It would appear that the tangled web of product return laws, migraine-inducing logistical challenges, and an intricate tapestry of local laws, regulations and practices are not enough to deter Europe’s top retailers from pursuing cross-border online sales in the region.
It would appear that the tangled web of product return laws, migraine-inducing logistical challenges, and an intricate tapestry of local laws, regulations and practices are not enough to deter Europe’s top retailers from pursuing cross-border online sales in the region. For many, the potential revenue growth on offer still makes it an irresistible opportunity, which they have placed toward the top of their agendas, but successfully seizing it will be far from simple.
We are starting to see retailers shifting from a defensive position, focused on protecting their market share and capitalizing on the multichannel opportunity in their domestic market, to a more offensive position aimed at tackling the cross-border challenge in Europe.
A recent study of 146 of some of Europe’s largest retailers, conducted by Accenture for the European Retail Round Table (ERRT), found that one quarter of European retailers believe that they could increase revenues by 25 percent if they could sell more effectively online and cross-border in Europe. Two-thirds of the retailers that we spoke to, consider expanded European cross-border e-commerce to be a medium or high priority for growth.
Undoubtedly, Europe’s consumers are increasingly digital. They are empowered by smartphones and social networks, and they have access to unprecedented levels of information, and this willingness to use digital channels for shopping is a key driver for retailer’s focus in this area. According to our study, more than three quarters of the retailers surveyed report that multichannel customers spend more than their single-channel customer counterparts, and one third said that multichannel customers spend at least 26 percent more than single-channel customers.
But this is not an open goal. As irresistible as the opportunity may appear, there are significant hurdles. Many retailers are struggling to navigate a muddle of diverse local laws, regulations and practices, which is hampering their cross-border sales aspirations.
The challenges are many and varied; diverse product returns laws, difficulty in efficiently handling product returns cross-border, different national laws governing consumer transactions, such as distance selling or data transfer requirements, and differing labour laws between geographies, were all cited by retailers as being sources of significant headaches.
According to many of our interviewees, Europe’s attractiveness needs to be improved, by continuing to make progress towards a single market in e-commerce, which will make it easier to do business in multiple channels across borders.
It is clear also that retailers need to tackle their internal challenges. More than half of the retailers that we spoke to are investing in technology to streamline and manage cross-border differences in Europe, with half offering local languages on their website and almost as many (49 percent) offering local currency payment facilities. But operating costs will remain an issue until retailers achieve scale, and, for most, international supply chain and fulfillment operations are still immature and sub-scale relative to domestic market operations.
Some retailers we interviewed are opening their domestic websites to European and/or international orders, or pursuing cross-border European sales from a domestic location. Several are considering entering new markets with a pure play online model to test the market, and following up by opening stores. Others are entering new, high-growth or under-served European markets via multiple channels, or upgrading to multi-channel in locations where they already have stores.
Leading retailers are creating innovative, low-cost operating models that combine the agility and flexibility of the pure plays with the brand power and convenience of store based businesses. In addition, they are investing in new collaborative alliances among partners in order to drive down costs.
It is understandable that some retailers still want to focus on their home market first; however, the online pure-play, behemoths are continuing their inexorable march and are taking a pan-European approach to the market of 500m potential customers. This is not a case of cultural insensitivity but the logical approach given their more flexible operating structure and lack of physical stores.
The opportunity for growing cross-border online sales across Europe is irresistible, and it is achievable. Successfully seizing it will require traditional retailers to move quickly to establish first-mover multichannel international advantage.
- Chris Donnelly, managing director, Accenture Retail