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eCommerce European Expansion: 8 Steps to Expand to Europe

The European eCommerce market is expected to hit USD $634.10 billion in 2023 — and that trajectory is projected to continue to climb. With a forecasted annual growth rate (CAGR) of 9.34% from 2023 to 2027, experts anticipate the market volume will escalate to USD $906.20 billion by 2027.

Achieving success in one market is a testament to your brand’s potential, but restricting your brand to the U.S. (or any single country) ignores vast revenue opportunities.

Break into any European country and you can market your products across more than 50 nations, including some of the world’s most affluent. The EU principle of free movement allows for the unimpeded flow of people, goods, and services, unlocking a potential customer base of over 540 million.

In this article, we’ll explore some compelling reasons to push your online business into the European market and the crucial factors of a successful expansion. You’ll also learn the common pitfalls that cause European market expansions to fail and how to avoid them so you’ll feel confident taking the first step in your cross-continental growth.

The benefits of breaking into Europe

Expanding your eCommerce operations into Europe presents numerous advantages that can boost your brand’s growth, visibility, and profitability.

Access to a larger market

The performance of established players serves as a reliable indicator of your own potential success in Europe. For instance, in May 2022, recorded 374.2 million visits — up more than six million from the previous month.

As further enticement, Europe hosts four of the world’s nine largest eCommerce markets: the UK, Germany, France, and Russia. Along with these powerhouses, other European countries like Spain, Italy, the Netherlands, and Poland offer promising opportunities for online retailers. In terms of GDP per capita, 14 of the top 18 nations globally are in Europe.

Although these numbers point to a highly lucrative market, you don’t have to take on all of Europe at once; you can use one country as a launchpad into the rest of the continent. For example, designating Germany as a hub for your operations, you can import goods there and then distribute products across the entire region.

Increased brand awareness

Another benefit of extending into more markets is the potential for greater market share. As your brand becomes established in new territories, it’ll appear on consumers’ radars in those countries. That increased visibility drives brand awareness, recognition, and revenue growth.

Broader offerings

Expanding into different European countries is also an opportunity to diversify your product or service offerings. As you venture into different markets, you identify, understand, and learn how to meet the specific demands of these new consumer bases.

You can experiment with unique variations of your products or even launch brand-new lines exclusive to specific markets. An open-minded strategy will ensure you cater to local preferences and strengthen your brand position while adding depth to your product catalog.

Access to different resources

European countries have access to unique resources, technologies, and potential collaborations. By expanding your business into these regions, you can take advantage of those exclusive perks.

Whether it’s a particular manufacturing process, groundbreaking technological advancements, or strategic business partnerships, you’ll be equipped to develop more advanced solutions and meet customer needs more effectively.

Better unit economics

Expanding your operations to cover additional European markets can significantly improve your unit economics in two major ways:

  1. You can negotiate better rates from your manufacturers by boosting your production scale.
  2. Larger order volumes help optimize freight space utilization as you distribute goods across European marketplaces.

Less competition

The European eCommerce market offers a comparatively less saturated environment than that in the United States.

While the U.S. boasts around 9.5 million eCommerce brands, Europe only has about 3 million. This less competitive landscape can be more conducive to growing and prospering your eCommerce business.

Further growth opportunities

A presence in multiple European markets paves the way for more growth opportunities in the future. Expansion could lead to potential collaborations, partnerships, or exclusive deals with European companies that would further encourage business growth.

Common blockers to international eCommerce expansion

While the benefits of expanding to Europe are enticing, it’s essential to consider the challenges involved as well to prepare your business for launch.

Packaging and product compliance

Each country has laws and regulations governing international commerce, including taxation, product and service regulations, data protection, and more. In Germany, for example, the Extended Producer Responsibility (EPR) regulation stipulates that companies are responsible for recycling any packaging you use.

To avoid legal issues, you must know and comply with all relevant laws before initiating any international eCommerce transactions.

Tax compliance

When you import goods into a country, you have to pay value added tax (VAT). That means you must remit additional taxes to the relevant authorities if your trading exceeds a certain threshold. Understanding these tax laws is vital to avoid potential legal and financial penalties.

Language barriers

The European Union consists of several countries, each with a unique, dominant language. Doing business and marketing products in these regions require translations. Thankfully, services like Amazon’s European Expansion Accelerator offer free translations for product listings to help overcome this hurdle.

