CONTINENTAL DIVIDE:
THE E-CUSTOMER’S UNLIKELY PROFILE

Byline: James Fallon

LONDON — European e-tailers might not be getting the customers they think they are.
As Web analysts probe more deeply into the realities of online retail purchasing activity in Europe, they are surprised at who is doing the buying. The stereotype of the Web-savvy surfer is not holding water when it comes to Net commerce.
And that means companies must decide, as the European e-commerce market booms over the next few years, exactly which customers they are targeting — e-surfers or e-buyers. The two types differ markedly from each other and are not likely to respond to the same stimuli.
Evidence is provided by a study from The Boston Consulting Group, Munich, of the 546 e-commerce sites in Europe. Research revealed that the consumers buying from the Internet, like their U.S. counterparts, were generally older than originally forecast. They spent little time surfing the Web, using it mainly as a tool of convenience.
“It isn’t the surfer who buys on the Net,” said Alex Lintner, vice president of Boston Consulting. “It’s someone who doesn’t spend a lot of time, but instead spends money.”
So who is that nonsurfing, Web-buying Euro consumer? At a conference in Italy on “Efficient Consumer Response” to consumer demand in retailing, Lintner offered himself as an example of the ideal cyber-customer.
“I don’t spend a lot of time on the Internet,” he said. “I’ve only been on it about 10 times so far this year. But I am the perfect e-commerce customer. The ideal customer is time-poor but cash-rich. It’s a professional person, not a 20-year-old.”
Equally important, the e-customer knows exactly what he or she wants. According to Boston Consulting, 61 percent of customers arrive at a multichannel e-tail site by typing in the exact URL address. About 46 percent of customers access pure-play e-commerce sites the same way.
Getting to know that customer is only going to become more important.
The study found that the European e-commerce market was growing at a rate similar to that in the U.S. and should mushroom by about 170 percent this year to more than $9 billion. This compares with a growth rate last year of 200 percent, when the market reached about $3.5 billion. By 2002, the market is expected to be worth about $45 billion — a 13-fold increase.
That said, the European e-commerce market is relatively tiny, by several measures. It’s still only a 10th the size of the U.S. market, accounting for only 0.2 percent of total retail sales in Europe.
The European online market trails that of the U.S. by an average of two years. Europe lags in almost every category of e-commerce, apart from food. In apparel, e-commerce represents only 0.1 percent of European sales, compared with 0.3 percent of sales in the U.S. The study estimates the time lag between the U.S. and Europe in the apparel category is about 16 months.
Boston Consulting also concluded that, at present, it is a misnomer of sorts to discuss a “European” online market at all, since there is no one, single pan-European marketplace. Instead, it’s a collection of different national markets. The time lag between those submarkets and the U.S. varies from 18 months in Sweden, the most advanced Internet market in Europe, to three years in Italy.
Internet penetration ranges from 54 percent in the Nordic countries of Denmark, Finland, Norway and Sweden, to a low of 18 percent in Spain and 16 percent in France. One factor retarding penetration is the high cost of access. Europeans pay almost 100 percent more for Internet access than Americans.
“Only a few online retailers have succeeded in making an impact on a pan-European scale,” said the study, which was written by Boston Consulting executives Patrick Forth, David Pecaut and Michael Hansen. “The top 10 retailers in Europe account for only a quarter of the total online market, whereas in the United States, the top 10 accounts for almost half the market. European online retailers tend to have a domestic focus; those very few retailers that do have a pan-European approach tend to be U.S.-based.”
European-based e-tailers generate 93 percent of their sales from local markets; only 5 percent comes from other European countries and 2 percent from outside Europe, the study said. The strongest local players are in Germany, Switzerland and Scandinavia, where import levels are only 10 to 18 percent.
But there are markets where foreign retailers are gaining share. In the U.K., overseas Internet retailers already have captured 40 to 45 percent of online sales; they’ve gained 60 percent of the market in Spain.
Momentous change is just ahead. “The year 2000 will be a critical year in determining which retailers will succeed,” the study said. “Many strong U.S. players are currently moving aggressively into the European market with localized offerings. At the same time, several European start-ups are beginning to create brand awareness.+Both pure-plays and multichannel retailers need to move very quickly to develop pan-European offerings as international players build their pan-European presence.”
One factor limiting the growth of European e-tailers is the small amount of money these companies spend on advertising, especially in the case of multichannel retailers. The study estimates that European multichannel retailers are spending only 8 percent of their online sales on advertising, compared with the 47 percent spent on marketing by European pure-play e-tailers. However, these levels are dwarfed by the 76 percent spent by pure-play e-tailers in the U.S.
A major strategy for European Internet companies has to be to leverage their trading relationships, Lintner said. He pointed to the fact that multichannel retailers continue to dominate European e-tailing in every category except auctions. In apparel, multichannel retailers account for 85 percent of European e-tail sales, while only 15 percent of the sales are represented by pure-play e-tailers.
“All of you need to become click-and-mortars retailers,” Lintner said.

SNAPSHOT: U.K. Cyber-Shoppers
Gender:
Male: 69 percent
Female: 31 percent

Age:
25 years old and younger: 17 percent
26-29: 15 percent
30-39: 32 percent
40-49: 22 percent
50-59: 9 percent
60 and older: 5 percent

Percentage of Internet Impulse Purchases
None: 41 percent of purchases
1-4 percent: 17 percent of purchases
5-9 percent: 13 percent of purchases
10-24 percent: 15 percent of purchases
25-49 percent: 8 percent of purchases
50 percent and up: 6 percent of purchases