Forrester European Online Retail Five Trends To Watch

February 3, 2012

European Online Retail: Five
Trends To Watch In 2012
by Martin Gill
for eBusiness & Channel Strategy Professionals

Making Leaders Successful Every Day

For eBusiness & Channel Strategy Professionals

February 3, 2012
European Online Retail: Five Trends To Watch In
2012
European eBusiness Executives Strive To Give Their Customers Choice And
Flexibility Across The Purchase Journey
by Martin Gill
with Patti Freeman-Evans, Sucharita Mulpuru, and Myriam Da Costa

Exec uti v e S u mma ry
European shoppers are becoming increasingly web-savvy and are turning to a wider range of
touchpoints as they research and buy products online and offline. In response, eBusiness executives
across Europe must learn to build sophisticated agile commerce strategies that embrace the increasingly
multichannel nature of their shoppers. But eBusiness execs must be careful to separate the game-
changing and value-adding initiatives from the hype. Speed, flexibility, and a multichannel approach,
underpinned by a robust understanding of cross-touchpoint customer behavior are the keys. Amid a
sea of other distractions, eBusiness execs must learn to experiment and innovate to identify genuinely
valuable new technologies and services while simultaneously enhancing their core capabilities.

tabl e of Co n te n ts N OT E S & RE S O U RCE S
2 Choice Is Key In 2012 As Shoppers Become Forrester interviewed a number of European
Increasingly Sophisticated retailers and vendors and used data from our
Experimentation And Innovation Will Go Hand European Technographics® Online Benchmark
In Hand With Enhancing The Basics Survey, Q3 2011 and our UK, Germany, and
France Retail WebTrack, Q2 and Q3 2011, for this
Some Trends Won’t Be That Disruptive —
Watch But Don’t Jump Yet report.

recommendations Related Research Documents
9 Don’t Let Experiments And Hype Distract You “Agile Commerce Is Coming Of Age For European
From Getting The Basics Right Retailers”
10 Supplemental Material October 26, 2011
“European Shopping Behavior Revealed“
October 17, 2011
“Will Facebook Ever Drive eCommerce?”
April 7, 2011

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2 European Online Retail: Five Trends To Watch In 2012

Choice is key in 2012 as shoppers become increasingly sophisticated
In 2011 many major UK retailers declared that they are “multichannel,” giving eBusiness a seat on
the top table. French and German firms such as Saturn and Decathlon are beginning to follow suit
as they look for new ways of engaging increasingly savvy customers. These strategies are reflected
in the go–to-market approach of companies that openly embrace a multichannel approach — for
example, Argos, Marks and Spencer, and Tesco. These leaders embedded a coherent multitouchpoint
approach into their company operating plans. As Europe enters 2012 in continued economic
tension, many eBusiness executives see multitouchpoint engagement as a key retail growth strategy.
A range of innovations and initiatives will continue to shape an increasingly complex market across
Europe. But not all innovation will deliver true value, and eBusiness executives must be careful to
focus their efforts on genuinely value-adding enhancements (see Figure 1).

Figure 1 Evaluate The Hype Versus Impact For Your Business

Undercover utilities Priority projects

Shipping
enhancements
Multichannel
customer offer
Privacy
Marketplaces and data
Mobile
strategy
Impact

Wait and see Let someone else
go first

QR codes
Contactless
payment
Next-gen Social
merchandising initiatives
In-store technology

Hype

How much media attention will this generate ?
Will your chief executive hear about it ?

61373 Source: Forrester Research, Inc.

February 3, 2012 © 2012, Forrester Research, Inc. Reproduction Prohibited

European Online Retail: Five Trends To Watch In 2012 3

Experimentation And Innovation Will Go Hand In Hand With Enhancing The Basics
The maturity of online retail varies radically across Europe.1 But despite the regional differences,
there are five key trends at work across Europe that will influence the way in which eBusiness execs
shape their strategies:

· Multichannel will sweep Europe this year. eBusiness executives across Europe are well aware
of the value of the multichannel shopper. As 40% of Europeans are now multichannel buyers, in
2012 more retailers will attempt to bridge the online to offline gap with initiatives such as click
and collect.2 The UK has led the way for some time now, although even some major German
retailers such as Saturn, which have traditionally maintained strong channel separation, are
beginning to build deliberate multichannel strategies and are experiencing strong customer
engagement (see Figure 2).

