European B2C e-commerce market breaks through €500 billion mark

14 June 2016

The European B2C e-commerce market is this year expected to, for the first time in its history, break through the barrier of €500 billion in turnover, according to new research. Double digit growth in large e-commerce markets like the UK, France and Germany have presided over a boom period for the digital landscape, and according to experts, the ceiling has not yet been reached. The UK can, with an e-commerce turnover of €157 billion, call itself the runaway leader.

The online retail market, has, in recent years, enjoyed rapid growth. The e-commerce market is growing its market share against, and next to, physical shopping, because consumers increasingly expect to shop anytime and anywhere using their laptops, smartphones or tablets. International research shows that especially the markets of the United States and China are enjoying rapid growth, where conditions are favourable for the emergence of the e-commerce market, but also many European countries are seeing the market boom, belonging, according to a study, to the top 20 most attractive e-commerce markets in the world. 

New analysis by Ecommerce Europe – an alliance of players in the European e-commerce sector – shows that in recent years there has been a sharp increase in the turnover of the European e-commerce market. Last year the market reached €455.3 billion, on the back of 13% growth, and while this is impressive double-digit growth, the growth rate was even higher in 2013 and 2012. Between 2011 and 2015 the revenue of online B2C players took off with a compound annual growth rate of 17% (‘CAGR’) – an increase of over €200 billion in online sales.

Size of the European B2C e-commerce market

The researchers, however, predict that the ceiling has by no means been reached. Although growth is expected to weaken somewhat further, the market will continue to show double-digit growth in 2016, with a projected increase of 12%. This would mean that the European e-commerce market will, in the current year, for the first time achieve a turnover of more than €500 billion – more specifically €510 billion. Of this amount, Western Europe will make up the largest segment, with a total of €252 billion, while Central Europe is foreseen to account for €89.5 billion.

A comparison of the top 10 largest B2C e-commerce markets in Europe shows that the UK is out well ahead, with a turnover of €157.1 billion in 2015 – more than a third of the total European market sales. France follows in second place, last year the country saw sales of €64.9 billion, followed by Germany with €59.7 billion. Outside the top three sales of European e-commerce market is much lower, with fourth place Russia accounting for €20.5 billion. Spain closes the top five with €18.2 billion.

Top 10 largest B2C e-commerce markets of Europe

The Netherlands, with a total of €16.1 billion, is in seventh place, just below Italy, with €16.6 billion. The remainder of the top 10 includes Denmark, Sweden and Switzerland. Across the board, the most is spent on travel and holidays, but hardware is also quite often purchased online. The B2C e-commerce market indirectly creates 2.5 million jobs, the researchers estimate, realised by around 750,000 online shops and ventures.

% of GDP
The authors also looked into the total value of e-commerce sales relative to a country’s economic output – Gross Domestic Product (GDP). Again, the UK leads the pack: the e-commerce market amounts to a total of 6.1% of total GDP. Denmark is in second place with 4.4%. The third place spot goes to Finland, where 3.5% of GDP comes from online sales, followed by France, with 3%. The Netherlands is again in seventh place, where 2.4% comes from online sales of GDP in our country. The rest of the top 10 consists of Ireland, the Czech Republic, Norway and Sweden.

European B2C e-commerce market

Despite the growing importance of e-commerce on the global retail landscape, recent surveys reveal that it is not singularly important. Consumers increasingly expect retailers to provide an omni-channel experience, whereby they can use all the different channels, including offline. The physical store therefore, remains important for omni-channel strategies. The trend for both is visible in practice; for example, in the US, pure play giant Amazon recently opened physical bookstores.

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Consumer goods start-ups grow interest from venture capital

23 April 2019

Funding the latest consumer goods start-up has been a real money-spinner for venture capitalist firms, with a number of $1 billion companies – or unicorns – having emerged in the space in recent years. New analysis has explored the resulting corporate consumer products activity in the acquisitions space.

Consumer products have enjoyed years of strong growth as new markets opened in developing Asia. China in particular has enjoyed strong growth across a range of consumer good types as the country’s middle class expanded. Private equity firms have been keen to pick up targets in the space as they expand their portfolios to include additional local capacity as well as customers in new markets.

As a result, a study from Bain & Company has found that interest from PE firms in the consumer product space grew sharply in 2018, hitting 6.1% of all invested capital for the year, and making it the third most sought-after category. It is now only behind financial services (23.9%) and advanced manufacturing and services (13.9%).

Corporate venture capital investment

The ‘M&A in Disruption: 2018 in Review’ research found that growth in the segment reflects key changes in the segment as a whole. This is particularly true of insurgent brands, which often leverage local expertise in order to take on international giants in domestic markets.

Short change

The market changes have led to shifts in motivations for consumer goods company investments from PE firms. The number of strategic investments stood at 50% in 2015 compared to deals that increased scope. This has shifted significantly, with 34% of deals focused on strategic outcomes in 2018 compared to 66% for scope. The move towards scope reflects companies seeking out fast-growing products that enable stronger revenue growth streams.

Acceleration in scope-oriented M&A in consumer products

However, there were other motivations for deal activity in the space. Activist investors have put pressure on companies to expand their portfolios in recent years, with the trend expanding from just US targets to Europe.

Further trends

The other key shift in the space regards outbound deal activity. The study found that outbound deal activity has increased significantly in the Americas (up 363%) with total deal volume up only slightly (15%). Key deals included Coca-Cola and Costa, Procter & Gamble and Merck’s consumer health unit, and PepsiCo and SodaStream. In the Asia-Pacific region, outbound deal activity rose 195% while total deal activity fell sharply, by -36%. The EMEA region saw both a sharp decline in outbound deal activity, at -68%, as well as lower overall deal activity, which fell by 32%.

Cross-regional deal making

Deal-making in the current environment is increasingly fraught with uncertainties, as business models change on the back of new technologies, new consumer sentiments and wider market changes from new entrants. As such, acquisitions are increasingly useful as possible hedges on changes in market direction. As such, companies are increasingly pressed to take a future-back position, making sure to incorporate a vision of how the company needs to look in five years into acquisition strategy.

The firm notes that certain acquisitions which enhance a remembrance of a nobler mission, revive a sense of entrepreneurialism and engage directly with consumers may be necessary qualities in acquisitions that transform a company to fit market expectations in the coming decade. While going forward, focus on innovation, partnering with retail winners, reducing cost base and constantly reallocating scare resources will be necessary to protect market share in areas where insurgent local and strategic competitors are active.

Related: Private equity asset growth top priority for 2018.