In the old days, expanding your business abroad was a lot harder than it is now. Ecommerce has removed some of the most important hurdles, and it actually facilitates crossing borders.
However, as most of the more experienced international ecommerce businesses might have realized, there’s still a lot to keep in mind when selling abroad.
In this blog post, I’ll discuss topics that ecommerce businesses considering selling their products online in Europe will need. I’ll also provide some useful insights for American ecommerce businesses already selling their products in Europe that wish to grow their businesses.
European Ecommerce Metrics
First, let’s take one step back and compare the key European market metrics with those of the U.S. to get a better understanding of its potential for American ecommerce companies. The two metrics I will compare here are market growth and maturity.
European Growth Compared with U.S. Growth
Research shows that online sales will continue to grow in both Europe and the U.S. While growth is declining in the U.S., Western Europe expects a stable 12% growth between 2012 and 2017, from $140 billion (€112 billion) to $239 billion (€191 billion). That’s a really great prospect for ecommerce businesses that are active in the European market.
Even better growth rates are expected in Southern Europe, with 18% per year between 2012 and 2017. Unfortunately, similar statistics could not be found for Central and Eastern Europe, but Statistica.com does say that B2C ecommerce sales for this market are expected to grow from $41.5 billion in 2012 to $73.1 billion in 2017, which is still pretty good.
The big leaders in the European market are the U.K., Germany, and France, which will continue to account for around 75% of online retail sales in Europe.
Much of the European growth is due to the rise of mobile payments, according to the Adyen Mobile Index. Europe is the region with the highest percentage of mobile payments, which are currently 24% of all payments. The U.K. leads with 41%; followed by the Netherlands and Spain, both with 26%; France with 18%; and Germany with 16%. In North America, mobile payments are 16.7%.
Maturity of European Markets
Growth rates indicate the potential of a market, but potential is not the only important factor when considering a foreign market. Readiness of the market is at least as important, if not more so.
Forrester has developed an “Ecommerce Readiness Index” by country, measuring a 360-degree view of a region’s online retail readiness, which includes factors such as consumer payment behavior, courier infrastructure, and disposable income.
The index measures the following pillars:
Consumer pillar. This pillar measures the sophistication level of consumer behavior to adopt online purchasing. Things like online tenure and usage of different payment types are considered.
Vendor pillar. This pillar measures company adoption and industry development to adopt Internet retailing. Some variables from this pillar include fragmentation of Internet retailing and the percentage of businesses selling online.
Infrastructure pillar. This pillar measures the overall economic and technological advancement within a country and includes factors such as broadband penetration, urban population, and parcel volume per capita.
Retail opportunity pillar. This pillar measures the potential retail dollar volume. It is calculated using the potential near-term retail sales and the percentage of the population buying online.
Based on these pillars, the U.S. scores highest in the world with 73.4. European countries that get closest to this are the U.K., Germany, the Netherlands, and Norway; and even though their scores are much lower, they are considered good from a global perspective.
The fact that these countries score lower than the U.S. but still fall within a very acceptable range can actually be a benefit for American ecommerce businesses. After all, customers in these countries will have lower expectations than your American customers, so you will be able to impress them with your high standards. Doesn’t that make these countries sound a lot more interesting?
So, now you know that some European countries (especially in the south like Italy and Spain) have greater growth rates than the European average, while other countries (like the U.K., Germany, the Netherlands, and Norway) have a more mature ecommerce market. The question is which countries should you invest in if you want to start selling your products online in Europe?
The answer depends on the products you sell and the people you want to sell them to. Since the products of all of you readers are diverse, and since the discussion on how to do competitor analysis in Europe should be a separate article (which I’d be happy to write for you one day), I’ve decided to focus on the people you are selling to. Therefore, the next part of this article will be about Europeans and their ecommerce needs.
The Difference between European and American Ecommerce Customers
I’m sure you are well aware of the fact that Europeans have a strong language and cultural diversity. There is no need to repeat such trivial information. But, what is important is how this affects working in the European ecommerce market as an American ecommerce business.
I see that many American companies target their European customers in English, so I thought it would be interesting to find out how many Europeans are able to communicate in English. I came across a chart made by Jakub Marian that was inspired by a report published by the European Commission called “Europeans and Their Languages.”
The chart shows the percentage of people in a country that are able to have a conversation in English. Even though some of the results seem a bit odd (could the Dutch be that close to the U.K. and Ireland?), it still gives a good impression of the difference in English language skills.
When looking at these figures, you should wonder if it makes sense to target Southern Europe in English, and you should even wonder if it makes sense to target big ecommerce markets like Germany and France in English.
Countries like Norway, Denmark, and the Netherlands score well on the ability to speak English. That’s why many American ecommerce businesses decide to target these countries in English. However, it’s also important to take national pride into consideration here, meaning that even Norwegian, Danish, and Dutch customers appreciate it if you target them in their own language, resulting in better success rates.
However, even if you decide to go for a local language, you should be careful. Both the Dutch and close to half of the Belgians (the Flemish) speak Dutch as a native language. But, just like American English is different from British English, Dutch in the Netherlands differs from Dutch in Belgium. And, both the Dutch and the Flemish prefer to be addressed in their local Dutch.
In general terms, you should aim for local languages as much as possible.
With so many different languages, it’s obvious that European cultures are very different. In the image below, I’m using the 4 buyer personas to show the differences for a number of European countries.