· Developing a mobile strategy can’t be put off any longer. There has been an explosion of
interest in mobile throughout 2011; however, a defined mobile strategy or even a mobile-
optimized website is still far from standard across Europe.3 At an entry level, those eBusiness
executives who are yet to launch a mobile site will focus their efforts on mobile optimization
of their existing online presence. Retailers that are evolving mobile into a core part of their
touchpoint strategy, such as John Lewis, will focus on optimizing the role of mobile — whether
to act as an engagement platform, drive store footfall, or to optimize sales (see Figure 3).

· The Web creeps slowly into the store (mostly on iPads). Readily available and user-friendly
tablet PCs are inspiring a range of retailers to experiment in bringing the best of their digital
experience into the store environment in a way that is more compelling for both store
colleagues and shoppers than a traditional kiosk. House of Fraser, John Lewis, Tesco, and Oasis
have all experimented with in-store tablets for both staff and shoppers to extend store range or
co-browse rich media content with shoppers (see Figure 4). These experiments will continue
apace as eBusiness executives work out where in-store technology fits into their mix.

· Shipping enhancements focus on speed and flexibility — but shoppers want value too.
Fulfillment remains one of the key inhibitors to eCommerce growth with European shoppers,
challenging eBusiness execs to continue to innovate in order to differentiate.4 Argos and Next
offer next-day or even same-day delivery, setting new levels of customer expectation in terms
of responsiveness. However, shoppers’ sensitivity to shipping cost means that eBusiness execs
could be better served concentrating on launching offers such as Zara’s free in-store pickup as a
more solid and dependable strategy.

· Cookie chaos continues. Most European countries have yet to enforce the revised European
Directive on Privacy and Electronic Communications, issued in May 2011. Even in some
countries where some form of governmental guidance has been given, such as the UK, there
has been a distinct lack of action from governments or eBusiness executives. Further changes

© 2012, Forrester Research, Inc. Reproduction Prohibited February 3, 2012


to the EU Data Protection laws have added further to the confusion — confusion that will
continue throughout 2012 as eBusiness executives struggle for clarity and those that operate
pan-European operations are faced with a complex web of national compliance (see Figure 5).

Figure 2 Unusual In Germany, Saturn Recently Launched A Click-And-Collect Service

Most German retailers offer
little or no multichannel
options — Media Saturn has
bucked the trend by offering
a “click-and-collect” service.

Source: Saturn website



Figure 3 John Lewis Encourages Mobile Shopping As Part Of A Multitouchpoint Strategy

John Lewis operates a price-matching
policy of “Never Knowingly
Undersold” and encourage shoppers
to turn to their mobiles in-store for
price comparison by offering free Wi-Fi
in all its UK department stores.

Source: John Lewis



Figure 4 Fashion Retailer Oasis Introduced iPads To Its Flagship Store

Oasis is one of a number of retailers
that are experimenting with in-store
tablets to enable a new style of
interactive co-browsing between
shoppers and sales associates.

Source: www.btexpedite.com/mobilepos



Figure 5 EU Privacy Laws Cause More Confusion Than Compliance

European eBusiness executives
struggle for clarity with how to
comply with changing legislation.
Many have taken no action yet, while
some take an open approach with
their customers.

Source: www.deliaonline.com

Some Trends Won’t Be That Disruptive — Watch But Don’t Jump Yet
Some trends are worth keeping an eye on, but won’t rock the EU retail world in the coming year.
While many of these initiatives may receive media attention, eBusiness executives must focus on
dissecting the game-changing “must haves” from those trends that are either too nascent to make an
impact yet or are more hype than substance. Ones to watch (but not act on yet) are:

· Marketplaces are here, but differentiation is the key. Amazon and eBay are major influencers
of eCommerce across Europe, and as other major online players are either already active (Asos)
or planning on launching (Tesco) a marketplace, it is tempting for eBusiness executives to follow



suit. A cautious approach is needed. The investment needed in both technology and processes
to ensure that sellers are of sufficient quality is not insignificant, and those marketplaces that
have been successful have differentiated themselves from Amazon and eBay, like Asos did with
its focus on vintage and hard-to-find apparel items.

· Social initiatives need to get more sophisticated if they are really going to drive sales. While
social media marketing campaigns are a common component of any marketing strategy now,
social selling has still yet to make a mark.5 Social initiatives need to become more product-
specific, building on the social merchandising approaches that leaders such as Marks and
Spencer and French Connection adopted with video sharing or Polyvore and its “sets.” Fashion
is the most likely sector to see success stories, but even in this category social engagement is still
unlikely to be a key sales driver for some time yet.

