European online retailers will reap 103 billion euros by 2006

Online shopping is increasing at a staggering rate, but retailers must target the right products and markets in order to succeed
Written by Wendy McAuliffe, Contributor

European online shopping doubled in 2000, but a new report from Forrester Research warns that retailers must now focus on targeting the right products and markets in order to reap the benefits of a market that is predicted to reach 103 billion euros in gross profits by 2006.

Contrary to expectations, the dot-com crash has not eroded consumer confidence in e-commerce. In the past six months, the share of Europeans online grew by 20 percent from the previous six months. Thirty two percent of Europe's population over the age of 16 is now online. In the UK and Germany, the percentage of consumers online reached 40 percent and 39 percent respectively.

"The longer people are online, the more they spend and the more categories they buy from," said Julia Woodham-Smith, Forrester senior analyst, who authored the report. "Once they have experienced the convenience of online shopping, they are not prepared to give it up."

The Forrester report published on Tuesday found that consumers in their first 12 months online spent an average of 134 euros on their most recent Internet purchase; those online for 13 to 24 months spent 140 euros; and online shoppers with more than 24 months experience spent 176 euros. This trend applies to all European countries.

A concurrent study by Internet retailer LetsBuyIt.com additionally reports that the vast majority of online Europeans have spent over £125 on the Web in the last 12 months -- the UK led the way with an average £200 spend.

But Forrester is warning Europe's larger Internet retailers that in order to succeed, they must target the right product for their country, and compete for a portion of sales in a market that has already become a "dog fight". The study draws attention to online spending patterns that are predicted to mirror offline retail spending more closely once consumers make purchases across more diverse product categories.

"When consumers start spending online they stick to purchasing low cost and low risk items such as books, but once they gain more confidence they spend according to higher risk categories such as airline tickets," explains Woodham-Smith.

The online grocery market is predicted to be the most lucrative, with 5.8 percent of online grocery shopping in 2006 accounting for more than Europe's entire market for books.

The Forrester report, "Europe's online retail profits," interviewed 50 European retailers about their online selling experiences in 2000. Twenty were pure players, and the remaining 30 were multichannel retailers.

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