Delivery logistics

Delivering products on time and in a cost-effective manner globally is a significant challenge. Research local delivery systems and customs regulations to ensure your products arrive safely and on time.

Different payment methods

Payment preferences vary worldwide. While credit cards are broadly accepted, it’s also necessary to accommodate other methods like cash, checks, bank transfers, and virtual currencies. Multi-currency bank accounts can streamline this aspect.

Cross-border fraud

Cross-border fraud is a common issue for global eCommerce businesses. It encompasses schemes such as foreign lottery scams, counterfeit goods, and ransomware and computer hijacking.

Protective and countermeasures are imperative here. You must invest in advanced technology and implement proactive measures to reduce chargebacks, protect customer data, and safeguard intellectual property.

How to expand your eCommerce business into Europe

Despite these challenges, with careful planning and strategic decision-making, you can navigate the complexities and seize Europe’s vast opportunities. Here’s a step-by-step guide to help you break in.

1) Research demand in Europe

Before introducing new products, consider expanding your existing popular product range. Determine which of your offerings would perform well in foreign markets. For instance, products like clothing, accessories, and shoes typically do well in Europe.

2) Learn the legal and regulatory framework

A critical factor when considering expansion into Europe is learning the comprehensive legal and regulatory framework that governs business operations in that region. Their laws and regulations can differ significantly from those in the U.S., so a thorough understanding is essential for seamless operations and legal compliance.

A set of unified laws and regulations govern commerce among all 27 member countries of the EU, covering consumer protection, data privacy, competition, and taxation. However, be aware that each participating country can have additional national laws that you must adhere to, such as:

  • Consumer protection: The EU is known for its strong consumer protection laws that provide numerous consumer rights. That includes the right to clear information on goods and services, a 14-day “cooling-off” period (where consumers can cancel an online purchase), and a two-year-minimum guarantee on products.
  • Data protection: The General Data Protection Regulation (GDPR) is a statute in EU law that protects individuals’ personal data and privacy. It affects all businesses that process the personal information of people who reside in the EU, regardless of the company’s location.
  • Competition law: EU competition policy guarantees fair competition within the European Single Market by regulating anti-competitive practices and mergers.
  • VAT and customs: VAT rules in the EU can be complex; it’s applied differently in each EU country and is based on the value of the goods, plus costs like transport and insurance. Understanding this is essential to price your products accurately and avoid legal troubles
  • Intellectual property: The EU offers various forms of intellectual property protection, such as trademarks and patents. You must be careful that your business doesn’t infringe on existing intellectual properties while protecting your own.
  • Product safety and compliance: The EU has stringent product safety and compliance laws. For example, CE marking is a certification designation that indicates conformity with health, safety, and environmental protection standards for products sold within the European Economic Area (EEA).

This isn’t an exhaustive list, and legal requirements vary by industry and country. Given the breadth and complexity, it’s advisable to work with legal professionals experienced in European law when planning your expansion to ensure full compliance.

3) Find the best point of entry

Identifying the most effective method to break into the European market will largely depend on your business model, product range, resources, and risk tolerance. Some common avenues of entry are:

  • Direct exporting: You might consider directly exporting your products to your target market. This approach can be straightforward and cost-effective, however, you’ll need to understand import laws, logistics, and possibly even set up a local office to manage operations.
  • Establishing a local presence: Opening a physical store or office can help build strong relationships with customers and local partners. But it comes with higher up-front costs and necessitates a deep understanding of the local market and regulations.
  • Online marketplaces: Capitalizing on existing eCommerce platforms like Amazon, eBay, or local alternatives gives you immediate access to a large customer base. They also provide helpful infrastructure, like customer service and logistics support. However, be aware of platform fees and the competitive nature of these marketplaces.
  • Partnerships or joint ventures: Team up with a local business to access their market expertise, established consumer bases, and shared risks and costs. The challenge here is finding the right partner and managing your collaboration.
  • Acquisition: If you have the resources, consider acquiring a local company. This method opens immediate access to the market, local business knowledge, and the existing customer base. The downside can be high costs and complex legal and business processes.
  • Licensing or franchising: This method involves giving a local company the rights to produce or sell your products. It’s a low-risk and low-cost method, but it gives you less control over your brand and depends heavily on the licensee or franchisee’s abilities.
  • Dropshipping: If your business model suits it, look into dropshipping. You won’t have to worry about inventory or logistics, as your supplier handles both. However, you’ll have less control over product quality, and your profit margins may be lower.

