E-Commerce EU Forecast 2006-2011

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TRENDSIncludes Consumer Technology Adoption Study data

EXECUTIVE SUMMARYIn the coming five years, the number of Europeans shopping online will grow from 100 million to 174 million. Their average yearly Net retail spending will grow from around €1,000 to €1,500, as UK Net consumers outspend even their US counterparts online. Overall, this will cause European eCommerce to surge to €263 billion in 2011, with travel, clothes, groceries, and consumer electronics all above the €10 billion per year mark.

TARGET AUDIENCE

Chief marketing officer/senior marketing executive, interactive marketing executive, market research/customer insight executive

eCOMMERCE KEEPS GROWING

Two years ago, Forrester predicted that European eCommerce would grow to €57 billion in 2005.1 We thoroughly reviewed our predictions, taking into consideration growing numbers of online shoppers, the extensions of their Net shopping lists, and the growing sophistication of online retailers.

More Online Europeans Spend More Online

Consumers who start to go online do so mostly to use email. But after a number of months, many of them discover the convenience and attractive prices of online shopping.

· The number of Europeans shopping online has increased by 37% in the past two years. At the end of 2003, 48% of Europeans went online at least once per month, and 19% had shopped online; two years later, these numbers had soared to 54% and 26%, respectively (see Figure 1).

· Net shoppers are spending more online. The average online shopper has increased his quarterly Net spending by 10%, from €244 in Q4 2003 to €268 in Q4 2005.2 Combined with the increase in the number of online shoppers, total European eCommerce grew 50% in two years.

· By 2011, 73% more Europeans will have become online shoppers. The online population in Europe will keep growing, from 189 million consumers in 2006 to 242 million in 2011 — or from 58% to 74% of the adult population. As both new and experienced Net consumers gain more confidence online, the number of online shoppers will grow from 100 million to 174 million over the same period.

June 29, 2006

Europe’s eCommerce Forecast: 2006 To 2011Net Retail Will Soar From €103 Billion To €263 Billionby Jaap Favierwith Michèle Bouquet

Trends | Europe’s eCommerce Forecast: 2006 To 2011 2

© 2006, Forrester Research, Inc. Reproduction ProhibitedJune 29, 2006

Figure 1 Forecast: Drivers Of Online Retail Growth In Europe, 2006 To 2011

Retailers Have Become More Sophisticated

To serve the growing online masses, retailers and service providers have upped their Web presence.

· Comparison shopping sites help online buyers. By transforming online consumers into more astute shoppers who feel confident about their purchase decisions, comparison sites like Kelkoo have grown in popularity in Europe and have pushed eCommerce forward. With 8.5 million monthly unique visitors, Kelkoo.fr is the second most visited eCommerce Web site in France and Kelkoo.co.uk the third most visited in the UK, with 6.4 million monthly unique visitors.3

· Retail executives buy into eCommerce. Afraid of cannibalization, most retailers in 2002 kept eCommerce well away from their high-street stores. But today, Casino is celebrating its online electronics discounter Cdiscount after it saw its revenues jump by 82% in 2005 to €383 million. In May 2006, HMV and Waterstones announced their intent to sever their hosting agreements with Amazon.co.uk, stating that eCommerce was too important to leave to a third party.4

· Multichannel retailers battle with dot-coms. Let’s face it — many retailers got involved with eCommerce in the 2000 dot-com craze just to inflate their shares; during the bust, online operations became orphans. But today, eBay and Amazon shares are rising steadily, while traditional retailers are under attack from discounters. Executives realize that they need to invest in their Net shops to avoid being marginalized online by the likes of Pixmania, which outperforms Dixons in online sales.

ONLINE RETAIL SALES WILL MORE THAN DOUBLE BETWEEN 2006 AND 2011

Fueled by improved supply, the average annual spend per online shopper will increase from €1,000 to €1,500 (see Figure 2). Multiply this by the growing number of Net shoppers, and European eCommerce will grow in the next five years from €102 billion in 2006 to €263 billion in 2011, including retail revenues through auctions.5

Source: Forrester Research, Inc.38297

Online populationOnline shoppers

58% 63% 67% 70% 73% 74%31% 36% 41% 45% 50% 53%

0%

20%

40%

60%

80%

Percent of population aged 16 and above who shop online

Percent of population aged 16 and above online

2011201020092008200720062005*2004*2003*

54%26%

52%23%

48%19%

Base: European consumers aged 16 and above*Source: Forrester’s ECTAS Q4 2003, Q4 2004, and, Q4 2005 Surveys



Figure 2 Forecast: Yearly Online Spend Per European Online Consumer, 2006 To 2011

Country Highlights: The UK Will Still Lead Online Sales In 2011

Two years ago, Forrester estimated that Germany’s online sales would surpass the UK’s by 2008. But the UK eCommerce market continues to outrun the German one, despite Germany having more online shoppers in absolute terms. Our forecast shows that (see Figure 3):

