Europe is set to become a lucrative market for ecommerce, but in order to be successful, online merchants must provide tailored services for each individual country.
According a report from Fletcher Research, Internet Europe: Connecting the Consumer, Europe will grow into a major international market with 121 million Europeans online by 2004, spending 17 billion euros on online shopping.
However, the report warns that the region is made up of different markets and not just one 'honeypot' and the successful online businesses will be those that can combine strong branding with locally aware, tailored services.
"Europe has the potential to become a larger Internet market than the US, but the complexity of creating successful Internet business models across the continent will mean the marketplace will develop very differently,” said Caroline Sceats, business analyst at Fletcher Research.
The report identified five key countries in the European market which together will make up 75 per cent of the region’s online population by 2004. Germany will be the biggest single market with 30 million users, followed by the UK with 25 million, France with 18 million, Italy with 10 million, the Netherlands with six million and Spain with eight million.
Fletcher Research warns that these are diverse consumers and reaching them requires more than just translating Web sites and advertising into local languages. “Consumers need truly localised services that take in to account differences in culture, law and payment systems,” the report says.
A big problem is that unlike the US where the credit card is king, only 12 per cent of Germans and 15 per cent of Italians have a card, so merchants must develop alternative payment methods - an expensive task.
"Operating across Europe is not for the faint hearted of shallow pocketed," the report says. "To reach 70 per cent of the EU in their mother tongue a Web site needs to be translated in to five different languages. Companies must provide real localisation through content, language, culture, payment system and legal requirements. Effective localisation is expensive, but it works."
Because of the huge cost, Fletcher predicts the European ecommerce market will be dominated by existing corporates rather than aggressive new start ups as they have the necessary resources and local presence.
"Established offline businesses have a real advantage in Europe, they have the corporate funding and local distribution channels to set up Internet businesses with truly localised services," said Sceats. "Providing a one-size fits all solution just won’t be enough to compete effectively."
The report urges venture capitalists to be more generous and supportive to launch pan European businesses.
Merchants must also tailor their services to meet the varying ways consumers feel comfortable accessing the Internet. Italians and Scandinavians will use wireless connectivity through mobile phones while Benelux consumers will use digital TV and cable access, says Fletcher.
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