As online commerce channels evolve, companies looking to launch expand or improve their digital strategy in Europe face big ‘x-geography’ challenges in terms of adoption and local best practices; effectively making the EU look like a digital patchwork quilt, of highly, medium and barely even enabled countries. In this article we look to analyse the underlying reasons for this uneven adoption rate and hopefully give you more insights into planning and boosting your Pan-European strategy.
Adoption in Europe is as diverse as its region
If we analyse the percentages of revenues generated in the digital world, according to Eurostat the leading country in the region is the United Kingdom. The UK closes 20% of its trade volumes through these channels, while others like Italy or Greece show a figure closer to 5%.
Despite the unbalanced value of digital commerce revenues, we should not miss one of the key factors that might not have been captured by the ROPO effect (Research Online / Purchase Offline). According to Forrester research for every Euro spent online, the digital channel influences 5 Euros in offline sales and by 2018 the web will influence 44% of physical retail sales in Europe.
If we consider both ratios as averages across Europe, we can infer that today (or in the near future), most of the revenues of European companies will either happen online or at least have been influenced by online channels – this is the real value of digital that we should be looking to understand in our strategic approaches.
Understanding the reasons for the imbalance
In order to understand the disparity across EU geographies we could approach the question from the economic point of view: either the demand is uneven (the consumer’s readiness), or the offering is, i.e. the gap comes from companies not adopting online commerce channels widely in some geographies.
Starting on the European consumer’s readiness and focusing on the connectivity level; in Western Europe, more than 80% of the households have internet connection and the bare minimum observed level connectivity sits around 65% even in Portugal and Greece. If we extend the analysis to Eastern Europe, most of countries connectivity sits in the band between 70% and 80% and the lowest level is not that different to that observed in Western Europe at 57%.
If we follow with an analysis on the European user’s behaviour, according to Eurostat’s metrics, most Europeans show sufficient internet skills to be considered mature users. Almost 100% of Europeans know how to use search engines and most know how to communicate and share experiences and files using the web. If we look into the behavioural differences across users, there are not really meaningful usability gaps.
Now let’s add one more piece to the analysis puzzle and look at the key reasons why Europeans choose not to shop online: the two biggest issues seem to be the lack of need to do so, and a preference towards physical channels. While in the United Kingdom these key reasons account for around 20% of the respondents, in Mediterranean countries like Italy or Spain it accounts for 40% and 60% of respondents respectively.
Summarising the findings, Europeans are quite evenly connected technically speaking; their internet skills are similar across geographies and we know the ROPO effect is larger across the non-leading digital economies. Applying a simple rule of inference, if the consumer is not the reason, the key missing factor to boost online commerce across Europe has to be a lack of impetus to adopt the technology and organisational changes digital disruption requires, straight from the companies themselves.
The implications of this imbalance
We can all agree that consumer readiness is driving the industry adoption of strong digital channels and strategies. The fact that both the industry will keep evolving (driven by consumer needs), and the consumer will keep adopting these innovations makes perfect sense – it’s a self-propelling cycle.
However, there still remain large areas of disparity and the gap between consumers and brands/retailers will increase before decreasing. The only way to soften this short-term blow and to maintain (or hopefully increase), your customer base is to have a dynamic digital strategy driven by the consumer not by peer pressure or internal rhetoric – companies must avoid the corporate ‘coolade’!
Now to put some numbers behind the theory. If we pretend all European companies have the same customer focus as British companies, and we run a quick calculation applying the British commerce penetration to the overall European trade commerce, the European digital market opportunity would immediately jump 40%, and that’s only the catch up effect!
In summary, brands are now increasingly confronted by technologically minded, enabled and empowered consumers, and they need an appropriate digital strategy to engage and take advantage of this. Despite the current gaps within the industry, this does mean there are opportunities to capture the attention of this new profile of consumer. Capturing the European online commerce potential depends on our ability to place the customer at the centre of digital strategies and investing based on the future potential of the market, rather than its legacy to date.
By Martin Coedo, Commerce Strategy Leader for IBM Commerce.
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