TRENDS

June 29, 2006

Includes Consumer Technology Adoption Study data

Europes eCommerce Forecast: 2006 To 2011

Net Retail Will Soar From 103 Billion To 263 Billion
by Jaap Favier with Michle Bouquet

EXECUT I V E S U M MA RY
In the coming ve years, the number of Europeans shopping online will grow from 100 million to 174 million. Their average yearly Net retail spending will grow from around 1,000 to 1,500, as UK Net consumers outspend even their US counterparts online. Overall, this will cause European eCommerce to surge to 263 billion in 2011, with travel, clothes, groceries, and consumer electronics all above the 10 billion per year mark. TARGET AUDIENCE Chief marketing ocer/senior marketing executive, interactive marketing executive, market research/ customer insight executive eCOMMERCE KEEPS GROWING Two years ago, Forrester predicted that European eCommerce would grow to 57 billion in 2005.1 We thoroughly reviewed our predictions, taking into consideration growing numbers of online shoppers, the extensions of their Net shopping lists, and the growing sophistication of online retailers. More Online Europeans Spend More Online Consumers who start to go online do so mostly to use email. But after a number of months, many of them discover the convenience and attractive prices of online shopping.

The number of Europeans shopping online has increased by 37% in the past two years. At the

end of 2003, 48% of Europeans went online at least once per month, and 19% had shopped online; two years later, these numbers had soared to 54% and 26%, respectively (see Figure 1).

Net shoppers are spending more online. The average online shopper has increased his quarterly
Net spending by 10%, from 244 in Q4 2003 to 268 in Q4 2005.2 Combined with the increase in the number of online shoppers, total European eCommerce grew 50% in two years.

By 2011, 73% more Europeans will have become online shoppers. The online population in

Europe will keep growing, from 189 million consumers in 2006 to 242 million in 2011 or from 58% to 74% of the adult population. As both new and experienced Net consumers gain more condence online, the number of online shoppers will grow from 100 million to 174 million over the same period.
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Trends | Europes eCommerce Forecast: 2006 To 2011

Figure 1 Forecast: Drivers Of Online Retail Growth In Europe, 2006 To 2011

80% 60% 40% 20% 0%
Percent of population aged 16 and above who shop online 2003* 2004* 2005* 2006 48% 19% 52% 23% 54% 26% 2007 2008 2009 2010 2011 Percent of population aged 16 and above online

Online population Online shoppers

58% 31%

63% 36%

67% 41%

70% 45%

73% 50%

74% 53%

Base: European consumers aged 16 and above *Source: Forresters ECTAS Q4 2003, Q4 2004, and, Q4 2005 Surveys
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Retailers Have Become More Sophisticated To serve the growing online masses, retailers and service providers have upped their Web presence.

Comparison shopping sites help online buyers. By transforming online consumers into more

astute shoppers who feel condent about their purchase decisions, comparison sites like Kelkoo have grown in popularity in Europe and have pushed eCommerce forward. With 8.5 million monthly unique visitors, Kelkoo.fr is the second most visited eCommerce Web site in France and Kelkoo.co.uk the third most visited in the UK, with 6.4 million monthly unique visitors.3

Retail executives buy into eCommerce. Afraid of cannibalization, most retailers in 2002 kept

eCommerce well away from their high-street stores. But today, Casino is celebrating its online electronics discounter Cdiscount after it saw its revenues jump by 82% in 2005 to 383 million. In May 2006, HMV and Waterstones announced their intent to sever their hosting agreements with Amazon.co.uk, stating that eCommerce was too important to leave to a third party.4

Multichannel retailers battle with dot-coms. Lets face it many retailers got involved with
eCommerce in the 2000 dot-com craze just to inate their shares; during the bust, online operations became orphans. But today, eBay and Amazon shares are rising steadily, while traditional retailers are under attack from discounters. Executives realize that they need to invest in their Net shops to avoid being marginalized online by the likes of Pixmania, which outperforms Dixons in online sales.

ONLINE RETAIL SALES WILL MORE THAN DOUBLE BETWEEN 2006 AND 2011 Fueled by improved supply, the average annual spend per online shopper will increase from 1,000 to 1,500 (see Figure 2). Multiply this by the growing number of Net shoppers, and European eCommerce will grow in the next ve years from 102 billion in 2006 to 263 billion in 2011, including retail revenues through auctions.5
June 29, 2006 2006, Forrester Research, Inc. Reproduction Prohibited

Trends | Europes eCommerce Forecast: 2006 To 2011

Figure 2 Forecast: Yearly Online Spend Per European Online Consumer, 2006 To 2011
Online spend per European online shopper

2,000 1,800 1,600 1,400 1,200 1,000

2006 1,026 2007 1,132 2008 1,235 2009 1,346 2010 1,446 2011 1,536
Source: Forrester Research, Inc.

