400 Europe data another way, web-only merchants grew faster than retail chains, consumer goods manufacturers and catalogers that sell online. In 2011, web-only merchants grew their combined business-to-consumer e-commerce revenue 26% to 32 billion euros ($41.4 billion) from 25.4 billion euros ($32.9 billion) in 2010. In comparison, catalog companies posted combined web sales in 2011 of 13.5 billion euros ($17.4 billion), up 16.4% from 11.6 billion euros ($15 billion) in 2010, while web sales of consumer brand manufacturers increased 17.5% to 4.7 billion euros ($6.06 billion) from about 4 billion euros ($5.16 billion) in 2010. The slowest-growing online merchants in Europe last year were retail chains, which grew online sales year over year to 30.6 billion euros ($39.6 billion) from 27.1 billion euros ($35.1 billion), an increase of 12.9%.
Analysts expect e-commerce will continue to grow, even as Europe's overall economy struggles. In fact, the stagnant economy may be making buying online more attractive as retail chains close more stores to stanch losses.
The United Kingdom provides a case in point. The number of store closings along the high street, as the British refer to commercial shopping streets, averaged between 14 locations and 20 locations per day in the United Kingdom last year, according to a study by consulting and accounting firm PricewaterhouseCoopers. Meanwhile, online sales in the United Kingdom grew 14% to 59.4 billion euros ($76.9 billion/49.2 billion pounds) from 52.1 billion euros ($67.4 billion/43.2 billion pounds) in 2010, according to a study the Centre for Retail Research conducted for shopping comparison site developer Kelkoo Inc. In 2012, U.K retail web sales are expected to grow another 14% to 67.7 billion euros ($87.6 billion/56.1 billion pounds), says Kelkoo CEO Richard Stables.
"The recession has boosted the appeal of online retailing, and European consumers are more determined than ever to make every penny count," Stables says. "Inevitably, this will have an ongoing negative impact on the high street, an issue which is forcing retailers to bring their two channels of stores and e-commerce much closer together."
The deep financial crisis and its drag on the overall economy remains a cloud darkening Europe. Yet, it remains mostly sunny in the e-commerce arena as European consumers continue to shift more of their spending to the web.