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As an American online merchant, selling in the US and Canada offers great sales potential. Still, the North American market is only one piece of the big e-commerce cake.
This is why most growing online businesses eventually reach the point where entering new markets is the next logical step.
Most of them, like you, consider expanding their online business to the European e-commerce market to benefit from the immense potential. To paint a picture, more than 500 million consumers in Europe have shopped online in 2021.
In this blog, we will highlight
- several reasons to bolster your plan to expand to the European market
- the most important factors to consider to master your expansion to Europe
- the biggest obstacles to a successful expansion
- the main reasons why expansions to the European e-commerce market fail, and how to avoid them.
Let’s jump right into it.
Reasons to expand to the European E-Commerce Market
Expanding to one of the countries in the European Union allows you to sell your products in all 27 member countries, some of which are among the wealthiest countries in the world. Due to the free movement of people, goods, and services within the EU, this gives you access to more than 450 million potential customers.
Including the population of countries that are not part of the EU, like Switzerland, the UK, or Russia, the population of Europe even amounts to more than 750 million people. Additionally, Europe is experiencing an e-commerce boom. Revenues of European online retail have grown about 10% p.a. in recent years. This growth has even accelerated due to the pandemic. According to NielsenIQ RMS, online sales of the 6 major markets in Europe have grown between 6.6x and 16.6x faster than offline sales during the last year.
Still, the market is not as saturated as the North American e-commerce market.
A growing market that is not yet saturated? That’s exactly what online merchants like to hear, right? Well, it gets even more interesting.
Biggest E-Commerce Markets in Europe
Europe is home to some of the strongest economies in the world. E-commerce is no exception in that sense. With the UK, Germany, France, and Russia, four of the 9 largest e-commerce markets in the world can be found on the European continent. Additionally, countries like Spain, Italy, the Netherlands, and Poland hold plenty of potential for online sellers. Besides that, in terms of GDP per capita, 14 of the top 18 nations worldwide are European.
The 4 most important Factors to master your Expansion into Europe
One of the biggest advantages of operating in e-commerce is that you are not limited to any kind of physical location of a shop. Hence, you can reach customers and sell your products to buyers from New York, London, and Paris at the same time. However, there are factors that can make or break a successful multi-market strategy. To help you out with that, we will highlight what to focus on when targeting the European E-Commerce market.
Compliance
VAT in Europe
If you are storing goods in an EU country it is important to know that the movements of goods to the warehouse across borders (so-called intra-community movements and intra-community purchases) need to be declared to the respective local tax offices. That means that local VAT registrations are required in the country of the warehouse to which you are delivering your goods.
How to apply for VAT-ID?
In most EU countries you can apply for a VAT-ID by post or online. The deadlines, waiting times, and the detailed process for the VAT registration vary across countries. Nevertheless, in the following we give a brief overview of the steps you need to consider:
EORI-ID
Equally important when storing your products in the European Union, is the EORI-ID. It is a must-have for any business that is dealing with customs procedures by importing or exporting goods and serves as a unique identification number. Other than the VAT, a single EORI-ID for importing into the EU is sufficient to serve all countries.
That means that when you start your operations in Germany only, for example, expanding to the Netherlands, Spain, or any other EU-county won’t be any more hassle regarding your EORI-ID
Here’s how you can request an EORI Number
More information about the IOSS (Import One-Stop-Shop), customs form, and similar, you can find in our Cross-Border Whitepaper.
Labeling – Are your products compliant for selling in Europe?
Besides tax barriers, online merchants should be specifically cautious about different rules in terms of product safety. Generally speaking, the European market is more regulated than is the Northern American one. This is especially true for the countries that are part of the European Union.
For instance, stricter rules apply for selling vitamins and supplements, cosmetics, or in some cases, when selling toys to or in Europe.
For that reason, it is important to check for rules and regulations including
- Product labeling
- Online labeling
- Advertising
- Advertising bans
- Obligation to notify when placing food products on the market
- Obligation to register
- Obligation to notify
GDPR
This is also true for GDPR and privacy laws. In fact, North American and European rules differ quite substantially in some cases. Be sure to check for these rules in order to avoid troubles, both in a legal sense and in regards to avoid upsetting your customers.
How to launch your e-commerce business in Europe?
Another decision that can make or break your endeavor to have a successful entry into the European e-commerce market is your strategy of launching your offers there. One possible starting point is to check which e-commerce markets are most attractive for your business and then adapt your market penetration strategy accordingly.
