Southern Europe’s retailers remain paralyzed in the face of unique regional roadblocks, according to a new Report by Forrester Research B.V. (Nasdaq: FORR). By not acting, they constrain supply, giving users little reason to shop online. But portals, invaders, and grocers will circumvent the roadblocks and push the area’s online retail to its full potential.
“Online retail sales in Portugal, Spain, Italy, and Greece lag their Northern European neighbors for a number of reasons. First, there are fewer online consumers: Only 20% of consumers are online in Spain and Italy. Second, those that are online have less experience: 50% of Net users in Spain and Italy have less than one year’s experience online,” said Forrester analyst Abigail Leland. “But meager online retail supply is the key factor holding back online retail’s growth in Southern Europe: Consumers in the region simply have fewer online retailers to choose from, giving them little motivation to shop online rather than off.
“However, the unique regional roadblocks that keep retailers from selling online run deep. A highly fragmented retail market, a dearth of publicly quoted firms, and absent venture capital to fuel dot-com competitors means that few retailers have the scale, funds, and external pressure to move online. Furthermore, inadequate fulfillment makes delivery difficult.”
Forrester believes that three trailblazers will work around these roadblocks to pursue growing online retail demand — portals seeking new revenue streams, invading retailers leveraging outside experience, and local grocers reaching across categories. These trailblazers’ moves will both increase the number of consumers shopping online and threaten other local retailers’ market share, ultimately pushing them to move online as well.
Portals looking for commissions on eCommerce sales will serve to prime the market as they spread consumer awareness and mitigate risk for retailers. In 2002, as portals continue to fuel the market, experienced invaders from outside the region will make aggressive plays for burgeoning online demand. Finally, Southern Europe’s grocers — with the funds to go online and the motive to defend market share — will leverage their brand, supplier relationships, and established fulfillment infrastructures to reach into higher-margin product categories with their online offerings.
“If all countries in the region will feel portals’ push first, the impact of invaders and grocers on the online retail market will be felt differently throughout the region,” Leland added. “Invading retailers will go for Spain and Italy first, prioritizing these countries’ large populations. But Italy’s tougher fulfillment infrastructure and highly fragmented wholesale network will make operations more time-consuming to set up. Because of this, Spain will feel the invasion push the earliest — starting mid-2001. And the highly fragmented retail industries in Italy and Portugal mean that grocers are among the few retailers with the scale and resources to launch eCommerce projects, and that their impact in those countries will be particularly strong.”
For the Report “Southern Europe’s Growth Spiral” Forrester interviewed 50 brick-and-mortar retailers operating in at least one of these countries — 25 selling online today and 25 not.