ONLINE RETAILING IN THE EU 2011

Strategies & Recommendations“One Currency, One Market, One Channel”

ResearchFARMRETAIL ANALYSTS

JULY 2011

Retailers

What are the strategic •imperatives for online retailing in the EU over the next 5 years?

Should retailers first •internationalise their online operations or first localise?

How can retailers retain their •newfound customers abroad?

WE HAVE QUESTIONS FOR YOU...

Product Suppliers

Will online internationalisation •increase the competitive pressure or is it a massive opportunity?

How important are local taste •variations across the EU?

Does it make sense to foster •online partnerships with non-competing retailers or suppliers in the EU outside your domestic market?

Property Firms

How will the threat from •online to established bricks & mortar players develop when international competition heats up online?

How will retailers integrate click •& collect/drive services into their real estate provisions?

How will this change when •online internationalisation is a reality?

Retail Services Providers

How will the legal framework •evolve going forward and what will the impact be on online retailing?

What will payment options and •loyalty schemes look like in the future?

Find out about retailer •strategies and tailor your IT/legal offering according to their needs

Consultancies

Why will online •internationalisation be absolutely crucial and a factor determining success or failure?

Which click & collect solutions •will win out?

What is the impact of SEPA or •the Consumer Rights Directive?

Financial Service Providers

Which retailers need your •undivided attention going forward?

What are the benefits of the •common EU market to EU retailers, especially from a payments perspective?

What will happen with payment •providers in the EU?

TABLE OF CONTENTS

Executive summary p7

Should internationalisation precede localisation? How to gainconsumer trust. Who stands to benefit most from internationalisation?Is language a barrier? Do websites have to be in English? Are differentlegal regimes holding online back? Used by a large bloc of householdsin the West, the common currency represents a massive opportunity.How to navigate VAT and fulfilment. Click & Collect potential.Partnerships abroad. A step change in online loyalty to retain new customers

The evolution of online retailing and the drivers of change: p15a 15 year viewFrom multi-channel to m-commerce to internationalisation, a rapid evolution p16

Drivers of change: economics, social, technological, legal, environmental… p18… all combining to catapult the development of online retailing to the next stage p19

Economics drivers p20E-commerce to win against the backdrop of austerity, online seen as best value Increased cross border shopping pushing online internationalisation

Social drivers p23More single person households, Increased interaction on New Social Media,greater customer involvement leading to greater transparency and lowerprices, creating network effects, recommendations, f-commerce andsocial shopping

Technological drivers p27Increased broadband penetration, the cloud enabler for the retailer backendand shopper personalisation, new loyalty opportunity, tabs & apps,4th generation wi-fi, internet of things, connected car and kitchen

TABLE OF CONTENTS

Legal drivers p30Strong political push to integrate the common market, The ConsumerRights Directive - An attempt to build consumer trust, SEPA harmonisingpayment across the EU, Cap on Roaming charges to boost m-commerce

Innovations in online loyalty p33

The essentials of online loyalty p34How to retain online shoppers: The 5 clicks rule, time slots, delivery charges, click&collect, m-commerce, data security, check out solutions

Outstanding case example I p37Amazon, the trendsetter: marketplace, prime, customer ratings, kindle Recommendations

Outstanding case example II p44Vente-Privee: loyalty through exclusivity, novelty and communication Other online clubs, brands4friends, buyVIPRecommendations

State of play in click & collect: 3 outstanding best practice operators p51

Chronodrive: The French drive concept in online grocery p53Making the shopper come to the retailer, eradicating delivery costs and time slots

ASOS: the pureplay teaming up with the UK high street p55Footfall generator, pureplay gains multichannel capabilities

The logistics provider (DHL): offering unmanned click & collect stations in Germany p57

Sources p58

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9 ResearchFarm - Retail AnalystsNo part of this report may be reprinted or reproduced in any way without the written permission of ResearchFarm.

All in all we believe that language barriers are not insurmountable, as relatively

good education systems are standard in the EU, English is well established as a

second language for most EU citizens.

Moreover translation into European languages is relatively straightforward and not

too expensive. Besides, national online players are well established, and their web-

sites can to an extent be copied or used as inspiration.

This preeminence of the English language also means that Anglo-Saxon

operators enjoy a clear head start when internationalising their online op-

erations over most other EU retail players, as consumers will feel more secure with

a site operated in English than in most other languages.

EU Online Retailing: Executive Summary

16 ResearchFarm - Retail AnalystsNo part of this report may be reprinted or reproduced in any way without the written permission of ResearchFarm.

The Evolution Of Online Retailing: A 15 Year View

SAMPLE PAGES (ZOOM IN)

12 ResearchFarm - Retail AnalystsNo part of this report may be reprinted or reproduced in any way without the written permission of ResearchFarm.

In terms of localising the international online retailing offer, a lot of col-

laboration potential exists between national champions from different sec-

tors – especially in fashion where brands can complement each other. Cloth-

ing retailer Next has started a partnership agreement with the US’s Sears – to share

online space initially and then for the products to be stocked in Sears’ physical store

estate.

Indeed Fashion and luxury players will emerge as obvious winners, as these

attract many overseas online customers already, so making it easier to access

these brands in a local context can only be a win win scenario for a French and Ital-

ian branded player and a say Austrian or Finish department store.

Other examples include online food specialists teaming up with non food special-

ists for example to enable click & collect solutions and drive extra footfall to stores.

Click and collect is a fast growing model and offers many opportunities for

EU Online Retailing: Executive Summary

retailers. Non food specialists can make their credentials and central locations in

high footfall areas count and utilize their store estates to draw in extra footfall by

partnering with a grocery player and acting as collection points for groceries for

busy commuters on their way home from work.

34 ResearchFarm - Retail AnalystsNo part of this report may be reprinted or reproduced in any way without the written permission of ResearchFarm.

For online players there are a number of issues independent of loyalty schemes that need to be covered to begin the process of turning footfall into loyal custom.

The golden rule of online retailing that shoppers should only ever be 5 clicks away from visit to purchase, when they � rst visit a site (assumption of a basket size of 1 product), should be followed as much as feasible.Moreover online pureplays need to focus on the last mile conundrum. This involves great customer service from the delivery personnel but also time slots and these slots becoming increasingly shorter – the retailer able to offer the shortest time windows in which customers need to wait at home for a delivery will win out. In re-cent years we have seen a number of online players offering shoppers competition for delivery slots, guaranteeing disciplined shopping behaviour and understanding that certain slots are more popular and hence quickly booked up.

The Essentials Of Online Loyalty

Moreover we will see the gradual abolition of delivery charges over the next 5 to ten year timeframe, or at least their signi� cant reduction in price for consumers. We believe it goes without saying that returns should be free – otherwise especially with sensitive products an unnecessary barrier to purchase will be established.

5 clicks

Time slots

Delivery charges

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