· Contactless payments are a small step toward a digital wallet. The 2012 Olympics will drive
adoption of contactless payments in London, but we are still some way away from a broader
vision of a mobile-driven eWallet. PayPal has grown significantly in consumer adoption and
will continue to innovate both online and offline. While we will see more payment innovation,
the impact on the multichannel world will not be revolutionary in 2012 as there are still
infrastructure challenges (lack of NFC-capable phones and POS terminals) and a lack of a
commonly adopted and understood standard.

· Next-generation merchandising is still too gimmicky to make a real difference. Virtual
fitting rooms, augmented reality, magic mirrors — there are a range of online and offline next-
generation merchandising tools that eBusiness executives are experimenting with, though many
still fall into the “gimmicky and not quite user-friendly enough” stage of development. These
technologies are worthy of consideration more from a PR perspective than as actual sales and
conversion tools.

· QR codes show promise — but users are still somewhat bemused. Consumer recognition is
the key blocker for further QR code adoption in Europe. Until the user experience is simplified
and handset manufacturers build scanning capabilities natively into phones, eBusines executives
will find that shoppers struggle to work out exactly what’s expected of them when it comes to
scanning codes. Experiments such as John Lewis and Waitrose’s QR code store will continue but
will not be significant drivers of sales.6



R ecomme n d a tio n s

don’t let experiments and hype distract you from getting the basics right
Sensational stories sell, and the press will absolutely focus on the stream of innovations that will
continue to push the limits of what we think of as eCommerce across Europe. However, it’s all
too easy to assume that just because you are not experimenting with pop-up store formats, new
shipping methods, or cutting-edge mobile apps that you are lagging far behind. The reality is
that the vast majority of eBusiness executives have more foundational work to concentrate on.
So while it is important to understand where the boundaries are, and while it is important to
experiment and innovate, don’t get sucked into the hype. You should:
· Map your cross-touchpoint customer journeys. Multichannel shopping is a reality across
Europe, and the influence of the Web on offline transactions is increasing as more and more
shoppers turn to the Internet to both shop online and inform their offline purchases. It is vital
that you understand how your shoppers use different touchpoints. This could be as simple
as the Web and the store or it could involve mobile, apps, social media, search, video, and a
range of other touchpoints. But the first key step is to build a picture of how your customers
are engaging and how you want them to engage. For instance, if you want to drive store
footfall in order to upsell to shoppers in-store, then developing click-and-collect and free
shipping to store offers will help, as will a mobile app with a store locator and multichannel
shopping features. Understand the shopper behavior you want to drive and don’t treat each
touchpoint as an isolated channel.
· If you don’t have a mobile strategy, sort that out now! Mobile will continue to receive
both hype and well-deserved credit in 2012. But . . . don’t rush into this. If you don’t
have a mobile strategy yet (app or web), then build one in the context of your overall
multitouchpoint strategy (see the first point). Mobile has the opportunity to be a bridge
between the online and the offline worlds, and if done well it can be used to enhance the
in-store experience and drive online sales as a result of offline activity. Be careful to build the
right metrics as you measure your return on investment in mobile. Slavishly pushing to drive
mobile-based sales risks missing out on the positive impact that mobile can bring to the Web
and to the in-store experience.
· Get ready for responsive, flexible, and fast fulfillment — but focus on shopper value. If
you are operating in the UK, then get ready for a speed-driven culture as other retailers work
to mimic or try to leapfrog Next, Argos, and Oasis. Define your response to this based on your
customer need (rather than a keeping up with the Jones’s race)and work out if you are in a
position to respond — this may mean enhancing store stock accuracy and integrating web
and store stock if you want to create a local, responsive shipping network. This is no small
undertaking — and given shopper sensitivity to shipping, cost options like free shipping
or ship to store may be enough to give your customers enhanced flexibility. If you are in
mainland Europe then keep an eye on the UK — next- and same-day delivery hasn’t arrived
for you yet, but get ready for someone pushing the boundaries very soon (or do it yourself ).



· Get involved in defining your in-store technology strategy. Bringing the Web into the
store risks jumping on the latest bandwagon. While there are undoubted benefits and we
will see some excellent applications (particularly for assisted high-value sales), don’t rush
randomly into this. Engage with your store operations and IT teams and educate them in
your multitouchpoint customer strategy. There are a range of possibilities for in-store web
technology, from extended inventory to assisted selling. Web kiosks that reuse existing
digital assets are a simple way to extend the range of a small store, while iPad-driven assisted
selling is more appropriate for higher-value merchandise or complex products that require
configuration or can be supported by rich media. In either case, tablets have changed the
game when it comes to the price of in-store infrastructure, but be conscious of the fact that
while tablets and other in-store technology have the potential to be disruptive, this is far
from being a mainstream trend yet.
· Organize for innovation. As new technologies and eCommerce service offerings continue
to generate media hype, eBusiness executives will be under increasing pressure to answer
the question, “Hey, why aren’t we doing that?” eBusiness executives should organize for
innovation by creating a cross-functional group that can look both internally and externally
to find areas of competitive advantage. This should involve monitoring new innovation in
the market and jointly assessing whether there is an opportunity for your organization in
following suit. It should also look internally to both understand current capability (across
marketing, eBusiness, fulfillment, and technology) and to look for ways to deliver innovative
new services or features with existing technology and processes. Forrester examines
approaches to driving internal and external innovation in our “empowered” reports.

