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Europe's economy is struggling, but some European retailers have discovered the secrets to success online.
More U.S. retailers are expanding into Europe, including Gap Inc., Dick's Sporting Goods Inc. and the Lands' End unit of Sears Holdings Corp., which last fall relaunched its German e-commerce site after a test in Sweden. As they move into Europe they won't be surprised to find Amazon.com Inc. towering over e-retail competitors there, and they may well know Germany's Otto Group, which has moved its 100 brands—including Crate & Barrel—to the web, which now accounts for 42% of company sales.
But there are many up-and-coming European web retailers that likely are less familiar to retailers coming from North America. Take the archly named Misguided Ltd., a web-only retailer that increased its sales 380% in 2011 from the prior year, according to an estimate from the newly released Internet Retailer Top 400 Europe Guide, in part through running edgy television ads featuring models right off the fashion runway backed by pounding rock music.
Founder Nitin Passin comes from a retailing family, but says he focused on the web when he launched Misguided in 2009 for a simple reason: "E-commerce businesses were the only businesses going up and I didn't see a future in anything else."
Passin's comment seems particularly apt three years later, as online retailing grows steadily even as Europe's economy struggles to avoid falling back into recession. Despite Europe's deep financial crisis last year, business-to-consumer e-commerce in Europe grew 18.2% to 200.5 billion euros ($259.5 billion) in 2011 from 169.6 billion euros ($219.5 billion) the year before, estimates the Centre for Retail Research, based in the United Kingdom.
E-commerce growth will continue at a rate of 12% a year through 2016, estimates Martin Gill, a Forrester Research Inc. analyst. Online shopping has become entrenched in the lives of many Europeans, with 63% of adults in France buying on the web, 69% in Germany, 36% in Italy, 75% in the Netherlands and in the United Kingdom, and 41% in Spain, Gill says.
"As economies settle down over the next five years, consumers who have found web shopping valuable in hard times will continue to make use of it in good," Gill writes in a recent report. "As a result, online sales will continue to grow."
That growth will no doubt tempt more North American e-retailers to consider expansion into Europe. As they do, they will encounter Amazon and some fast-growing local players, including the retailers from Italy, Spain, Belgium, the United Kingdom, Germany and Russia profiled on the following pages.
The gap in online retail leadership grows wider – Amazon.com
Amazon remains Europe's most dominant retailer for a few simple reasons. Amazon (No. 1 in the Internet Retailer Top 400 Europe Guide) serves up the best deals, inventory and customer experience, which other European merchants find hard to match, says Scot Wingo, a long-time Amazon observer and CEO of ChannelAdvisor, which helps retailers sell on marketplaces such as eBay and Amazon.
Amazon also isn't afraid to experiment with new features—and make acquisitions—to grow its European e-commerce operations. Amazon, which Internet Retailer calculates grew its European web sales year over year 37.2% to 12.9 billion euros ($16.7 billion) from 9.4 billion euros ($12.1 billion), made two acquisitions, The Book Depository International and LoveFilm International Ltd., in 2011 to broaden its merchandising growth.
Amazon also now has about 4 million European users of Amazon Prime, a program that gives subscribers free two-day shipping on all Amazon purchases and other perks in exchange for an annual membership fee. "Amazon Prime gives Amazon an excellent platform to keep serving up better value, selection and customer service to its best return shoppers," says Wingo.
Amazon also is piloting new ways to ship merchandise. In the United Kingdom, Amazon is running a pilot with a series of coded drop boxes situated near two busy subway stations. Busy commuters and Amazon shoppers have the option of having their purchase delivered to the subway drop box. When the parcel is ready for pick-up, Amazon sends the shopper a text message with a code that will open the box. "Amazon has a nice way of figuring out what European shoppers want," Wingo says.
E-commerce drives growth at Otto Group – Otto.de
Since identifying e-commerce as a major growth channel in the mid-1990s, the Otto Group (No. 2) has built a vast e-commerce empire that accounted for an estimated 41.7% of total sales in fiscal 2011, making e-commerce the company's fastest-growing line of business.
While most online shoppers may not be familiar with the Otto Group name, they are no doubt familiar with the 100 online retail brands it owns all or a portion of, such as Crate & Barrel, Frankonia and Henie.
In fiscal 2011, web sales totaled 4.8 billion euros ($6.2 billion), up 24.4% from fiscal 2010. In the company's core market of Germany, e-commerce sales rose 26.5% to 3.1 billion euros ($4 billion) during the same period. The Otto Group's product catalog includes do-it-yourself items, office supplies, women's fashions, home furnishings and electronics.
Otto Group CEO Hans-Otto Schrader says e-commerce has become the company's most important sales channel and now benefits all of the company's business lines.
With its e-commerce business going gangbusters, Otto Group has set its sights on becoming a major player in mobile commerce as part of its commitment to innovation. The company's redesigned mobile web site, m.Otto.de, has been optimized for a touchscreen interface and can be accessed through a mobile app.
Other m-commerce innovations include the Otto catalogs iPad app, which enables consumers to access the product content of six of Otto's main merchandise suppliers, and the Home Affaire Catalogue, an iPad app that shoppers can launch to browse products and then link to an e-commerce site to make a purchase.
A local approach to global e-retail pays off – Yoox Group