Private investment firm Comvest Partners acquires the financially troubled e-retailer, which filed for Chapter 11 bankruptcy protection in March.
Following in the footsteps of McDonald’s, American e-retailers are rapidly taking share of the European e-commerce market by exporting the strategies and practices they used to build e-retailing in the States.
McDonald’s, the world’s largest restaurant chain and an icon of America’s consumer services culture, gets two-thirds of its total revenues from its restaurants outside the U.S. When it began its big push abroad in 1970 with a store in the Netherlands, McDonald’s was attempting to change the history of retailing. Up to that point, no American retail chain had successfully penetrated the foreign market, although Sears and others had tried and failed.
When McDonald’s began franchising in Europe, it abandoned some of the proven methods it had used to revolutionize food service in America. Rather than franchising to individual entrepreneurs, it opened its first European store in the Netherlands as a 50-50 venture with Albert Heijn, the country’s big supermarket chain that is now part of the Ahold Group. It also developed unique menu items designed to appeal to local tastes, realizing that foreign consumers were not as keen on hamburgers—and in some cases even beef—as Americans were. So, for example, it served up chicken croquettes to the Dutch. But the Netherlands venture was a bust nonetheless.
Fred Turner, then CEO of McDonald’s and the man most responsible for making the chain an international wunderkind, did an about-face. He began developing markets in Europe and elsewhere based on the very same “All-American” menu and entrepreneurial franchising formula that had worked so well in the U.S. To succeed outside the U.S., he concluded, McDonald’s had to change the culture rather than change McDonald’s. Today, Mickey D’s has restaurants in 120 countries. Enough said.
A true American invention succeeds outside the U.S. only when the inventors stick to the fundamentals that delivered success at home. The application of that lesson is taking place all across Europe right now with an American innovation that promises to be bigger than fast-food: E-Commerce.
As reported in our inaugural 2011 Edition of the Internet Retailer Top 300 Europe Guide, which ranks, profiles and provides a wealth of financial and operating data on Europe’s leading e-retailers, e-commerce in Europe has until now been very different than in America, which invented the idea.
In the American model e-retailing is driven by companies from outside traditional retailing. These so-called pure-plays, or web only merchants, are driving the growth in online retailing here; the retail chains tag along from the ride, typically adopting innovations developed by entrepreneurial e-retailers that have no stores. From the get-go, large and small e-retailers in the U.S. have targeted the entire American market, going well beyond their regional markets. When a new web platform like the iPhone comes along, many American web merchants have been quick to adopt it.
The European model of e-commerce has so far been very different—and now seems destined for extinction. Even now the big store chains still dominate e-retailing in Europe, accounting for 43% of all e-commerce sales in 2010, with web-only merchants, catalogers and manufacturers accounting for the rest. And while Europe is a common market with a common currency, the vast majority of e-retail sales on the Continent are purchases made by consumers who reside in the same country that the e-retailer calls home. Retail web sites, the ultimate platform for cross-border marketing, are primarily used in Europe to market to the retailer’s national market. The Europeans are also trailing the Americans in the race to develop mobile commerce platforms to tap into the burgeoning smartphone market.
Yet right now, the European model is undergoing a revolutionary change under competitive pressure from American e-retailers, who lately are thriving in Europe. In fact, they are leading a major shift in European e-retailing toward the American model. Four of the top 20 e-retailers in Europe are American companies—Amazon, Staples, Apple and Dell. All told, American companies control a stunning 27% of the European e-commerce market.
More important, the American companies grew their online e-retail business in Europe last year by 25%, compared to just 14% for Europe-based e-retailers. Given that trend, it seems likely that U.S.-based web merchants as a group this year will command a larger share of the European e-commerce market than merchants from any single European country.
Why is this happening? For one thing, American e-retailers do not feel constrained by tradition to restrict their e-commerce operations to any one country. The major American competitors in Europe are building warehouses throughout the Continent to serve the entire common market. And while their web sites “speak” multiple languages, they are based on a single brand. They employ the same e-commerce technologies that have worked well in America. With a few notable exceptions, the Americans transforming European e-commerce are not retail chains managed by executives who earned their stripes by running stores. These guys are wed to e-retailing, not flirting with it as the retail chains often do. It should come as no surprise that the top-ranked e-retailer in Europe is none other than Amazon.com, which invented e-retailing and dominates the American e-commerce market as well.
In contrast to the American e-retail invasion of Europe, European e-retailers have not had anything close to a significant impact on the U.S. e-retailing market. European companies own 11 of the 500 leading retail web sites ranked and profiled in our Top 500 Guide. Together, these e-retailers account for a mere 1.6% of the total e-retail sales recorded by the 500 largest e-retailers in the U.S. last year. And that share is shrinking: Europe’s e-retailers last year only grew their U.S. retail web sales by just 12%, well below the 18% growth rate registered by the American companies ranked in the Top 500 Guide.
In short, American web merchants are rapidly taking share of the European e-retailing market from their European counterparts. And they are doing it by exporting to Europe the same strategies, marketing programs and highly efficient business models that they used in the U.S. to create the world’s #1 e-commerce market. In doing so, they’re taking a page out of McDonald’s playbook.