In the prosperous U.S. market, it is easy to forget about the possibility of selling in other regions, countries, and markets. I mean, why take on the extra risk when you have the American consumer to help fuel your entrepreneurial dreams? However, the European market is quickly expanding and presenting a major opportunity for sellers. I understand why Europe isn’t the most attractive place to sell your product; Events like Brexit and bankrupt countries give off a stigma of risk and higher costs. Even if it is profitable, would it really be worth putting your effort and available opportunity cost in a fluctuating market? The short term problems are something to consider, but the long term investment could bring money into your pockets.
European (Economic) Expansion
To be fair, the EU and its economy are slowing down. This is mainly due to market speculation on a No-Deal Brexit and a lack of industrial output by the leading economy, Germany. However, E-Commerce has recently seen a huge spike in all categories. Compared to the U.S. with an E-Commerce growth rate of 11.1%, the EU will have a projected growth rate of 13.6%. There is no clear cut reason that the region is looking to spend more on goods online, but there are many factors playing a role.
Europeans can find it to be difficult to find the product they are searching for. Americans are spoiled with the easily accessible option of picks between four or five different goods; Europeans, on the other hand, usually only heave the between one or two goods–often at a higher price. Online shopping has created a fix to this issue.
Some countries are heavily reliant on online shopping. It is reported in the European E-Commerce Report (2019) that some countries spend up to 88% of their shopping online. With a limited amount of local imports, shoppers no longer need to go to the countries capital to find the items they are searching for.
European countries are still gaining greater access to more readily available internet. It is easy to take for granted internet access. For example, 90% of the U.S. is covered by 4G internet, where as the U.K. only has 77%. While the number of consumers is almost at full potential in the U.S., countries in Europe are becoming more available, and so are their buyers.
The European E-Commerce Market
From the information above, it is easy to understand why the big name marketplaces have been making serious moves. For example, Amazon just created a new partnership in hopes to enhance their customer experience and gain a greater market share. Currently, Amazon is the #1 marketplace in all of Europe combined; however, they are not the number one choice in several different countries. And when have you known Amazon settle in second place? The company is aggressively looking to pass other marketplaces like Bol and Alibaba.
To push sales, the company also needs to increase the supply of goods available. Like I mentioned earlier, it can be difficult to find certain goods in-store and even online. Amazon is actively looking for new vendors to join the EU team. The company entices sellers by “being the first” vendors in a growing marketplace with little to no competition. Amazon also offers to take away the logistical nightmare of the international processes that may be needed.
Sellers can also focus on selling straight to the consumer. Sellers can find gaps in the market that a consumer is looking for someone to fill. If those gaps are identified correctly, the need for a marketplace like Amazon is abolished and higher profits can be achieved. This obviously comes with higher costs and logistics but can bring a vendor closer to a big money acquisition.
Conclusion
Leaving one’s comfort zone is always risky. Things can change; risks are greater; anxieties are higher than ever. However, it can lead to new, prosperous opportunities. It is time to seriously consider expanding your E-Commerce brand across borders. E-Commerce is growing at a faster rate in Europe than it is in the U.S. At the same time, there is a shortage of a wide variety of goods that are demanded across the continent. The rising political tension is something to be wary about, but it can also bring even greater revenues if the opportunity is taken correctly.
Before looking into diversifying your portfolio even further, sellers need to make sure that their books are in order; this is important when it comes to profit margins for different currencies and tax liabilities. Sellers also need to make sure that they have an adequate cash flow system that can prevent them from falling apart if spread too thin. If you are in need of financial analysis, contact us for a free consultation!