· UK eCommerce even bests the US. The average UK online shopper will spend €1,744 online in 2006 — a higher percentage of his retail budget than of his US counterpart’s — and €2,410 in 2011. These ardent shoppers will drive UK eCommerce from €43 billion in 2006 to €76 billion in 2011, 29% of total European Net retail. Online shopping is the norm, with multichannel retailers like Argos integrating their Web businesses with their stores via functions like online store inventory display. Net grocery purchases from firms like Tesco are key in putting the UK ahead of the US.6

· Germany stumbles over low-spending online punters. German consumers are less bullish about their financial situation and continue to spend less online than UK consumers. The average German online consumer will almost double his online purchases, from €786 in 2006 to €1,441in 2011 — almost half of what UK Net consumers spend online. The sheer scale of shoppers — 43 million in 2011, a quarter of all online European shoppers — and especially those looking for bargains at eBay and travel sites like Opodo.de ensures Germany’s strong second place on Europe’s eCommerce map.

· France thrives on dot-com action. France is a dot-com stable, with thoroughbreds like Pixmania and GO Voyages giving traditional retailers a run for their money. In the coming years, the growth of the French online retail market will outpace that of the UK and Germany, more than tripling its size to €39 billion in 2011. Online spending per French Net shopper will remain roughly on a par with the European average.


€1,000

€1,200

€1,400

€1,600

€1,800

€2,000

201120102009200820072006

€1,026 €1,132 €1,235 €1,346 €1,446 €1,536

Online spend per European online shopper



· The Netherlands leads the Benelux. The online retail market in the Benelux is and will remain roughly half the size of the one in France. But the Benelux market is far from uniform: The Netherlands has the most Net shoppers, but their yearly online spend is low — only €688 in 2006, compared with €851 in Belgium. Having a dense retail network gives the Dutch a bigger incentive to research products online, but buy them at the store.

· The Nordics finally embrace eCommerce. Average online spend per Net shopper in Sweden and Norway is almost as high as in the UK; online Swedes will raise this to more than €3,000 by 2011, including spending more than €300 on clothing online. Online Danes today spend less than half of what their Norwegian counterparts spend on the Net, but will reduce the gap by quadrupling their online spend by 2011.

· The rest of Western Europe brings up the rear. Spain and Italy together make up a quarter of Western Europe’s population and a fifth of its Net population, but jointly account for less than 7% of its eCommerce. In the next five years, their share of online retail will gradually rise to nearly 10%. While Portugal and Greece trail their Mediterranean neighbors, Switzerland and Austria are at the other end of the spectrum: Their share of online retail will keep pace with Germany’s.

Category Highlights: Leisure Travel Remains The Top Money-Spinner

Online Europeans learned to shop online at sites like Amazon and Expedia for CDs, books, and airline tickets — products that don’t necessarily offer the great high-street shopping experience that shoes do. But the more experienced online shoppers keep expanding their Net purchase categories, which will lead to (see Figure 4):

· Travel losing a fraction of its massive lead. Today, one in three of the euros, pounds, or kronor that consumers spend online go to leisure trip bookings. Online travel spending will grow by 133% to almost €77 billion in 2011 — making it the biggest grower in absolute terms — but its share of total retail will decline to 29%. Clothing will see its online turnover grow from €10 billion in 2006 to more than €31 billion in 2011. Big winners will be catalog retailers like Neckermann, Otto, and La Redoute, which are refining their decades-old CRM best practices for the Net.

· Alcohol enjoying the highest growth. While probably unrelated, online sales of alcohol and sports equipment will see the highest growth in the next five years — 283% and 245%, respectively — but jointly won’t account for more than 4% of total online purchases. Along with travel and clothing, food and beverages and consumer electronics will see Net revenues increase to more than €10 billion across Europe as the likes of Ahold and Media Markt keep persuading consumers to click the “buy” button.



Figure 3 Forecast: European Online Retail Sales By Country, 2006 To 2011


Country breakdown

Nordics

Benelux

Rest of Europe

France

Spain

Italy

Finland

Norway

Sweden

Belgium

Netherlands

Luxembourg

Switzerland

€16,590

€5,309

€2,170

€3,874

€2,592

€4,752

€67

€4,077

€2,254

€21,675

€7,220

€2,590

€5,075

€3,244

€6,322

€99

€5,294

€3,172

€27,275

€9,444

€3,005

€6,371

€3,914

€8,074

€144

€6,706

€4,293

€33,107

€11,906

€3,408

€7,705

€4,579

€9,926

€206

€8,279

€5,573

€38,844

€14,520

€3,791

€9,004

€5,233

€11,783

€287

€10,001

€6,926

€53,859

UK

€29,671 €37,281 €45,444 €62,298€22,892

€71,222

Germany

€51,155 €58,579 €65,318 €76,412€43,070

€12,254

€3,765

Denmark €1,889 €2,551 €3,321 €4,166 €5,046€1,356

€3,619 €4,759 €6,007 €7,309 €8,625€2,652

€1,764

€2,846

€1,987

€3,450

€45

€3,048

Austria

€1,737 €2,445 €3,314 €4,326 €5,422€1,196

€1,551

Portugal €403 €586 €824 €1,117 €1,457€268

Ireland €560 €828 €1,194 €1,662 €2,520€371

Greece €159 €246 €372 €550 €785

26%

31%

17%

26%

21%

28%

45%

27%

35%

22%

12%

30%

27%

35%

40%

47%

51%

21%

€101

€102,614 €130,878 €161,966 €195,020 €228,898 €262,954

(numbers have been rounded)

€0

€50,000

€100,000

€150,000

€200,000

€250,000

€300,000

2011 CAGR20102009200820072006

The spreadsheet detailing this forecast is available online.

