European online retail sales will reach €191 billion by 2017, up from €112 billion in 2012 – reflecting a 11% compound annual growth rate (CAGR) over the next five years.

Forrester’s latest European Online Retail Forecast plots the growth rate of online sales across 17 European countries and 22 categories. For the first time this year we have included a view of overall retail sales in order to calculate the online channel share. This helps place traditionally buoyant online growth in context to show how the major retail economies of Europe are increasingly reliant on online sales to drive growth — a fact highlighted by John Lewis’ recent results showing a 15% growth in group operating profit, underpinned by an incredible 40.8% growth in web sales.

But, as online channel share grows to a significant portion of overall retail sales in countries like the UK and Germany, we predict a subtle segmentation in the markets across Europe. We will see:

  • Southern European countries experiencing the fastest growth rates. As online shopping becomes a mainstream activity in Spain and Italy over the next five years, eBusiness executives must focus on driving web growth by securing the keystones of eCommerce: convenience, value, and (most importantly) choice.
  • Northern Europe entering a new phase of competitive expansion. Online shopping is the norm in Northern Europe and increasingly encompasses multiple touchpoints. Most retailers now sell online, giving shoppers unprecedented choice. eBusiness executives must follow a path of optimization and innovation as they fight to remain competitive.

In comparison, US online retail sales will hit $370 billion by 2017, up from $231 billion in 2012, at 9% CAGR, a sign that the US market has reached a stage of maturity and stability that is somewhat ahead of most European countries. These figures are outlined in our US Online Retail Forecast by Sucharita Mulpuru.

eBusiness executives across Europe are entering a new era of competitive tension. They must become more aggressive in developing strategies to secure growth, identifying new sources of competitive advantage and differentiation as they optimize their businesses to serve increasingly web-savvy shoppers in a very crowded market.

John Lewis chairman Charlie Mayfield puts his company’s results down to a focus on the right products, value and online growth. He acknowledges that such results aren’t accidental, and have been driven by a focus on increasing organizational adaptability and agility. In his words:

“We see this as a time of significant opportunity in a changing market. Behind the scenes, therefore, there's a quiet revolution underway in our supply chain, IT and support functions. Our investment in these areas is up substantially and that commitment continues into 2013. In recent years, the Partnership has consciously invested to have the right skills, systems and organisational structures to be able to offer customers what they want in a fast-changing market.”

To regular readers of my blog, this paints a familiar picture: the need to continually adapt to market conditions by developing agile organization structures and processes and underpinning them with flexible technology and cross-touchpoint metrics.

The need for agility has never been more apparent.