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Country Highlights: The UK Will Still Lead Online Sales In 2011 Two years ago, Forrester estimated that Germanys online sales would surpass the UKs by 2008. But the UK eCommerce market continues to outrun the German one, despite Germany having more online shoppers in absolute terms. Our forecast shows that (see Figure 3):

UK eCommerce even bests the US. The average UK online shopper will spend 1,744 online

in 2006 a higher percentage of his retail budget than of his US counterparts and 2,410 in 2011. These ardent shoppers will drive UK eCommerce from 43 billion in 2006 to 76 billion in 2011, 29% of total European Net retail. Online shopping is the norm, with multichannel retailers like Argos integrating their Web businesses with their stores via functions like online store inventory display. Net grocery purchases from rms like Tesco are key in putting the UK ahead of the US.6

Germany stumbles over low-spending online punters. German consumers are less bullish

about their nancial situation and continue to spend less online than UK consumers. The average German online consumer will almost double his online purchases, from 786 in 2006 to 1,441in 2011 almost half of what UK Net consumers spend online. The sheer scale of shoppers 43 million in 2011, a quarter of all online European shoppers and especially those looking for bargains at eBay and travel sites like Opodo.de ensures Germanys strong second place on Europes eCommerce map.

France thrives on dot-com action. France is a dot-com stable, with thoroughbreds like

Pixmania and GO Voyages giving traditional retailers a run for their money. In the coming years, the growth of the French online retail market will outpace that of the UK and Germany, more than tripling its size to 39 billion in 2011. Online spending per French Net shopper will remain roughly on a par with the European average.
2006, Forrester Research, Inc. Reproduction Prohibited

June 29, 2006

Trends | Europes eCommerce Forecast: 2006 To 2011

The Netherlands leads the Benelux. The online retail market in the Benelux is and will remain
roughly half the size of the one in France. But the Benelux market is far from uniform: The Netherlands has the most Net shoppers, but their yearly online spend is low only 688 in 2006, compared with 851 in Belgium. Having a dense retail network gives the Dutch a bigger incentive to research products online, but buy them at the store.

The Nordics nally embrace eCommerce. Average online spend per Net shopper in Sweden

and Norway is almost as high as in the UK; online Swedes will raise this to more than 3,000 by 2011, including spending more than 300 on clothing online. Online Danes today spend less than half of what their Norwegian counterparts spend on the Net, but will reduce the gap by quadrupling their online spend by 2011.

The rest of Western Europe brings up the rear. Spain and Italy together make up a quarter of
Western Europes population and a fth of its Net population, but jointly account for less than 7% of its eCommerce. In the next ve years, their share of online retail will gradually rise to nearly 10%. While Portugal and Greece trail their Mediterranean neighbors, Switzerland and Austria are at the other end of the spectrum: Their share of online retail will keep pace with Germanys.

Category Highlights: Leisure Travel Remains The Top Money-Spinner Online Europeans learned to shop online at sites like Amazon and Expedia for CDs, books, and airline tickets products that dont necessarily oer the great high-street shopping experience that shoes do. But the more experienced online shoppers keep expanding their Net purchase categories, which will lead to (see Figure 4):

Travel losing a fraction of its massive lead. Today, one in three of the euros, pounds, or kronor
that consumers spend online go to leisure trip bookings. Online travel spending will grow by 133% to almost 77 billion in 2011 making it the biggest grower in absolute terms but its share of total retail will decline to 29%. Clothing will see its online turnover grow from 10 billion in 2006 to more than 31 billion in 2011. Big winners will be catalog retailers like Neckermann, Otto, and La Redoute, which are rening their decades-old CRM best practices for the Net.

Alcohol enjoying the highest growth. While probably unrelated, online sales of alcohol

and sports equipment will see the highest growth in the next ve years 283% and 245%, respectively but jointly wont account for more than 4% of total online purchases. Along with travel and clothing, food and beverages and consumer electronics will see Net revenues increase to more than 10 billion across Europe as the likes of Ahold and Media Markt keep persuading consumers to click the buy button.

June 29, 2006

2006, Forrester Research, Inc. Reproduction Prohibited

Trends | Europes eCommerce Forecast: 2006 To 2011

Figure 3 Forecast: European Online Retail Sales By Country, 2006 To 2011

The spreadsheet detailing this forecast is available online.

300,000 250,000
Online retail 200,000 sales ( millions) 150,000 Rest of Europe Nordics Benelux Spain Italy France Germany

100,000 50,000 0 Country breakdown UK

UK

2006

2007

2008

2009

2010

2011

CAGR

43,070

51,155 29,671 16,590 5,309 4,077 4,752 3,619 67 2,592 3,874 1,889 2,170 2,254 1,737 560 403 159

58,579 37,281 21,675 7,220 5,294 6,322 4,759 99 3,244 5,075 2,551 2,590 3,172 2,445 828 586 246

65,318 45,444 27,275 9,444 6,706 8,074 6,007 144 3,914 6,371 3,321 3,005 4,293 3,314 1,194 824 372

71,222 53,859 33,107 11,906 8,279 9,926 7,309 206 4,579 7,705 4,166 3,408 5,573 4,326 1,662 1,117 550

76,412 62,298 38,844 14,520 10,001 11,783 8,625 287 5,233 9,004 5,046 3,791 6,926 5,422 2,520 1,457 785

12% 22% 26% 31% 27% 28% 27% 45% 21% 26% 30% 17% 35% 35% 47% 40% 51% 21%

Germany 22,892 France 12,254 Italy Spain Benelux Netherlands Belgium Luxembourg Nordics Norway Sweden Denmark Finland Rest of Europe Austria Switzerland Ireland Portugal Greece 3,765 3,048 3,450 2,652 45 1,987 2,846 1,356 1,764 1,551 1,196 371 268 101

Total Europe 102,614 130,878 161,966 195,020 228,898 262,954 ( millions) (numbers have been rounded)
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Source: Forrester Research, Inc.