Online retailsales

(€ millions)

Total Europe(€ millions)

Spain

Nordics

Germany

UK

France

Italy

Benelux

Rest of Europe



Figure 4 Forecast: European Online Retail Sales By Category, 2006 To 2011


The spreadsheet detailing this forecast is available online.

2006 2007 2008 2009 2011% of 2011

retail*2010

Europe’s total online retail sales(€ millions)

€102,614 €130,878 €161,967 €195,020 11.0%€228,898 €262,954

Books

Music

Videos

Event tickets

Flowers

Apparel

Jewelry/watches

Recreation

Clothing

Footwear

Sports equipments

Electronics

Computer hardware

Consumer electronics

Groceries

Food/beverages/household supplies

Alcohol

Health/beauty

Home products

Home appliances

Household goods

Furniture

Garden/tools/DIY

Leisure travel

Video games

Toys

Software

4,960

1,100

1,516

€5,555

€809

€14,446

1,743

€3,824

10,035

2,669

1,274

€13,823

5,806

8,016

€10,156

5,284

1,552

3,321

€12,208

3,001

3,247

1,952

4,008

€32,959

1,147

1,404

1,257

€8,833

6,019

1,296

1,895

€7,127

€1,066

€18,873

2,074

€4,880

13,445

3,354

1,746

€17,139

7,115

10,024

€13,736

7,071

2,208

4,456

€15,986

3,889

4,332

2,530

5,235

€41,325

1,383

1,751

1,538

€10,747

7,065

1,489

2,280

€8,921

€1,369

€23,993

2,428

€6,035

17,500

4,065

2,294

€20,681

8,573

12,108

€17,930

9,149

3,039

5,741

€20,134

4,850

5,529

3,189

6,567

€50,241

1,615

2,127

1,828

€12,662

8,074

1,669

2,653

€10,920

€1,716

€29,639

2,809

€7,273

22,052

4,778

2,922

€24,310

10,115

14,195

€22,773

11,593

3,988

7,192

€24,603

5,841

6,771

3,921

8,071

€59,279

1,841

2,510

2,111

€14,507

25.9%

21.8%

21.9%

33.7%

10.4%

8.8%

9.9%

13.4%

8.7%

8.5%

8.9%

29.5%

43.0%

24.1%

3.5%

2.2%

6.2%

14.0%

9.5%

15.8%

11.8%

6.7%

7.7%

31.9%

29.7%

19.2%

46.9%

26.2%

9,019

1,830

2,999

€12,978

€2,101

€35,577

3,208

€8,575

26,896

5,473

3,629

€27,920

11,655

16,265

€28,171

14,411

4,989

8,771

€29,252

6,806

8,013

4,698

9,735

€68,104

2,059

2,887

2,372

€16,220Media

9,884

1,974

3,310

€14,972

€2,512

€41,547

3,605

€9,921

31,810

6,132

4,398

€31,296

13,118

18,178

€34,249

17,891

5,944

10,415

€33,929

7,745

9,185

5,493

11,506

€76,755

2,269

3,254

2,605

€17,773

(numbers have been rounded)

European online retail sales by category(€ millions)

*Online sales as % of total sales per category


Forrester Research (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice about technology’s impact on business and consumers. For 22 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its research, consulting, events, and peer-to-peer executive programs. For more information, visit www.forrester.com.

© 2006, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, Forrester’s Ultimate Consumer Panel, WholeView 2, Technographics, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. To purchase reprints of this document, please email [email protected]. 38297

SUPPLEMENTAL MATERIAL

Online Resource

The underlying spreadsheets detailing the forecasts in Figures 1, 2, 3, and 4 are available online.

ENDNOTES1 As both consumers and Net retailers get smarter about using the Web, online retail growth will continue

unimpeded, taking 8% of total retail sales by 2009. See the March 1, 2004, Market Overview “Europe’s eCommerce: The Next Five Years.”

2 Source: Forrester’s European Consumer Technology Adoption Study Q4 2003 and Q4 2005 Surveys. We surveyed consumers in the five markets of the UK, France, Germany, Italy, and Spain.

3 Source: ComScore Media Metrix, April 2006.

4 The partnerships deals in both cases tipped in favor of Amazon.

5 Our online retail forecast from March 2004 did not include online auctions.

6 Online retail sales will grow from $172 billion in 2005 to $329 billion in 2010. Both consumers and sellers continue to stoke the eCommerce fires. As consumers increase shopping-related activities and sellers compete to innovate and keep them engaged, online sales will enjoy a solid 14% compound annual growth rate (CAGR) over the next five years. See the September 14, 2005, Trends “US eCommerce: 2005 To 2010.”

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Documents

E-Commerce EU Forecast 2006-2011