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Online Retailing: Britain, Europe and the US 2014
E-commerce is the fastest growing retail market in Europe, with sales in the UK, Germany, France, Sweden, The Netherlands, Italy, Poland and Spain expected to reach a combined total of £111.2 bn in 2014 (€155.3 bn or $212.8 bn). We expect online sales in the US to reach $306.0 bn (€224.0 bn) in 2014.
Our independent study for 2014-15 has been funded by RetailMeNot, Inc., the world's largest digital coupon marketplace (known in the UK as MyCoupon.com) as a contribution to discussion.
The Centre for Retail Research has estimated the trends in online retail sales for eight European countries (see above) and the US. This is based on the sales of goods (excluding fuel for vehicles and sales of prepared food in cafes and restaurants). Tickets, holidays, gambling and insurance are also excluded because they are not classed as retailing. 'Online' is defined as sales where the final transaction is made over the internet or at a distance, irrespective of whether the internet has been used for browsing and price comparisons. Sales made using mobile phones and tablets are included in our figures.
One thousand shoppers in each country (a representative demographic cross section) have been surveyed for this project and 100 online traders in each country. We have taken advantage of new data to produce results that are more accurate overall.
Main Results: Onwards and Upwards
In 2013, online retailing in Europe grew by a weighted average of 21.1% to £111.2 bn, but growth should slacken slightly in 2014 to 18.1%. The recession has induced many shoppers to buy online rather from traditional stores, whilst above-average growth in countries with smaller ecommerce sectors shows there has been an element of catch up. Retail focus on the growing use of mobile technology is an additional factor in making online retailing attractive and convenient.
As before the European online market is dominated by the UK, Germany and France which together are responsible for 81.3% of European sales in these eight countries.
Apart from the UK and Germany, market shares are low in most European countries. The weighted average in 2014 is expected to be 7.2% (6.3% in 2013).
The UK online share of retailing is expected to rise from 12.1% (2013) to 13.5% (2014). The German online sector has expanded rapidly in 2012-13 but we expect the rate of increase to decline but its market share will still rise to 9.7% in 2014.
Over the next four years we expect the major players to continue to expand (at a lower growth rate than hitherto) and the smaller online countries to grow quickly thus reducing the discrepancies between different states.
US Online Spending 2013-14
US online spending was $268 bn in 2013 and we forecast it will reach $306 bn in 2014, an increase of 14.5%. If we use the same definition of retail sales that is used in Europe then the US share of retail (ie sales of goods) in 2013 was 10.6% and is estimated to reach 11.6% in 2014. There has been a lot of discussion in the US about when the online share would break through the 10% barrier (and we have contributed to that) but this has already been achieved if one eliminates the broader non-retail merchandise from the US definition of the retail industry as is already done in Europe.
The US is still the leader in online retailing compared to Europe. With a similar population to the eight countries surveyed, 54.5% of the US public were eshoppers compared to 45.6% in Europe. Every online shopper in Europe is expected to spend €886.18 (£748.82 or $1,210.63) in 2014 compared to €1,308.29 (£1,105.51 or $1,787.28) in the US.
Online orders made using mobile technology (smartphones and tablets) in 2013 were 8.0% of all online sales in Europe but as high as 13.8% in the US. The percentages for browsing were much higher but these totals refer to the final transaction (ordering and paying) not the entire process, where between one-third and 45% of retail website visits may be done on mobiles.
In 2014 we expect online retail sales made via mobiles to grow in the UK by 62% to a total of £7.92 bn. This is equivalent to 17.6% of UK online retail sales. Sales using tablets will grow by 100% (to £3.10 bn) and smartphone retailing is expected to grow by 44.3% to £4.82 bn. Smartphones will still provide 60.8% of UK mobile shopping. Other European countries with high mobile shares will be Germany (16.8% of German online sales [£5.59bn or €6.61bn] and Sweden (16.5% of Swedish online retail sales [£0.59 bn or €0.70 bn]). French mobile spending is expected to be 13.5% of online retail sales in 2014 (£3.56bn or €4.21bn).
Mobile shopping will represent 13.1% of the online retail spend in 2014 or £19.78 bn.
In the US, mobile shopping is growing even faster and should grow by 65.1% to account for 19.9% of online spending in 2014 (£37.66bn or $61.06bn). Of this 40.0% will be tablet sales and 60.0% on smartphones.
Effect on Traditional Stores
The growth of online sales at such a rate will inevitably reduce the market for traditional shops. By the time that online sales represent 5% or more of domestic retailing then the continued growth of online retailers will occur at the expense of conventional stores. In Europe as a whole, online retailers are expanding 11.9 times faster than conventional outlets, although 'only' 5.6 times in the UK and 3.3.times in the US.
Stages in Market Development
We think there are three stages in online market development and business strategy:
Maturity - market share of 9.5% or above, 55%+ of the population are internet shoppers, rapidly developing mobile use (15%+ of all online in 2014), multiple online providers throughout each sector and 12+ purchases pa by each shopper.
Mid range - market shares of 6.5% to 9.5%, a wide range of suppliers, more than ten purchases pa per shopper, 45% are online shoppers and a smaller mobile use.
Immature - online market share below 6.5%, patchy takeup (regionally or demographically) of online retailing, fewer than ten purchases pa, and some trade sectors are comparatively less developed.
Mature markets, such as the US, the UK and Germany, are expected to grow more slowly, recruiting a percentage of non users but mainly growing because existing eshoppers place more orders or buy more expensive items.
Mid range markets, such as France, The Netherlands and Sweden, will grow by recruiting more users as well as persuading shoppers to buy more frequently.
Immature markets, such as Italy, Spain and Poland, have to overcome structural issues in the quality of their telecommunication networks, but can be expected to develop rapidly by increasing the number of eshoppers in their population and then inducing them to purchase more regularly.
Are the statistics right?
The statistics are problematic as state statistical research organisations often tend to underestimate the size of the sector, because conventionally they are best at collecting information from companies that own retail shops. There can be problems in determining online sales from abroad, because UK statistical authorities may not be fully aware of their scale, foreign firms may not wish to comply fully with UK statistical needs, and sampling may be problematic as a result of rapid sector change. There are important issues about whether to include mail order when it is mainly online and how to account for partial online ordering such as click and collect. Other issues include the definition of 'retail' where US authorities seem to combine food services (cafes and restaurants) within retail, which is not the case in Europe. However in Europe and the US fuel for cars is normally included as 'retail' but as this is not the retailing of goods and would be difficult to sell over the web we have attempted to adjust our estimates to take account of this.