The Global Retail E-mpire

Cross-border online trade for six of the biggest e-commerce markets to grow fivefold to $130 billion in 2020

  • UK emerges as the world's leading exporter of goods purchased online with a trade surplus of over USD 1 billion in 2013
  • US and Germany are the nearest challengers with USD 180m and USD 35m trade surpluses respectively 
  • OC&C Strategy Consultants and Google have come together to offer insight into how retailers can capitalise on growing opportunities for international expansion online

Cross-border online trade for six of the biggest e-commerce markets is expected to grow fivefold over the next seven years, from USD 25 billion in 2013 to USD 130 billion in 2020, according to new research by OC&C Strategy Consultants in collaboration with Google.

The Global Retail E-mpire report, published today, estimates the value of online retail trade based on Google searches in six of the biggest e-commerce markets, making up half of global e-commerce volumes: the UK, the US, Germany, the Nordics, the Netherlands and France. It has found that the retail sector is becoming increasingly global and interconnected as trade between countries is growing exponentially.

Among the six markets analysed, the UK's online retail economy is expected to generate the largest trade surplus in the world in 2013, surpassing USD 1 billion. The US and Germany follow, with trade surpluses of USD 180 million and USD 35 million respectively.

Peter Fitzgerald, Director at Google, said: "The global increase in the number of people with internet access coupled with a rise in consumer confidence, combine to provide the ideal market conditions for e-commerce. The success of UK retailers can partly be attributed to operating in the most advanced e-commerce market in the world, but also to the high level of trust international customers have in UK brands and retailers. Looking to the future, any retailer wishing to enter the market must adopt a digital-first strategy to succeed."

Whilst Amazon and eBay are the pioneers of online retail, a number of specialist retailers have shown that they can internationalise successfully through digital commerce - in some cases, by establishing a combination of a digital and a physical presence. These include online 'pureplays' such as ASOS, iHerb and Zalando; multichannel retailers such as Sephora and Pandora; and luxury and sport brands such as Burberry, Hugo Boss, Adidas and Lacoste.

Anita Balchandani, Partner at OC&C, said: "Over the next decade, online retail will become even more international. This represents a great opportunity for retailers by providing a new, capital-light approach to grow rapidly. At the same time, internationalisation poses many challenges and will require retailers to master new capabilities and complexities.

"Localisation is crucial to tap into new pockets of demand, from tailoring the range on offer, to localised marketing activity, to ensuring that delivery and payment methods are best suited to country requirements. For example SmartGuy, an online fashion e-retailer in the Nordics, has successfully expanded across Europe through thinking and acting local. Its marketing team delivers local campaigns which translate into demonstrable improvements in sales.

"It is equally critical to localise only where it matters to customers, to avoid the cost and complexity of over-tailoring the retail offer by country. ASOS, for instance, services customers around the world from a single location in the UK but executes its digital marketing activity in a localised way, allowing it to strike the right balance between customer relevance and cost.

"Online marketplaces like eBay create opportunity for retailers of all sizes, allowing them to internationalise at low risk – researching consumer behaviour, testing their online offering and benefitting from the traffic and brand awareness of the marketplace itself. We expect online marketplaces to be part of the mix for retailers particularly in the early days of their international expansion, and to play a complementary role with a retailer's own website and stores.

"As the global retail landscape continues to develop, we also expect retailers to look for innovative ways of shipping goods directly from the source of supply to the buyer – making international delivery between countries even faster and creating a seamless shopping experience."

Highlights from the study can be found in the infographic.

Supporting case studies

eBay

  • eBay delivers one of the world's largest online marketplaces to customers via any connected device, connecting people with the things they need and love.
  • With more than 124 million active users globally, eBay is one of the world's largest online marketplaces, where practically anyone can buy and sell practically anything.
  • Founded in 1995, eBay connects a diverse and passionate community of individual buyers and sellers, as well as small businesses. Its collective impact on e-commerce is staggering, and more than 500 million items are listed on eBay.
Alex Von Schirmeister, Vice President, eBay, said: "We believe it's time to declare the 'death of distance'. Cross-border trade on eBay in the second quarter of 2013 reached $11 billion, representing 22 per cent of the company's total commerce and payment volumes.

"eBay enables retailers to seize this cross-border opportunity with minimal red-tape. Retailers and brands choose eBay because we are a partner - never a competitor - and offer a range of services to businesses including inventory optimisation, and assistance with language and shipping solutions.

"Over 95 per cent of British businesses on eBay, both big and small, already export around the world. Across Europe, for instance, brands such as Mountain Warehouse, Sojeans, Boohoo and The Entertainer are selling internationally through us."

ASOS (UK)
  • ASOS is the UK's largest online fashion store selling both branded fashion goods and its own range of clothes targeted at the 20-something audience.
  • ASOS has websites targeting the UK, USA, France, Germany, Spain, Russia, Italy, Australia and China and ships to over 237 other countries from its central distribution centre in the UK.
Shaun McCabe, International Director at ASOS, said: "Our aim is to always offer our products to ASOS customers globally and we use our brand and online marketing to build a loyal customer base in new markets. Supporting this is a simple and cost effective operation with a centralised infrastructure and team and operational back-end support enabling us to serve the world from the UK."

