ResearchFARM ONLINE RETAILING IN THE EU Strategies & Recommendations One Currency, One Market, One Channel RETAIL ANALYSTS

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1 ResearchFARM RETAIL ANALYSTS ONLINE RETAILING IN THE EU 2011 Strategies & Recommendations One Currency, One Market, One Channel JULY 2011

2 WE HAVE QUESTIONS FOR YOU... Retailers What are the strategic imperatives for online retailing in the EU over the next 5 years? Should retailers first internationalise their online operations or first localise? How can retailers retain their newfound customers abroad? Product Suppliers Will online internationalisation increase the competitive pressure or is it a massive opportunity? How important are local taste variations across the EU? Does it make sense to foster online partnerships with noncompeting retailers or suppliers in the EU outside your domestic market? Property Firms How will the threat from online to established bricks & mortar players develop when international competition heats up online? How will retailers integrate click & collect/drive services into their real estate provisions? How will this change when online internationalisation is a reality? Retail Services Providers How will the legal framework evolve going forward and what will the impact be on online retailing? What will payment options and loyalty schemes look like in the future? Find out about retailer strategies and tailor your IT/ legal offering according to their needs Consultancies Why will online internationalisation be absolutely crucial and a factor determining success or failure? Which click & collect solutions will win out? What is the impact of SEPA or the Consumer Rights Directive? Financial Service Providers Which retailers need your undivided attention going forward? What are the benefits of the common EU market to EU retailers, especially from a payments perspective? What will happen with payment providers in the EU?

3 TABLE OF CONTENTS Executive summary p7 Should internationalisation precede localisation? How to gain consumer trust. Who stands to benefit most from internationalisation? Is language a barrier? Do websites have to be in English? Are different legal regimes holding online back? Used by a large bloc of households in the West, the common currency represents a massive opportunity. How to navigate VAT and fulfilment. Click & Collect potential. Partnerships abroad. A step change in online loyalty to retain new customers The evolution of online retailing and the drivers of change: a 15 year view From multi-channel to m-commerce to internationalisation, a rapid evolution Drivers of change: economics, social, technological, legal, environmental all combining to catapult the development of online retailing to the next stage p15 p16 p18 p19 Economics drivers E-commerce to win against the backdrop of austerity, online seen as best value Increased cross border shopping pushing online internationalisation p20 Social drivers More single person households, Increased interaction on New Social Media, greater customer involvement leading to greater transparency and lower prices, creating network effects, recommendations, f-commerce and social shopping p23 Technological drivers Increased broadband penetration, the cloud enabler for the retailer backend and shopper personalisation, new loyalty opportunity, tabs & apps, 4 th generation wi-fi, internet of things, connected car and kitchen p27

4 TABLE OF CONTENTS Legal drivers Strong political push to integrate the common market, The Consumer Rights Directive - An attempt to build consumer trust, SEPA harmonising payment across the EU, Cap on Roaming charges to boost m-commerce p30 Innovations in online loyalty The essentials of online loyalty How to retain online shoppers: The 5 clicks rule, time slots, delivery charges, click&collect, m-commerce, data security, check out solutions Outstanding case example I Amazon, the trendsetter: marketplace, prime, customer ratings, kindle Recommendations Outstanding case example II Vente-Privee: loyalty through exclusivity, novelty and communication Other online clubs, brands4friends, buyvip Recommendations p33 p34 p37 p44 State of play in click & collect: 3 outstanding best practice operators Chronodrive: The French drive concept in online grocery Making the shopper come to the retailer, eradicating delivery costs and time slots ASOS: the pureplay teaming up with the UK high street Footfall generator, pureplay gains multichannel capabilities p51 p53 p55 The logistics provider (DHL): offering unmanned click & collect stations in Germany p57 Sources p58

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7 SAMPLE PAGES (ZOOM IN) The Evolution Of Online Retailing: A 15 Year View EU Online Retailing: Executive Summary 16 ResearchFarm - Retail Analysts No part of this report may be reprinted or reproduced in any way without the written permission of ResearchFarm. All in all we believe that language barriers are not insurmountable, as relatively good education systems are standard in the EU, English is well established as a second language for most EU citizens. Moreover translation into European languages is relatively straightforward and not too expensive. Besides, national online players are well established, and their websites can to an extent be copied or used as inspiration. This preeminence of the English language also means that Anglo-Saxon operators enjoy a clear head start when internationalising their online operations over most other EU retail players, as consumers will feel more secure with a site operated in English than in most other languages. 9 ResearchFarm - Retail Analysts No part of this report may be reprinted or reproduced in any way without the written permission of ResearchFarm.

8 SAMPLE PAGES (ZOOM IN) The Essentials Of Online Loyalty 5 clicks Time slots Delivery charges For online players there are a number of issues independent of loyalty schemes that need to be covered to begin the process of turning footfall into loyal custom. The golden rule of online retailing that shoppers should only ever be 5 clicks away from visit to purchase, when they first visit a site (assumption of a basket size of 1 product), should be followed as much as feasible. Moreover online pureplays need to focus on the last mile conundrum. This involves Moreover we will see the gradual abolition of delivery charges over the next 5 great customer service from the delivery personnel but also time slots and these to ten year timeframe, or at least their significant reduction in price for consumers. slots becoming increasingly shorter the retailer able to offer the shortest time We believe it goes without saying that returns should be free otherwise especially windows in which customers need to wait at home for a delivery will win out. In recent years we have seen a number of online players offering shoppers competition with sensitive products an unnecessary barrier to purchase will be established. for delivery slots, guaranteeing disciplined shopping behaviour and understanding that certain slots are more popular and hence quickly booked up. EU Online Retailing: Executive Summary 34 ResearchFarm - Retail Analysts No part of this report may be reprinted or reproduced in any way without the written permission of ResearchFarm. In terms of localising the international online retailing offer, a lot of collaboration potential exists between national champions from different sectors especially in fashion where brands can complement each other. Clothing retailer Next has started a partnership agreement with the US s Sears to share online space initially and then for the products to be stocked in Sears physical store estate. Indeed Fashion and luxury players will emerge as obvious winners, as these attract many overseas online customers already, so making it easier to access these brands in a local context can only be a win win scenario for a French and Italian branded player and a say Austrian or Finish department store. Other examples include online food specialists teaming up with non food specialists for example to enable click & collect solutions and drive extra footfall to stores. Click and collect is a fast growing model and offers many opportunities for retailers. Non food specialists can make their credentials and central locations in high footfall areas count and utilize their store estates to draw in extra footfall by partnering with a grocery player and acting as collection points for groceries for busy commuters on their way home from work. 12 ResearchFarm - Retail Analysts No part of this report may be reprinted or reproduced in any way without the written permission of ResearchFarm.

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