Choosing the right point of entry requires a careful evaluation of your business’s specific circumstances and a thorough grasp of the European market’s unique dynamics. Regardless of the method you choose, deep market research and potentially seeking advice from local experts will be crucial to your decision-making.

4) Start with the UK

For English-speaking brands, launching in the UK market can be beneficial due to the shared language and existing trade agreements between the U.S. and the UK (e.g., no double taxation). Plus, the UK is a hotbed of growth opportunities for eCommerce businesses.

5) Use Germany as a base

After successfully establishing a foothold in the UK, consider expanding to Germany due to its high-grossing marketplace status. From there, you can further grow across Europe with ease, using Germany as your base or hub.

6) Partner with a reliable fulfillment company

The fulfillment company you work with when you expand your eCommerce business into Europe can make or break your venture.

Choosing the right partner can ensure smooth operations, enhance customer satisfaction, and drive profitability. When making your selection, consider:

  • Experience in European markets: It’s critical to find a fulfillment company with extensive experience in the European markets you’re targeting. They’ll understand the unique logistics, customs, and regulatory requirements of each country, ensuring your products reach your customers efficiently and legally.
  • Inventory management: Effective inventory management is imperative in eCommerce. Look for a fulfillment partner who can provide real-time inventory updates, accurate forecasting, and efficient order management to prevent stockouts and overstocking.
  • Warehouse locations: Ideally, the company you partner with will have multiple warehousing locations across Europe. That enables fast and cost-effective delivery to your customers, which can improve their satisfaction and loyalty.
  • Scalability: Your fulfillment partner should be able to scale their operations as your business grows. They should have the capacity to handle increased order volumes during peak seasons and as your consumer base expands.
  • Technology: Seek out a partner who uses advanced technology for order tracking, data analytics, inventory management, and automation. This will ensure accuracy and efficiency in fulfillment and provide valuable insights for business decisions.
  • Returns management: An efficient returns process is vital in eCommerce, where return rates can be high. Your partner should be able to deal with returns swiftly and efficiently, ensuring a seamless experience for your customers and minimizing losses for your business.

The right fulfillment partner will help you overcome the logistical challenges of expanding your brand into Europe, allowing you to focus on your core business operations.

7) Study local marketing tactics

Familiarize yourself with local marketing tactics. For example, Germans are known to value quality and sustainability, so focusing on these aspects in your marketing material could drive sales in that country.

8) Monitor performance and refine strategies

Expanding your eCommerce business to Europe is not a one-time task but an ongoing process that requires the close monitoring of performance and periodic refinement of strategies.

Here are some helpful steps to follow:

  • Set clear KPIs: Start by setting clear key performance indicators (KPIs). These might include revenue, profit margins, customer acquisition cost, customer lifetime value, return rate, conversion rate, website traffic, and customer satisfaction scores.
  • Monitor regularly: Regular monitoring is essential to track your progress towards your objectives and spot any issues or opportunities early. This could involve daily, weekly, or monthly check-ins, depending on the KPI.
  • Analyze data: Employ data analytics tools to dive deeper into your performance metrics. They can help you identify trends, understand customer behavior, track the success of marketing campaigns, and assess the effectiveness of your logistics and fulfillment processes.
  • Adjust strategies: Once you’ve collected and analyzed your data, use the insights to adjust your strategies.
  • Learn continuously: The European eCommerce market is diverse and dynamic, with consumer preferences, market trends, and competitive landscapes changing constantly. Keep an eye on these changes and continuously learn and adapt your strategies accordingly.
  • “Test and learn” approach: Don’t be afraid to experiment. You could try various marketing techniques, introduce new products or services, or explore different price points. Watch the results closely and learn from both your successes and failures.

Wrapping up — Win in the European eCommerce market

International expansion is a significant move for any eCommerce business, presenting both opportunities and challenges. With careful planning, diligent research, and strategic execution though, you can navigate these obstacles and unlock the vast potential of the European market.

Breaking into the continent opens access to a larger market, increased brand awareness, diversified offerings, and improved unit economics. Don’t restrict your brand’s potential to a single country. With the rich opportunities waiting in Europe, now’s the time to plan your international expansion.