Most attractive E-Commerce Markets in Europe
Many merchants opt for starting in the UK or Germany first. The French E-Commerce market is another popular choice. Other comparably big and attractive e-commerce markets are the Netherlands, Spain, Italy, and Poland.
Leading Marketplaces in Europe
While everyone in the US, Canada, and in basically any other country knows Amazon, there are various marketplaces that quite successfully compete with the American giant on a national or inner-European level.
You can find a summary of the most popular marketplaces per country below:
Besides these top marketplaces in Europe, people still use marketplaces from outside Europe, like Amazon, Etsy, eBay, and the like.
While these marketplaces are a good starting point for many, there are quite substantial downsides in choosing this strategy. Ever-increasing fees, high dependency, and limited possibilities in terms of branding and packaging are some of the disadvantages.
Hence, an increasing number of merchants decide to expand with their own, independent online shops. In fact, it has never been easier to set up an online store. Shopify, WooCommerce, Plentymarkets, and co. make this possible with their drag and drop solutions.
Cultural understanding of European customers
It is also worth noting that cultural differences can play a big role in the success of your expansion plans. Therefore, when you are choosing the path of entering the European market with your own online shop, make sure to be aware of the characteristics of the potential customers you are trying to sell to.
Demand and Local Buying Trends in Europe
First of all, check the demographics, preferences, and habits of the various countries you consider selling to.
German online shoppers particularly love buying clothing and footwear online. The same is true for buying movies online. Meanwhile, shoppers from the UK are more likely to buy food online both in absolute and relative terms. Spanish and Italian e-customers are relatively more likely to buy sports and leisure products online. Online Shoppers from Poland, on the other hand, are relatively more prone to buy children’s items compared to other nations.
From these examples, you see that there are big differences in what people from each country are used to buying online. Keep that in mind before you make a decision on where to sell first.
E-Commerce Marketing in European Countries
If you have checked for the demand for your products in the respective countries, you’ve set the basis. Next, you need your online shop to be visible.
When not physically present, there are 3 main channels online merchants use to draw attention to their channels. Search engine advertising (e.g. Google Ads), Social Media (e.g. Instagram), and Search engine optimization (organic search results).
SEA – Search engine advertising in Europe
First of all, it’s no big surprise that Google, with a market share of more than 93%, is the undisputed leader in search engines in Europe.
However, what is more interesting is that the average costs per click (CPC) for online shops is the highest in the USA (1.05$) compared to the main European markets like the UK (0,73$), Germany (0.64$), Austria (0.54$), France (0.45$), and the Netherlands (0.44$).
Consequently, this means that for the average price of 100 clicks in the US, you can have an average of 239 clicks in the Netherlands, for example. Utilizing these SEA particularities in Europe, you can effectively decrease your cost of acquisition which is key to e-commerce businesses.
Social Media in Europa
One of the biggest differences between North American and European e-commerce is the role of social media. While nearly every e-commerce company in the US or Canada has its social appearance optimized, an elaborate strategy can still give you an edge in the European market. European businesses are closing the gap, still, there is a lot of work to do, thus, opening the chance to squeeze in for newcomers.
Moreover, there are huge differences in which social platforms are popular in the different markets.
One example is Twitter. While, according to Statista, the platform is quite popular in the US (73 million users), European countries lag behind – the UK (17.5 million), France (9.05 million), Spain (8.1 million), and Germany (7 million).
Another example is the Chinese internet phenomenon TikTok. In August 2020 its user number amounted to 65.9 million in the US, while France, the UK, and Germany combined only amounted to 26.9 million users.
What is striking is that European user numbers of social media platforms are growing arguably faster than do the efforts of companies to cash in on that fact. However, experience shows that it won’t take long until this gap will be bridged, so you better be fast there.
SEO – Search engine optimization
Search engine optimization is a powerful strategy to follow. It won’t bring the cash in on short notice, but once you got it up and running, it will be a steady source of revenue without additional costs. Naturally, you have to take into account that keywords differ from country to country. There might even be differences within a region or between countries that speak the same language.
Be sure to invest some time in proper keyword research. That way you can make sure to get the best results possible. Patience is key if you want to be successful with this strategy. SEO is a marathon rather than a sprint.
Also, try to set up a website that is optimized for different countries. You’ll reach better rankings in Germany with a page that ends with “.de”, and website.fr will perform better in France than elsewhere.
