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.
Expanding your eCommerce operations into Europe presents numerous advantages that can boost your brand’s growth, visibility, and profitability.
The performance of established players serves as a reliable indicator of your own potential success in Europe. For instance, in May 2022, Amazon.co.uk 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.
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.
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.
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.
Expanding your operations to cover additional European markets can significantly improve your unit economics in two major ways:
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.
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.
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.
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.
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.
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.
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.
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 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.
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.
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.
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:
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.
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:
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.
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.
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.
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:
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.
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.
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:
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.