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Online Retailing: Britain, Europe, US and Canada 2015
E-commerce is the fastest growing retail market in Europe. Sales in the UK, Germany, France, Sweden, The Netherlands, Italy, Poland and Spain are expected to grow from £132.05 bn [€156.28 bn] in 2014 to £156.67 bn [(€185.39 bn] in 2015 (+18.4%), reaching £185.44 bn (€219.44 bn) in 2016. In 2015, overall online sales are expected to grow by 18.4% (same as 2014), but 13.8% in the U.S. on a much larger total.
These figures relate only to retail spending, defined as sales of merchandise to the final consumer.
In the US, online sales are expected to rise from $306.85 bn [£189.26] in 2014 to $349.20 bn [£215.39 bn] in 2015 and $398.78 bn [£245.96 bn] a year later. Canada's online sector is comparatively small, but is forecast to grow from US$20.82 bn [£12.84 bn] in 2014, to reach $23.56 bn [£14.53 bn] in 2015 and $26.99 bn [£16.65 bn] in 2016.
This independent study for 2015-16 has been funded by RetailMeNot, Inc., the world's largest digital coupon marketplace with 655 mn customer visits to its sites in the last year as a contribution to discussion. The RetailMeNot, Inc. portfolio of coupon and deal websites includes RetailMeNot.com, VoucherCodes.co.uk, Deals.com, Bons-de-Reduction.com, Deals2Buy.com and Poulpeo.com.
The Centre for Retail Research has forecast the trends in online retail sales for eight European countries (see above) and the US for more than ten years. The calculation 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: Regular and Unceasing Growth (so far at least)
Actual growth in 2014 (+18.4%) slightly exceeded our original forecast (+18.1%) and online growth in Europe is expected to continue with 18.7% forecast for 2016. 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 comparatively low in most European countries. The weighted average share in 2014 was 7.2% in 2014 and is expected to be 8.4% in 2015. The countries with the highest online shares of their internal markets are: the UK (15.2% forecast for 2015); Germany (11.6% in 2015); and France (8.0% in 2015). France lost its third place in 2013-14 but is expected to regain it again in 2015. Other countries with high market shares are Sweden and The Netherlands. At present Germany has the fastest-growing online sector (23.1% forecast for 2015, compared with 25.0% in 2014).
In previous surveys the CRR argued that the very rapid growth of the smaller ecommerce countries then occurring compared with the slower growth in the larger ecommerce countries meant that the smaller countries would have caught up in the next four or five years. From the vantage point of 2015, this now looks unlikely as the gap between the larger ecommerce countries and the smaller ones is actually widening. However there is no doubt that most of the countries surveyed will achieve online market shares of at least 18%, the only question is the timescale and no longer whether it will occur.
US Online Spending 2014-2015
US online spending was $306.85 bn [£189.26] in 2014 and should reach $349.20 bn [£215.39 bn] in 2015, an increase of 13.8%.
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 2014 was 11.6% and 12.7% in 2015. The European market share was 7.2% in 2014 and 8.4% is projected for 2015. 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, 57.4% of the US public were eshoppers compared to 46.7% in Europe. Every online shopper in Europe is expected to spend £820.05 [$1329.54 or €970.47] in 2015 compared to £1119.79 [$1815.52 or €1325.20] in the US.
$398.78 bn [£245.96 bn], In the US, online sales are expected to rise from in 2014 to in 2015 and a year later. Canada's online sector is comparatively small, but is forecast to grow from US$20.82 bn [£12.84 bn] in 2014, to reach $23.56 bn [£14.53 bn] in 2015 and $26.99 bn [£16.65 bn] in 2016.
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 in 2015 are expanding 14.2 times faster than conventional outlets creating major strategic issues for store-based retailers.
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. However online growth in Germany is continuing at a very high rate, so maturity is a tendency rather than a scientific law.
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.
Please note that our figures are based on a strict definition of retailing, a term which is increasingly used in a loose fashion to mean 'anything relating to consumers', such as 'retail banking' or 'retail travel agents'. Including holidays, tickets, travel, motor fuel and insurance as 'retail' is all very well but it will usually produce figures that are three times higher than those provided here. So who is right and who is wrong? The CRR is interested in how the retail industry develops over time rather than how or whether different industries like tickets and travel operate online. Hence we use the strict definition of retail and do not study travel, restaurants, tickets, transport etc because it ain't the retail industry.