Report: Regulations Choke European E-tail

Online shopping in Europe is unlikely ever to catch up with e-commerce levels in the U.S., in large part because of regulatory hurdles and small domestic markets, a Forrester Research analyst told the E-Commerce Times on Monday.

“Shopping online doesn’t just depend on people having a lot of online experience,” Forrester analyst Jed Kolko said. “It also depends on a regulatory environment that encourages e-commerce, and large enough domestic markets that can support online retail sites.”

According to a report issued by Forrester, 8 percent of European consumers have made an online purchase. That figure represents 26 percent of all Europeans currently online, the report said.

“Europeans are less likely to have credit cards, which are the easiest way to shop online, and the regulations impede the extent to which online retailers can offer discounts and promotions in many countries,” Kolko told the E-Commerce Times.

Kolko said that the restrictions affecting European pricing and store hours were originally put in place to protect smaller retailers from larger companies, who could otherwise undercut them.

However, Kolko said that a country’s domestic market size affects e-commerce even more than payment attitudes or regulations. Having more domestic retailers means that more products are available online, and also introduces competition, which lowers prices and improves service.

All Hail the Queen

Even though the average British Internet user has been online no longer than the average European overall, 43 percent of Internet users in the UK shopped online — the highest figure in Europe.

“All the factors are pointing the right way (in the UK),” Kolko said. “They’ve been online longer, they have more credit cards than other countries, and the regulations aren’t as strong.”

According to the report, if other European nations adopted the lighter regulations currently in place in the UK, online shopping rates in those countries would increase more than 25 percent.

Experience Overrated?

Online experience is not as big a factor as might be expected in determining who shops and who doesn’t, according to Forrester.

Despite having the most Internet experience and highest penetration rates, Internet users in the Scandinavian countries of Finland, Sweden and Norway have the lowest percentage of buyers.

“Even though people tend to be online, the biggest reason why they are not shopping in the Nordic countries is they are small domestic markets, where it’s hard to generate the kind of brand recognition and presence one needs to do well,” Kolko said.

What can e-tailers do to combat Europe’s strict regulations and smaller markets? For starters, Forrester said they should be as low in pricing as regulations will allow, and be as quick as they can in those countries where offline stores close early.

Open All Night

“Online retailers could actually have the advantage of getting an item to the consumer faster than if they tried to get it in person,” Kolko said.

In addition, the report recommends that companies in smaller countries focus heavily on brand recognition. Kolko said that “people who live in smaller countries tend to be more influenced by brand name and offline presence than those in larger countries, (who are) used to a much larger range of choice.”

Ultimately, European e-tailers can only hope at best to narrow the disparity with the U.S., according to Kolko.

“Tackling the real barriers, like low credit card ownership and retail regulation, will narrow the gap with the U.S., but fragmentation will indefinitely keep Europeans from shopping online as much as Americans do,” Kolko said.