Studies Predict Huge Online Boom

LONDON/FRANKFURT – A Boston Consulting Group study released last month predicts that online sales in Europe in 2002 will climb to $45 billion, up from $3.5 billion last year. It is one of many published in recent months.

The reach of the reports is breathtaking, ranging from predictions that e-business will become totally integrated by 2008 and no longer have a separate identity to claims that 6 percent of European retail sales will be on the Web within two years.

A German consumer group found that the number of Germans online has doubled in recent months to almost 16 million, while three German media associations predicted that advertising outlays on the Web in Germany would double to $160 million this year. Here is a rundown:

Patrick Forth, author of the BCG study, “The Race for Online Riches – E-Retailing in Europe,” interviewed 546 European retailers, and used “other publicly available data sources” in 14 countries.

He noted – as have other European observers including London’s Financial Times – that European retailers risk losing market share to “more experienced US competitors” unless they become more aggressive online.

He argued that the battle to dominate online retailing in Western Europe began in earnest this year with three major players – established online European companies, European start-ups and the invading Americans.

“US players have already been able to scoop up 20 percent of the European market by coming in with large-scale pan-European businesses,” Forth said. “This approach contrasts with that of the typical European incumbents who have focused on their national markets only.

“US online retailers, however, will also find it difficult to deal with the European online market since it is a conglomeration of regional markets, each at a different level of development.”

Revenues last year totaled $3.5 billion, Forth said, predicting $9 billion this year and $45 billion in 2002, a thirteenfold increase.

Most European Web merchants have migrated bricks-and-mortar brands onto the Internet, while “pure play” retailers who only sell online account for a third of the market. However, their growth rate is 25 percent higher than that of multichannel merchants.

European Web retailers are hesitant about expanding beyond their home markets where they generate 93 percent of their sales, the BCG report said. Web exports to Europe account for 7 percent, those outside Europe for 2 percent.

Four categories of goods and services make up the European Web staples – travel, computer hardware/software, books and financial services – and account for 75 percent of the market.

Germany and the UK are the most lucrative online markets, generating 60 percent of European sales and growing by more than 300 percent in just one year.

France has bought on the minitel system for 20 years but is only now shifting to online buying. Italy, Spain and Portugal have market size but lack online penetration.

“European retailers need to determine what part of their business can be scaled on a pan-European basis and what parts needs to appeal to local preferences,” Forth said.

The Bathwick Group authored a study entitled “Connected World” that is based on interviews with leading executives of 2,000 companies and 500 governmental bodies in 10 European countries.

The study expects Internet sales to double over the next two years and eventually to reach almost 6 percent of all retail sales in Europe. But it also notes hesitation among executives about profiting from e-business.

Some feel they are already too late. A quarter of respondents fear that the Internet will be overloaded within two years, while another 34 percent worry about the high cost of putting their business online.

Still, 98 percent believe that some presence on the Web will be an essential part of future success. Almost half want to use the Web to win new clients rather than keep those they have, even though they know that new clients cost 10 times as much as keeping old one.

Some 55 percent of these key decision makers concede they don’t have access to e-mail, while 30 percent said they had no contact with e-mail and didn’t plan to install it.

The society for consumer research in Germany found that 5.8 million of 28 million German households have access to the Web and that 8.4 million individuals surf from home. The other 7.5 million do so from work.

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