How to expand digital sales

beyond the Nordics

How to expand digital sales beyond the Nordics

As life has returned to normalcy, e-commerce growth is plowing back to the pre-covid levels. Some of the e-commerce companies are even reporting de-growth as compared to the previous year. Markets across the US and Europe are experiencing a slowdown. Rising inflation- the war in Ukraine, and high energy cost are some of the factors that are denting consumer sentiments or are driving up the input cost. On top of the tough market conditions, another trend stalling e-commerce growth is that customers are returning to physical retail. So, how does one sustain e-commerce growth and what are the options for the Nordic brands?

Expansion to new markets is a good alternative, especially to markets that are closer to home.

One of the alternatives to grow the e-commerce business is to get into bigger and new markets. Possibly, a Nordic brand can expand into other European countries, The US, and the Asian markets. All these markets are  big in size (Exhibit 1) and at the same time are extremely competitive and complex from a new setup and operations perspective. Nordic brands have good brand equity and favorable perception in all of these markets. They are seen as symbols of good design, functionality, and superior quality*. Nordic design is associated with being simple yet innovative in consumers’ minds hence can attract new customers in new markets in a quick time.

 

Exhibit 1


Source: Statista

Western Europe, Germany, and the UK in particular are large and growing markets

The first step to expand beyond Nordics is to go to the neighboring EU markets before venturing to far flung markets. Total B2C e-commerce in Europe excluding travel, music, and e-books is estimated to be €618 billion in 2021.

Within Europe, e-commerce market size and growth vary from country to country. Barring the country’s macroeconomic factors, e-commerce growth is heavily influenced by internet penetration, logistics network performance, delivery reliability, ease of doing business, digital payment penetration & ecosystem and shopping behavior. At 64% Western Europe has the highest share of European e-commerce turnover followed by southern, central, northern, and eastern Europe in 2020 (Exhibit 2).

Exhibit 2


 

Along with growth, high percentage of e-shoppers, internet penetration (Exhibit 3) and purchase frequency (Exhibit 4) make these two markets very attractive for e-commerce.

 

 

 

 

 

 

Source: CMI ANALYSIS

 

Exhibit 3


Internet penetration: Percentage of the population accessing the internet

Source: EUROSTAT


Exhibit 4


Online shopping: Percentage of users that bought goods online

Source: EUROSTAT

Expansion into Germany and UK can easily be engineered through marketplaces

Marketplaces are an inevitable channel now as e-commerce growth in Europe is driven by marketplaces. Marketplaces share is approximately 30-40% of the e-commerce turnover. However, the share of marketplaces varies widely across countries in Europe. Marketplaces dominate e-commerce sales in both the UK (Amazon) and Germany (Amazon, Otto & Zalando). Share in both markets is as high as 50% of total e-commerce turnover. Marketplaces have high traction in these markets because a high percentage (90%+) of online shoppers shop on them (Exhibit 5).  

 

Exhibit 5


Source: E-commerce in Europe by PostNord

 

Marketplaces are also a ‘first search’ platform now. Marketplaces are starting points in almost 44% of all product searches which is almost twice of search engines**. It’s huge as compared to brand websites where only 9% of initial product searches take place. Younger consumers (18 to 24 years) are more hooked on marketplace platforms. As high as 52% of them start their product searches on a marketplace compared to 18% on a search engine.    

Marketplaces not only attract a large amount of traffic but also have higher customer retention and high repeat purchase frequency due to the availability of a variety of product categories ranging from daily necessities to high indulgence goods accompanied with wide assortment in each product category and superior customer experience. 

Marketplaces have very well-developed ecosystems of logistics, warehousing, payments, and customer support which can be leveraged to enter new markets. A brand can easily plug into a marketplace platform in a new market without having to invest plenty of time, money, and effort to set up everything on its own. Also, the brand could access a large amount of customer and transaction data to finetune assortment, prices and new product development. It is important to have a well-thought-out marketplace strategy before one decides to go ahead and sell on any platform. Curamando has a detailed growth framework which considers all critical elements to develop an executable strategy. Get in touch with the author for more details or discussion on the topic.

 

About the Author

Suminder Pal Singh is leading the marketplace practice at Curamando. He has multiple years of experience across e-commerce and marketplaces. Connect with him for discussion/views on the topic.

Email: suminder.pal.singh@curamando.com

Linkedin: https://www.linkedin.com/in/suminder-pal-singh-0071b3a/

 

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