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Sales Market Europe I: Why it pays to enter cross-border commerce

by Editor

B2C online commerce has seen record growth over the past two years – fueled by the Corona pandemic. Likewise, cross-border online retail sales have risen sharply, as the 500 most successful companies registered 1.4 billion monthly cross-border visitors in 2021 – a 40 percent increase over the previous year. Thus, despite current declines in e-commerce sales, the forecasts for cross-border online retail in Europe continue to indicate growth in the long term and offer online retailers ideal opportunities to enter the market. The first part of our series “Sales Market Europe” provides an insight into the development of European cross-border e-commerce.

Growth of the e-commerce market

According to a recent study conducted by Cross-Border-Commerce Europe (CBCommerce), a platform promoting cross-border online commerce in Europe, the total B2C online sales have increased by 11.5 percent to 639 billion Euros over the course of 2021. In this context, cross-border e-commerce in Europe – excluding the travel segment – accounted for a share of 171 billion euros. This represents a growth of 17 percent compared to 2021 and makes cross-border e-commerce perform even stronger than online retail as a whole in terms of revenue growth. Europe-based online stores have generated cross-border sales of 100 billion euros – an increase of 14.6 percent compared to 2020 (then: 87.2 billion euros).

Sales decline due to Brexit in the UK

Solely the UK’s cross-border sales dropped by 12 percent from 33 billion to 29 billion euros due to Brexit and the associated VAT regulations, import duties and complicated logistics requirements. The number of British retailers among the top 500 fell from 100 to 68, with the UK relinquishing its leading position in European cross-border trade to Germany.

Market leading segments fashion, jewelry and beauty stay in the lead

The number of multichannel retailers showed a decline. At the same time, the number of branded manufacturers has increased by 50 percent, as they had previously expanded their direct-to-consumer channels. Pure players, including marketplaces, account for 47 percent of the top 500 retailers. The number of marketplaces increased from 28 to 42. Their sales revenue reached a record of 20 billion euros – a year-on-year plus of 45 percent.

With a share of 41 percent of the total cross-border sales volume, “fashion, jewelry and baby” remains the most important market segment, followed by the “home, garden and DIY” sector with sales growth of 15 percent. The “Personal Care” sector showed the greatest growth rate – cross-border sales have doubled in 2021.

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Advantages of cross-border shopping for customers

For consumers, shopping in other European countries offers a variety of advantages. Searching for products across borders offers a wider selection and may allow for lower prices. EU-wide regulations for cross-border parcel deliveries, uniform consumer protection regulations and the common currency ensure a high level of consumer confidence in companies or online retailers in the European Union. Customs duties are eliminated for most goods, which also facilitates overview and price calculation. Exemptions and restrictions only apply to tax payments for goods such as alcohol, tobacco or coffee. Shipping within the EU and Europe is also offered by many companies within a reasonable time, reliably, at acceptable shipping costs and with comfortable return conditions.

Advantages of cross-border commerce for companies

For companies operating within the member states of the EU and also other European countries, entering cross-border e-commerce promises to increase the number of potential customers and thus boost sales. The European Union facilitates cross-border online commerce – offering similar time zones, increasingly cross-national standards, and the euro as a largely unified currency. In addition, e-commerce providers within Europe benefit from geographical proximity to their customers when it comes to the costs of warehousing, shipping and returns logistics.

Different countries, differing shopping preferences

The leap across borders is therefore a promising one for European online retailers. However, it is important to learn about specific differences and requirements in advance. This applies, for example, to legal specifications: while many have been standardized within the EU, there are still different national requirements, especially when shipping conditions are concerned.

There are also significant variations in customer expectations and preferences, for example with regard to payment methods. In some countries, the option of online payment is very popular, while in others, customers prefer to pay by credit card or order on account. Companies should always ensure that payment processing is secure and that shipping costs and any customs duties are clearly stated.

Success criteria for cross-border commerce

Further critical success criteria for cross-border retailers are acceptable delivery times, a reliable delivery as well as an easily manageable returns processing. To ensure this, an efficient logistics infrastructure and well thought-out fullfilment are essential.

In our monthly follow-up articles, we will look at specific local factors that companies should consider, the hurdles that need to be overcome, and the ways in which cross-border logistics and fulfillment solutions are relevant to success.

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