European E-Commerce To Hit $1Trillion by 2004

According to a new report by Forrester Research, European e-commerce will grow at triple-digit rates over the next five years to a total of more than $1 trillion (US$).

While this increased demand will quickly jump-start Northern Europe into e-commerce hyper-growth, the study found that Southern Europe will still lag behind, thereby preventing the region from closing their e-commerce gap with the U.S.

Critical Mass Formed In 1999

“With a critical mass of over 386 million consumers, the 17 countries of Western Europe represent the world’s largest potential online trading bloc,” the report says. “After a slow start, the region kicked off its first large scale e-commerce enterprises this year (1999).”

The report points out that 16 million European consumers came online in 1999, doubling Internet home penetration to nearly 49 million — or 13 percent of the population. Forrester estimates that these new users racked up about $37 billion in online sales.

European Growth Factors

According to the report, several major factors contributed to this unexpected e-commerce windfall.

First, free Internet access greatly contributed to the e-commerce growth. Forrester says that within 12 months of the launching of the UK’s Freeserve in September of 1998, Freeserve attracted 1.5 million British users to its free Net access service and triggered dozens of copycats.

Even merchants like FNAC and financial firms such as Barclays now bundle free access in their offerings. Additionally, subscription-based online services like AOL have cut their fees in half. The report asserts that up to 30 percent of all new online buyers in the UK have been driven online by free online access.

Second, the floodgate on venture capital has been opened. According to Forrester, corporate Net funds like Groupe Arnault’s $518 million Europ@Webnow now compete with leading venture capitalists like Atlas Ventures and Apax Partners to fund Europe’s new dot-com firms. For instance, the number of technology companies listed on Euro.NM — the alliance of five new European equity markets — doubled this year while their capitalization grew by $36 billion. The study discovered that after a dry two years, Europe is now flush with dot-com companies.

Third, European e-commerce is being stimulated by competition that is coming from the North and West. Forrester says that after succeeding in their own smaller e-commerce markets, Nordic firms like Boxman and Buynet are now seeking larger markets in Britain, France and Germany.

From the West, U.S.-based leaders such as Amazon.com and Autobytel have been localizing their offerings for the same market. As a result, European e-commerce companies are quickly moving to ward off the foreign invasion.

Sales Boom

The report concludes that the sum of these factors will translate into a sustained sales boom for European e-commerce.

“Manufacturer Cisco claims that Net-based sales to European businesses now reach 70 percent of the region’s total sales, or $2 billion — surpassing the ratio achieved in the U.S.,” the report says. “Leading sites forecast that they will grow their online sales by 280 percent on average this year.”