June 29, 2006

2006, Forrester Research, Inc. Reproduction Prohibited

Trends | Europes eCommerce Forecast: 2006 To 2011

Figure 4 Forecast: European Online Retail Sales By Category, 2006 To 2011

The spreadsheet detailing this forecast is available online.
European online retail sales by category ( millions) 2006 2007 2008 2009 2010 14,446 18,873 23,993 29,639 35,577 10,035 13,445 22,052 26,896 17,500 3,354 4,065 4,778 5,473 2,669 1,743 2,074 2,428 2,809 3,208 13,823 17,139 20,681 24,310 27,920 5,806 7,115 8,573 10,115 11,655 8,016 10,024 14,195 16,265 12,108 5,555 7,127 8,921 10,920 12,978 809 1,066 1,369 1,716 2,101 10,156 13,736 17,930 22,773 28,171 1,552 2,208 3,039 3,988 4,989 5,284 7,071 9,149 11,593 14,411 3,321 4,456 5,741 7,192 8,771 12,208 15,986 20,134 24,603 29,252 1,952 2,530 3,189 3,921 4,698 4,008 5,235 6,567 8,071 9,735 3,889 4,850 5,841 6,806 3,001 5,529 6,771 8,013 3,247 4,332 32,959 41,325 50,241 59,279 68,104 8,833 10,747 12,662 14,507 16,220 9,019 4,960 6,019 7,065 8,074 1,100 1,296 1,489 1,669 1,830 1,257 1,538 1,828 2,111 2,372 1,516 1,895 2,280 2,653 2,999 3,824 4,880 6,035 7,273 8,575 1,274 1,746 2,294 2,922 3,629 1,404 1,751 2,127 2,510 2,887 1,147 1,383 1,615 1,841 2,059

Apparel Clothing Footwear Jewelry/watches Electronics Computer hardware Consumer electronics Event tickets Flowers Groceries Alcohol Food/beverages/household supplies Health/beauty Home products Furniture Garden/tools/DIY Home appliances Household goods Leisure travel Media Books Music Software Videos Recreation Sports equipments Toys Video games

2011 41,547 31,810 6,132 3,605 31,296 13,118 18,178 14,972 2,512 34,249 5,944 17,891 10,415 33,929 5,493 11,506 7,745 9,185 76,755 17,773 9,884 1,974 2,605 3,310 9,921 4,398 3,254 2,269

% of 2011 retail* 8.8% 8.7% 8.5% 9.9% 29.5% 43.0% 24.1% 33.7% 10.4% 3.5% 6.2% 2.2% 14.0% 9.5% 6.7% 7.7% 15.8% 11.8% 31.9% 26.2% 25.9% 21.8% 46.9% 21.9% 13.4% 8.9% 19.2% 29.7% 11.0%

Europes total online retail sales 102,614 130,878 161,967 195,020 228,898 262,954 ( millions) (numbers have been rounded) *Online sales as % of total sales per category
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Source: Forrester Research, Inc.

June 29, 2006

2006, Forrester Research, Inc. Reproduction Prohibited

Trends | Europes eCommerce Forecast: 2006 To 2011

SUPPLEMENTAL MATERIAL Online Resource The underlying spreadsheets detailing the forecasts in Figures 1, 2, 3, and 4 are available online. ENDNOTES
1

As both consumers and Net retailers get smarter about using the Web, online retail growth will continue unimpeded, taking 8% of total retail sales by 2009. See the March 1, 2004, Market Overview Europes eCommerce: The Next Five Years. Source: Forresters European Consumer Technology Adoption Study Q4 2003 and Q4 2005 Surveys. We surveyed consumers in the ve markets of the UK, France, Germany, Italy, and Spain. Source: ComScore Media Metrix, April 2006. The partnerships deals in both cases tipped in favor of Amazon. Our online retail forecast from March 2004 did not include online auctions. Online retail sales will grow from $172 billion in 2005 to $329 billion in 2010. Both consumers and sellers continue to stoke the eCommerce res. As consumers increase shopping-related activities and sellers compete to innovate and keep them engaged, online sales will enjoy a solid 14% compound annual growth rate (CAGR) over the next ve years. See the September 14, 2005, Trends US eCommerce: 2005 To 2010.

3 4 5 6

Forrester Research (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice about technologys impact on business and consumers. For 22 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its research, consulting, events, and peer-to-peer executive programs. For more information, visit www.forrester.com. 2006, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, Forresters Ultimate Consumer Panel, WholeView 2, Technographics, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each gure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reect judgment at the time and are subject to change. To purchase reprints of this document, please email resourcecenter@forrester.com. 38297