Europe 500 retailers took market share from offline rivals, collectively increasing online sales by 13.9% in 2017 while Western Europe total retail grew only 2.6%. Amazon distanced itself from its top European competitors, registering 21.2% online growth in the region, where it operates ecommerce sites in six countries.

Amazon.com Inc. may be in hot water with some European politicians and unions, but many of the region’s consumers still think it’s cool to shop with the U.S. ecommerce giant.

Amazon’s growing dominance in European online shopping is one of the big stories that emerges from an analysis of data from Internet Retailer’s 2018 Europe 500 ranking of Europe’s leading online retailers, along with the growth of online grocery shopping, especially in the United Kingdom.

Taken as a whole, the 500 retailers and consumer goods brands ranked in the Europe 500 are taking market share from offline retailers. The Europe 500’s sales grew 13.9% in 2017 versus the prior year, while total retail sales in Western Europe only grew by 2.6% in 2017, according to Statista.

U.K. consumers purchased 6.0% of their groceries online in 2018.

Amazon, which for years has held the top spot in the Europe 500, extended its lead in 2017 with year-over-year growth in the region of 21.2%. Among the top 10 online retailers in Europe, only German web-only apparel retailer Zalando SE (No. 6 in the Europe 500) grew faster, registering a 21.5% growth rate in 2017. However, competition from Amazon and other web retailers has led financial analysts of late to express concern about Zalando’s prospects, and the retailer’s share price dropped by nearly half from July 2018 to February 2019.

 

advertisement


Amazon has a big presence in Europe. It operates websites in the United Kingdom, France, Germany, Italy, Spain and the Netherlands and had 174 fulfillment and delivery centers of various types across Europe as of February 2019, according to logistics consulting firm MWPVL. That includes eight warehouses in three Eastern European countries—Poland, Czech Republic and Slovakia—where Amazon does not operate ecommerce sites. Nonetheless, consumers throughout Europe shop on Amazon and those fulfillment operations ensure their goods arrive quickly.

Amazon exploits its extensive fulfillment network to offer European consumers such rapid-delivery services as Amazon Prime Now, which promises members of Amazon’s Prime paid loyalty program free two-hour delivery and one-hour delivery for a fee. Prime Now is available to larger European cities in the U.K., Spain, Italy and France.

Amazon faces political pressure from authorities from the European Union and Germany over whether it treats fairly the merchants that sell on Amazon’s online marketplaces. And it endured warehouse strikes during the 2018 holiday season in Germany, Spain, Italy and the U.K. But none of that seems to be deterring European consumers from shopping on Amazon.

Grocery shopping on the web

As it seeks to extend its dominance in European commerce, Amazon keeps adding new convenience features. The Amazon Prime Wardrobe service, which lets consumers try items on at home before they buy, launched in the U.K. in October 2018.

Meanwhile, the ecommerce powerhouse has introduced its Amazon Fresh food delivery service in major metropolitan areas in the U.K. and Germany. Amazon also has been getting in on the trend toward more online grocery shopping in Europe by offering food delivery in partnership with two grocery store chains, Wm Morrison Supermarkets plc in the U.K. and Monoprix in France.

advertisement

The trend toward online grocery shopping, especially in the U.K., is evident in the high rankings in the Europe 500 of two British supermarket chains—Sainsbury’s (No. 4) and Tesco Stores (No. 5). (German retailer Otto Group, which has its roots in catalogs sales, is No. 2 in the Europe 500 and U.S. consumer electronics manufacturer Apple Inc. is No. 3.)

U.K. consumers purchased 6.0% of their groceries online in 2018, according grocery research firm IGD. The firm predicts ecommerce will be the fastest-growing sales channel in the U.K. grocery market between 2018 and 2023, with web sales growing by 52% over that period. Discounters will grow the next fastest at 36.7% and convenience stores at 17.6%. Conventional supermarkets are only forecast to grow by 7.7% during the period, and larger hypermarkets by 1.4%.

IGD also notes the growing role of discount grocers in the U.K. market, particularly Aldi and Lidl. That intense price competition was credited by analysts as playing a part in pushing Walmart to sell its Asda grocery subsidiary in the U.K. to rival Sainsbury’s. If regulatory authorities clear the transaction, and they have expressed concern, Walmart would receive $10 billion and a 42% stake in the combined company. Walmart, meanwhile, booked a $2 billion loss on Asda (No. 10), which it acquired in 1999.

Where the growth is

Despite the competition from the likes of Amazon, Otto Group and Apple, there is still room for newcomers in European ecommerce. A prime example is Gymshark, the U.K. exercise apparel brand that was founded in 2011 by 19-year-old entrepreneur Ben Francis and registered the fastest growth in the Europe 500. The brand’s online sales grew 205.0% in 2017.

It’s noteworthy that seven of the 10 fastest-growing companies in the Europe 500 are consumer brand manufacturers. Two retail chains and one web-only retailer round out the Top 10. Brands can control where their products are sold and for how much, which enables them to set themselves apart from all-encompassing shopping portals like Amazon.

advertisement


In terms of growth by country, Finland took the top prize. Although it has only two representatives in the Europe 500, they grew by a combined 30.4%. Turkey’s 22 Europe 500 companies grew collectively by 19.0%, ranking it second in Europe 500 growth among countries in the region, although Australia’s lone Europe 500 entry, youth apparel retailer Cotton On, booked a 20% increase in European online sales.

The United Kingdom had the largest roster of Europe 500 companies, at 126, and they accounted for $41.0 billion in 2017 online sales, or 22.2% of total Europe 500 sales of $185.0 billion. Leading the way in share of European sales was the United States, whose 40 Europe 500 entries, accounted for $49.8 billion in European online sales, or 26.9%. Amazon and Apple accounted for much of those U.S. sales.

Mass Merchant—a grouping that includes Amazon—was the leading merchandise category in the Europe 500 in terms of sales, representing 39.1% of Europe 500 sales, followed by Apparel/Accessories at 22.1%. The fastest-growing merchandise category was Automotive Parts/Accessories: Those 12 Europe 500 retailers collectively grew web sales by 20.3% in 2017.