As you can see, German buyers are mostly competitive and methodical. They are competitive in that they look for a competitive advantage in your product and want to know your credentials. They are methodical in that they do a lot of research before buying your product and want a guarantee that your product is the best.
Spanish buyers, on the other hand, are mostly spontaneous and humanistic. They are spontaneous in that they want to find a solution that makes their life easier and more enjoyable. And, they prefer to find this fast. They are humanistic in that they strongly care about getting to know you and finding out what your values are, whether your values match with theirs, and whether you are trustworthy. Feelings are very important for these customers.
Obviously, we are talking about stereotypical customers here, and you could easily argue that many Spanish customers can be competitive and methodical as well, or that German customers can be spontaneous and humanistic.
But, the goal of this exercise is to highlight some of the most important cultural differences between these nations and to stress the importance of targeting them with a different message. In other words, be careful with simply translating content into other languages, as the message you are communicating in one country may not work in another country.
The European Union is trying hard to standardize European laws in order to facilitate cross border ecommerce, but many countries still have their own ecommerce laws.
Germany has stricter rules than other European countries. For example, most German online retailers worry about the “Abmahnungsgefahr.” This German rule forces online retailers to pay a fine when a customer, consumer organization, or another online merchant finds incorrect information on their website.
Also, Germany was the first European country to introduce the “buy with an obligation to pay” add-to-cart button. You see, instead of simple add-to-cart buttons in Germany, the buttons must contain text that shows visitors they have to pay if they continue with the transaction. The European Union has followed the German example, and this is now European law as well.
When doing business in Europe, it’s important to be aware of these laws, and it’s vital to follow both European and national laws. There are many European and national ecommerce associations that can help you with this.
Even though many Europeans have adopted the euro as their national currency (with the exception of countries like the U.K., Sweden, Norway, and Poland), most European countries show differences in their favorite payment methods.
Credit cards and PayPal are widely adopted, but in countries like the Netherlands, most consumers prefer to pay with a payment method called iDEAL. Not offering this as a payment method would seriously harm your conversion rate in the Netherlands.
If you decide to sell your products across Europe, it’s advisable to offer a wide variety of payment methods that allow your customers to choose. If you decide to sell your products in one European country only, or in a limited number of countries, you should offer at least the most common payment methods there.
While the U.S. express market is mostly dominated by UPS and Fed Ex, Europeans prefer DHL (around 40% market share) followed by TNT (around 15% market share). UPS has a market share of around 10%.
Local players have a big role in the logistics market, too. In the Netherlands, many ecommerce businesses send their goods with PostNL. If they ship their goods to Belgium, PostNL will work with the Belgian market leader bpost (Belgian Post Group) to have the goods delivered. These local providers have built up great reputations and are often considered the favorite logistical partner by both ecommerce businesses and their customers.
Prices for international shipments can vary a lot per country. In the long run, you may benefit from maintaining a local stock in Europe and shipping your products locally.
Not all Europeans feel comfortable buying products from a foreign company. While Danish customers feel very comfortable buying products from a foreign company (as three out of ten online purchases are already placed in a foreign online shop), German customers really like to buy German products (as they can be sure these products are well tested by qualified institutions).
So, in order to win the trust of the European customer, you need to localize. I’ve already discussed the importance of localizing your content, but you should also think of establishing a local presence. This can be a local office with a local agent, or you can rent a postal address without having to be physically present in the country. There are many companies that specialize in this. Just Google “virtual address [city]” and you’ll find many.
The next step would be to have a local phone number so your customers can reach you without having to pay for international phone calls. And, if you want to go the extra mile, you may want to consider having a local bank account as well.
Certifications are another way to build trust with your European customers. German customers especially find this very important and may not buy from you if you are not certified by an institution they know well.
As you are not based in Europe, your European customers may be afraid they cannot dispute your possible failure to deliver. You will need to show them you are able to meet the same benchmarks as European ecommerce businesses, and the tips above will help you do that.
As you set up and maintain your local marketing activities, keep in mind that a mistake often made by ecommerce businesses is translating their website into a foreign language without optimizing it for the local important SEO keywords.
A simple tool that can help you is Google’s Global Market Finder, a nifty tool that translates your most important SEO keywords for North America into local languages and checks for local search volume. Then, you can use those keywords to find new keywords to optimize your web content and your AdWords campaigns to attract new visitors.
Also, there are many companies that combine translations with SEO copywriting and can offer you help with both.
Support and Sales
Now that you know how to attract visitors to your ecommerce website, you need to think of how you can follow up with them. This starts with having sales agents or account managers that speak the language and, preferably, are from the country you are targeting. In general, Europeans will trust your business more if they deal with someone who speaks their language and is from their country.
In addition to sales agents, you will need to have someone who can help customers when they are having issues. As with sales agents, it’s advisable to choose someone who speaks the language and is from the customer’s country, especially since not all Europeans speak English, as we’ve seen earlier in this article.
If you can’t find these sales and customer service agents, don’t worry, because there are many companies that specialize in this and can help you out.
Europe offers many opportunities to American ecommerce businesses, but it’s important to keep the local needs of your European customers in mind.
Make sure you’ve done your research before expanding to Europe. Decide whether you want to focus on one European country only or on multiple countries simultaneously. Don’t just look at the growth rates of a market, but also look at the maturity of the market. And, last but not least, localize your business, your product, and your message.
It may be a lot of work at the beginning, but once you master it, Europe may prove to be your most valuable export market.