Factors that influence the Buying Decisions
Once potential customers land on your page and love your products, the sale, unfortunately, is still not in the books. In fact, there are still many big and small hurdles that might influence the potential customer to leave your page.
Language
The most obvious of these potential sale killers are language barriers. Language is much more than just words. It is an extension of identity, culture, and personality. Thus, word-to-word translations usually don’t work because nuances get lost in translation. As an e-commerce company, you try to build trust within your potential customers in a matter of seconds. After all, you want to make that sale, meaning that you need to trigger that leap of faith in your online shop visitors.
Now, while most online shoppers in Europe understand a certain degree of English, online shops offering a translation in their mother tongue will most likely have an edge regarding making that sale. In fact, 75% indicate that they want to shop on pages in their mother tongue only
However, Europe is a diverse continent. In the European Union alone, the number of official languages amounts to 24, so you have to get your priorities right. Also, don’t forget to offer your product in the local currency, as any other currency will scare off a big share of potential customers.
Pro-Tip:
If you want to test markets and need a quick translation, don’t use Google Translate. It might have improved throughout the years, however, there are better options available for free. One of them is DeepL. Another, relatively cheap option is to use the services of freelancers. There are multiple platforms like fiverr, that offer quick and comparably cheap solutions. Using the help of a local native speaker will, in most cases, pay off quite soon.
Most Popular Parcel Delivery Companies in Europe
Another deciding factor for making a sale or not is the shipping company that delivers your products. The popularity of these carriers significantly differs per country.
Find more information about the most popular parcel delivery companies in:
Most Popular Parcel Delivery Methods in Europe
Not only is the parcel delivery company a crucial part of decision making, but the shipping method is so too. In fact, preferences for various methods differ quite substantially within Europe. This is confirmed by the results of the e-commerce in Europe report by postnord.
According to the report, home delivery in the daytime, for example, is the most popular method in France (64%), the Netherlands (51%), Italy (70%), Spain (38%), and the UK (41%), while only 25% of Germans prefer that method of delivery.
With 38% of customers in Poland indicating that their preferred method is collecting the product from a parcel machine by themselves is the most popular method. In contrast, in other countries, this is preferred by a maximum of 5% of online shoppers.
Spanish customers, on the other hand, like home delivery in the evening significantly more than any other country in Europe.
Most Popular Payment Providers in Europe
Similar to shipping providers and methods, providers and methods of payment are key to converting website visitors into buyers.
While nearly nobody pays via invoice in the UK, Italy, Poland, Spain, or France, every fifth transaction in Germany is done this way. Debit card or credit card payment, however, is the preferred method for more than half of the British, Spanish, and French customers while it is used by less than a quarter of Dutch, Polish, and German e-shoppers. Direct payments through the bank are particularly popular in Poland and mobile apps are used mainly by Dutch online shoppers.
Apart from various payment methods, there are also different providers that are most popular per country. In Italy, for example, the CartaSi credit card is what the majority of the population uses to pay, while in the Netherlands more than half of the online purchases are made through iDeal.
What is the main reason why expansion to the European E-Commerce market fails? Logistics.
While all these variations might seem overwhelming for an American merchant planning to expand to Europe, investing your time into finding the perfect solution will eventually pay off.
However, if there is one thing that can be named the single most decisive factor for the failure of expanding to Europe, it is bad logistics. However, here’s the good news. There are multiple solutions that allow for a hassle-free fulfillment process.
3PL companies like byrd can help you to get rid of many fulfillment blockers that you will face when expanding to the European market. As a fulfillment expert focused on the European market, byrd will take care of storage, picking, and packing, as well as shipping, and the entire reverse logistics process. To top things off, with byrd you also won’t have to worry about VAT regulations anymore.
Instead, you will be able to focus on introducing your brand to the diverse European market and spread your word. Similar to ShipBob in the US, byrd has the industry know-how and years of experience in the European market and can build on long-term partnerships with leading logistics companies.
How can byrd help you to win the European E-Commerce Market
One of the characteristics that differentiate byrd from other 3PLs is the expertise and the focus on the European market. With more than 15 warehouses across the main European e-commerce markets (including UK, Germany, France, Netherlands, and Austria), you can serve your customers from a close-by warehouse, reducing the time and cost of delivery, while offering more environmentally friendly shipping solutions.
Additionally, shipping from various warehouses in multiple countries allows you to be more flexible and minimizes the risk of bottlenecks due to seasonal peaks or problems due to strikes, corona clusters, or similar.