Supplemental MATERIAL
Methodology
The European Technographics® Online Benchmark Survey, Q3 2011, surveyed 21,000 respondents
in the eight markets of France, Germany, Italy, the Netherlands, Poland, Spain, Sweden, and the
UK. This survey is based on online population ages 12 and older (16 or older in Poland) who are
members of the Ipsos-MORI online panel. Ipsos weighted the data by age, sex, online frequency,
and hours spent online to demographically represent the online adult European population per
country. Ipsos fielded the survey in June and July 2011 and motivated respondents with various
incentives. For results based on a randomly chosen sample of this size (N = 21,000), there is 95%
confidence that the results have a statistical precision of plus or minus 0.7% of what they would be
if the entire online adult population of Western Europe had been polled. This confidence interval
can widen to 3.1% when the data is analyzed at a country level. The sample used by Ipsos is not a
random sample; while individuals have been randomly sampled from the Ipsos panel for this survey,
they have previously chosen to take part in the Ipsos online panel.



Endnotes
1
The most visionary European multichannel retailers are beginning their transformation toward agile
commerce and are reaching out to their customers on new touchpoints — mobile, social, and so on — in
a comprehensive and coherent way. But they are in the clear minority. Many retailers run successful web
operations, yet lack a strategic plan to make the leap to a cohesive multichannel effort. Many retailers are
not even in the game, with a significant number yet to sell online or still in the experimentation phase.
These novice eCommerce sellers are still concerned about channel conflict, detrimental brand impact,
and revenue cannibalization. Yet no matter what the stage of their maturity, multichannel retailers across
Europe agree that customer data will be the key that unlocks cross-touchpoint success. See the October 26,
2011, “Agile Commerce Is Coming Of Age For European Retailers” report.
2
After 12 years of online retail in Europe, the Internet has become a core part of the purchase journey for
Europeans. Forrester has analyzed the shopping behaviors of European adults and created a segmentation
that reflects which channels and digital touchpoints consumers use as they buy. Today there are more
Europeans who purchase across multiple channels than single-channel shoppers, and consumers are adding
touchpoints — digital ones — to their journey by the day. Changing consumer behavior demands that
eBusiness strategy executives adjust their approach to put digital at the heart of their increasingly digital
touchpoint strategies. See the October 17, 2011, “European Shopper Behavior Revealed” report.
3
Less than half of the major European retailers we examined in the latter half of 2011 had either mobile
optimised websites or a mobile app. Source: Forrester WebTrack for UK, France, and Germany Q2 and Q3
2011.
4
Of those European web users who have yet to shop online, 41% say that lower shipping costs would
encourage them to buy online. Source: European Technographics Retail, Customer Experience, And Travel
Online Survey, Q3 2011.
5
In spite of the fact that hundreds of millions of people around the world have Facebook accounts, the
ability of the social network to drive revenue for eCommerce businesses continues to remain elusive.
eBusiness professionals in retail collectively report little direct or indirect benefit from Facebook, and social
networks overall trail far behind other customer acquisition and retention tactics like paid search and email
in generating a return on investment. For some companies and brands, Facebook promises to support
branding and awareness (i.e., “top of the [marketing] funnel”) efforts, but for most eBusiness companies
in retail, Facebook is unlikely to correlate directly to near-term sales. A few pockets of success, however,
have surfaced, and a cottage industry of vendors who can support these programs will inevitably burgeon.
Forrester examines “social commerce” in a report. See the April 7, 2011, “Will Facebook Ever Drive
eCommerce?” report.
6
John Lewis and Waitrose have jointly experimented with QR Code driven “Virtual Stores “displaying John
Lewis products in the windows of Waitrose grocery stores to buy via a QR code that links to a mobile
website. Other retailers such as Occado have also experimented with QR-code-driven stores. Source: David
Moth, “John Lewis opens virtual QR store,” Econsultancy Digital Marketers United Blog, November 25, 2011
(http://econsultancy.com/uk/blog/8370-john-lewis-opens-virtual-qr-store).


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