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Is EU cross-border e-commerce underdeveloped or underestimated?

October 30, 2015

French postal operator Le Groupe La Poste examines how cross-border e-commerce operates in Europe and if the domestic vs external market figures tell the whole story.

The European Commission considers the growth of cross-border e-commerce sluggish because it compares the 15% of European online consumers that shop with e-tailers located outside their domestic market with the 47% of European consumers who made at least one online purchase from domestic vendors (between September 2011 and September 2012).

However, it should be noted that the proportion of ‘cross-border e-shoppers’ has nearly tripled since 2006 whereas the number of domestic e-shoppers is only near to doubling. To explain this gap, some argue that consumers make their first steps as online shoppers on their domestic market (with which they are more familiar) before venturing across borders.

Moreover, we can see that cross-border e-commerce is well developed in the ‘smaller’ EU member states, i.e. on markets where the domestic supply probably cannot meet all consumer demand (in terms of variety).

For example in Malta, 42% of the online consumers use a cross-border seller at least once against 11% who used a domestic one. In Luxembourg, these figures are respectively equal at 41% and 14%. In Cyprus, 31% of people purchased goods abroad against 5% on the domestic market.

In the larger countries, the domestic offer of both off-line and online retailers may prove to be sufficiently varied and competitive for consumers to find what they were looking for on domestic sites.

But beyond this, it is very difficult to assess true parcel cross-border volumes. Sellers with large volumes use what are known as ‘direct injection’ solutions. The parcels are prepared in country A with the label of the delivery operator in the destination country B, and are directly injected into a sorting center owned by the destination delivery operator. The delivery operator treats these customers as though they are domestic ones. Often there is nothing to distinguish direct-entry parcels and domestic ones.

Last but not least, assessing the development of the EU e-commerce market as the sole indicator of cross-border parcel flows is misleading. These flows will, in all likelihood, drop with the continuing expansion of e-commerce, as it becomes profitable for e-tailers who have developed their business on a foreign market to set up operations there. Amazon’s decision to set up operations in Italy is an instructive example.

In October 2011, Amazon opened its first distribution center in the Piacenza region in the north of Italy. The 270,000ft² facility supplies the entire Italian market. This new warehouse changed what used to be called cross-border flows (from a warehouse located in France or the UK) into ‘domestic’ flows. And yet this fall in cross-border volumes is by no means a sign that e-commerce is flagging; on the contrary, it reflects strong growth in the sector.

October 30, 2015

 

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