Report: European E-Commerce Growing Fast, But Risks Remain

European e-commerce is poised to grow by nearly 50 percent this year but will still account for just 2 percent of all sales across the continent, according to a report from GartnerG2.

The research firm said that online commerce will account for about 97.8 billion euros, or about US$86 billion, in 2002, compared with 66 billion euros, or $57 billion, last year. The increase represents a one-year jump of 48 percent.

Meanwhile, e-commerce will gain market share rapidly in Europe, GartnerG2 said, accounting for 2.3 percent of all sales in 2002 and more than 5 percent within three years.

In comparison, the U.S. Department of Commerce recently reported that domestic e-commerce grew to $32 billion in 2001, an increase of more than 19 percent over the year before. Online sales in the United States accounted for just over 1 percent of overall retail sales.

Shotgun Approach

Despite the European growth, Gartner warned that some retailers are rushing to implement broad multichannel strategies that may not work in the long run.

"Linking online channels with offline channels is the ultimate key to success , and buyers will desert those companies that don't get this right," Gartner analyst Gill Mander said.

Multiplication Tables

Mander noted that companies need to use a "laser focus" approach to leveraging multiple channels, one that recognizes the limitations and potential of each online medium.

"For example, digital TV is not always the ideal medium for selling, and the limitations of the mobile phone are immediately apparent," Mander said. "However, each can play a vital role in improving customer relationships, branding and loyalty, resulting in greater profitability in a market where margins continue to fall."

In fact, GartnerG2 said that despite rapid adoption of interactive television and widespread use of mobile devices on the European continent, e-commerce there will be dominated by PC-based shoppers.

By 2005, 73 percent of online shopping will be done using PCs, 17 percent using Digital TV, and another 10 percent via mobile devices. An earlier Gartner study found that just 6 percent of all interactive TV subscribers in Europe had used the channel to make a purchase.

Gartner advised retailers to look beyond sales when evaluating whether to use various channels and to focus on making the overall buying process more convenient for shoppers.

From Many, One

Germany will dominate e-commerce sales, accounting for $20 billion in sales in 2002, followed by the United Kingdom with $9 billion and France with just under $4 billion.

The GartnerG2 numbers echo similar findings from research firm IDC, which forecast a 68 percent increase in European online sales this year, helping to propel worldwide e-commerce sales over the $1 trillion level in 2002.