European E-Commerce Poised for Boom

According to a new study by Forrester Research (Nasdaq: FORR), online business-to-consumer (B2C) sales are set to grow explosively in Europe from $2.8 billion (US$) in 1999 to approximately $170 billion in 2005.

The Cambridge, Massachusetts-based research firm predicts that growth will average 98 percent annually, and will be fueled by a meteoric rise in Internet use, the onset of a single currency in 2002 — the Euro — and the development of both interactive digital television (iDTV) and wireless e-commerce.

The shift toward Internet commerce will be driven by pan-European retailers who have the logistics infrastructure, supplier relationships, and merchandising experience to expand their markets to consumers across Europe, Forrester said.

Pan-European Firms To Lead

“Over the next five years, both Internet pure-plays and traditional retailers must develop cross-border strategies that culminate in pan-European sales, or their businesses will be eroded by competitors who do,” said Forrester senior analyst Matthew M. Nordan.

“The resulting industry consolidation will shrink the number of pure-plays to a few pan-European leaders, while traditional retailers, leveraging their considerable strengths, will claim more than 75 percent of online sales in Europe by 2003,” Nordan added. “Traditional retailers have a huge advantage in a pan-European world. They have the potential to dominate a pan-European retail future. But they must act now or risk the onslaught of fast-moving Internet pure-plays.”

Germany To Lead the Pack

Given the spate of news about Internet pure-plays opening European subsidiaries, it would appear that Forrester’s European findings are widely accepted by others in the industry. Virtually every major American Internet commerce property has an affiliation of some kind in Europe.

For example, Internet loan broker E-Loan announced today that it has launched operations in France and Germany, while the Lycos network completed a $650 million initial public offering last week for its Lycos Europe unit.

With Europe’s largest population — over 80 million people — Germany will account for 26 percent of all Internet commerce in Europe, Forrester predicts. France will rack up 14 percent of total sales, while Sweden will have the highest proportion of retail sales online, at some 9.3 percent.

By 2005, e-commerce sales will account for seven percent of all of Europe’s retail sales, Forrester said. The company added that media, electronics and leisure travel totaled more than 80 percent of Europe’s online sales in 1999, but that figure will slip to less than 40 percent in 2005 as online sales of apparel, groceries and autos burgeon.

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