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Payments, Regulations, And Scale Are Holding Back Online Shopping, Forrester Finds

Amsterdam, Netherlands, June 6, 2001 . . . European retailers must consider local barriers and consumer experience levels when designing online strategies, according to a recent Technographics® Report by Forrester Research B.V. (Nasdaq: FORR).

"Cultural differences matter, but payment issues, regulations, and domestic market size are the dominant reasons why consumers don't buy online," said Jed Kolko, Forrester Technographics analyst. "Europeans have wildly different expectations about payment for goods, both online and offline, and consumers who prefer using credit cards or debit cards to pay for online or offline purchases are much more likely to shop online. The Swedes, the Swiss, Spaniards, and Italians prefer using cash, while the French are fondest of checks and Germans, the Swiss, and Austrians want the option to pay by invoice. Only UK consumers cite credit cards among their top three payment preferences. So to succeed, retailers selling online across Europe must offer a multitude of payment options."

The world over, convenience and price top the list of reasons people shop online but their importance wanes where payments, regulation, and scale hold back shopping. Using Organization for Economic Cooperation and Development (OECD) data on national-level retail regulations on pricing, discounts, and store opening hours, Forrester found that retail regulations correlate strongly with less online shopping. The UK's and Sweden's light regulatory hands are most conducive to online shopping -- whereas Southern Europe's strong laws against pricing promotions and discounts and German-speaking countries' strict opening-hours regulations are emblematic of
wide-ranging restrictions on retail trade.

Online consumers in large countries like Germany, the UK, France, Italy, and Spain are half again as likely to shop online as those in the smaller countries. Online retailers need scale and larger countries have domestic markets sufficient to provide scale without having to face
cross-border challenges. Also, having more domestic retailers means that products are available online; it also introduces competition, lowering prices and improving service relative to smaller countries. The more consumers prefer paying by credit card, the more likely they are to shop online because of the convenience and
round-the-clock availability. Where retail is tightly regulated, the decision to shop online depends more on whether consumers find online or in-person shopping more enjoyable. Where regulations are less onerous, low prices stand out as the reason why people shop online.

"Our three barriers to European eCommerce -- payments, regulation, and scale -- affect all online categories, but not equally," added William Reeve, Forrester's group director of European Data Products. "Certain categories work well even in adverse contexts, while others have no hope. Books, music, and videos are the most sensitive to payments and regulation: They depend heavily on consumer comfort with online payment and are much more popular in larger countries. Travel suffers from regulation but doesn't need large domestic markets because most online travel shops are international providers or, at least, part of international alliances that create scale regardless of home market size. Computers, software, and electronics work best in large markets where online competition pushes down prices and pushes up service. Finally, online grocers benefit less from scale than other online sellers due to the need for local inventories."

The data used for the Report, "What's Stopping Shopping," was drawn from Forrester's Consumer Technographics Q4 2000 Europe Benchmark Study, fielded in 13 European countries by means of consumer mail panels of 26,700 respondents. The 13 markets are Austria, Belgium, Finland, France, Germany, Great Britain, Italy, Ireland, The Netherlands, Norway, Spain, Sweden, and Switzerland. All data was weighted to represent the countries' populations demographically. Statistics based on this data are accurate overall to plus or minus 2% for the total sample.

Forrester Research is a leading emerging-technology research firm, analyzing technology change and its impact on business, consumers, and society. Forrester's "Whole View" of the Internet economy enables clients to weave together Internet commerce initiatives with eBusiness technology to satisfy customers' changing needs. Clients receive continuous research and analysis through Forrester eResearch® Reports, an array of Advisory Services, Assessment Tools, and topical events. Established in 1983, Forrester is headquartered in Cambridge, Mass., with North American Research Centers in San Francisco, Calif., and Toronto, Canada. Forrester's European Research Center is located in Amsterdam, Netherlands, its UK Research Centre is located in London, and its Research Center Deutschland is located in Frankfurt, Germany. Additional information about Forrester Research can be found at www.forrester.com.

Contact:

Clive Savage
European PR Manager
Forrester Research B.V.
+31 20 305 4868
csavage@forrester.com