House of Fraser (UK)

Andy Harding, Executive Director of Multichannel, House of Fraser, said: "House of Fraser's multichannel capabilities have been core to our recent success, and we have grown our customer base from across the globe as a result. We've achieved this by focusing on three key areas. Firstly, by differentiating ourselves from our competitors, particularly through our market-leading delivery. We can get products to customers in 131 countries faster than almost anyone else. Secondly, our focus on mobile has meant that we were receiving more than 50% of traffic from touchscreen devices six months before our competitors. Thirdly, our focus on creating unique, engaging and authoritative content for our customers has led to greater brand awareness and higher conversion to sales."

Farfetch (UK)
  • Farfetch is an online marketplace for the world's best independent fashion boutiques.
  • It adopts a consistently global approach, with the aim of bringing customers extensive choice and seamless delivery across luxury clothes from a range of boutique brands.
  • It has more than 240,000 customers.
  • It offers shops from 25 countries and delivers to over 170 countries.
  • Native language sites are offered in French and Portuguese.
  • It has more than 80% of sales across a country border.
Andrew Robb, COO at Farfetch, said: "Farfetch has an atypical story because we took a global approach from the very beginning, shipping initially from five countries to the rest of the world. We believed the proposition of combining items from the best fashion boutiques would have global appeal, so long as we could provide a seamless customer experience. We now ship from 25 countries and have customers in over 170. A core part of our success has been implementing processes that work on a global scale, including customer acquisition, shipping, customs clearance and returns. We currently have operations in Europe, US and Brazil with websites in English, French and Portuguese. We strongly believe that providing a global product proposition with a localised, multichannel experience is the future."

bonprix (Germany)
  • Since its establishment in 1986, fashion retailer bonprix, a subsidiary company of the OTTO Group, delivers reasonably priced high quality clothes.
  • It has expanded very successfully during the last 27 years. Today, bonprix serves more than 27 million customers in 27 countries.
  • Markus Fuchshofen, Head of e-commerce at bonprix, said: "Our international expansion is focused on expanding our e-commerce offering. Ensuring we have sufficient time, adjusting to local market conditions and having the right people with our unique bonprix spirit are critical factors to succeed in international markets."
Spreadshirt (Germany)
  • Spreadshirt lets anyone create, sell and buy ideas on things consumers love to wear, use, and carry.
  • Founded in 2002 in Leipzig, Germany, Spreadshirt is a global company with headquarters in Germany and the US, and factories in North America, Germany and Poland to allow rapid delivery to customers.
  • The platform is active in 17 countries, 9 languages and 7 currencies across the EU and North America with orders coming from over 45 countries.
Philip Rooke, CEO of Spreadshirt, said: "We are very proud that, as a German company, almost 80% of our revenue now comes from outside Germany - 40% of it from the US. We actively market Spreadshirt in 17 countries across the EU and North America, and this year alone we took orders from 215 countries. I have always believed that 90% of success is about turning up – and, if you are not pushing to be international to reach customers in each territory, you will not succeed. The other 10% is to always be customer focused on the products you offer, combined with price, quality and service. Internationalising also poses a number of challenges – working across 17 tax & legal jurisdictions, nine languages, seven currencies, four factories and five offices can be tough to manage."

Babyshop.com (Sweden)
  • Leading premium baby clothes and equipment e-retailer, founded in Sweden in 2006.
  • Today serves over 60 countries with focus on Nordics, Russia and Eastern Europe.
Magnus Fredin, CEO at Babyshop.com, said: "The 'virgin' Eastern European, Baltic and Russian e-commerce markets represent a significant opportunity for Western e-retailers, combining rapid online growth with less developed competition.

"In each market, Babyshop has grown its share by maintaining the core values our Nordic customers love - fantastic brands offering great customer service - whilst adapting to local market conditions."

SmartGuy Group (Denmark)
  • Online fashion e-retailer founded in Denmark in 2000 and now an established household name across the Nordics.
  • Expanded throughout Europe under StylePit brand serving 2.5m customers, across Central & Eastern Europe through to the Caucasus.
Sïmon Saneback, CSO at SmartGuy, said: "We've internationalised quickly, covering seventeen countries in seventeen months to target new emerging ecommerce economies with Western style and service. "Through thinking and acting local we've been able to gain a major share in rapidly growing markets, where incumbent competitors are weaker.

"Today, half of our sales are international, a share we forecast will increase to about 70% over the next three years as consumers' appetite for e-commerce and international brands develops across our key emerging markets".

- ENDS -

The Global Retail E-mpire report is available on request, contact:

Keelin McGrory: keelin.mcgrory@occstrategy.com

Methodology

Google search statistics for c.1,500 of the world's most searched for e-tailers in six markets – USA, UK, Germany, France, Holland and Nordics from 2010-13 were analysed to highlight international retailer success stories and consumer demand trends.

Demand indicators were cross-referenced with primary research recording e-tailer international supply, such as delivery destination, language options and international sales share.

This was supported through retail executive interviews adding operational insight from many of the world's most successful e-retail companies.

About GOOGLE Inc.

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