Despite the shake-ups in geopolitics, the recent energy crisis, and a spike in inflation, consumer economics in the European Union continues its upward trend. It is estimated that European B2C e-commerce turnover increased by 8% last year, reaching a value of €975 billion. Additionally, the market is expected to reach a landmark growth rate of 13% this year, highlighting increased consumer confidence in e-commerce. According to experts, success in e-commerce depends on understanding market trends, navigating cross-border opportunities, and developing strategies to compete in this increasingly hectic environment.
E-Commerce growth amidst global uncertainty: socioeconomic factors
So far, the 2020s have been an extremely turbulent and unstable decade. Despite this, eCommerce continues to grow. Revenues in the global e-commerce market are projected to reach over US $4 trillion in 2024. It is estimated that in the coming years, the annual growth of the market should remain at ~12,22%.
The growth of e-commerce was significantly accelerated by the COVID-19 pandemic. Data shows that during this period, European consumers changed their habits, relying more and more on online shopping. This trend did not reverse even in the face of the recent energy crisis, inflation, and the war in Ukraine – geopolitical and economic circumstances that significantly affected manufacturing industries as well as the efficiency of supply chains.
“The pandemic boosted e-commerce revenues because online shopping was the safest way to purchase essential goods,” says Laura Galdikienė, Principal Economist at ConnectPay. “However, this growth did not subside even after the health crisis, as the spike in inflation put significant pressure on the purchasing power of many consumers. Consumers appreciate the convenience of comparing prices across multiple online stores before making a purchase. As the economic situation remains weak in Europe and fears of a recession in the US mount, consumers are likely to continue to use online shopping to hunt for fairly priced products.”
According to Laura, e-commerce provides more transparency to the market, as consumers can track more easily where and how the products are produced:
“Given the geopolitical tensions and the increase in consumers’ climate concerns, shopping online may help customers avoid products that are produced in countries or by companies that undermine important values.”
Cross-border e-commerce: opportunities and complexities
One of the key reasons businesses are increasingly adopting e-commerce is its flexibility and the potential to expand their customer base across different demographics and even international markets. In fact, in Europe, cross-border sales are forecasted to outpace domestic sales, growing at an impressive 30% annually. This growth presents not only new possibilities for expansion but also requires businesses to navigate various complexities.
While e-commerce enables businesses to broaden their market reach, maintaining efficient and high-quality customer service can be challenging. For example, data from Help Scout shows that 86% of online customers will never return to a store after an unpleasant experience. Additionally, only 4% of them provide feedback, meaning businesses receive very little information on the processes and customer experience elements that need improvement.
Navigating challenges for sustainable growth in online retail
The borderless nature of e-commerce provides businesses with both opportunities and additional challenges. Attracting new customers is one thing; retaining them in an increasingly competitive market is another. It is loyal customers who enable e-commerce businesses to achieve long-term success. According to data from Georgias, these customers generate 44% of total revenue and 46% of orders, despite only accounting for 21% of a brand’s customer base.
Successful consumer attraction and retention in e-commerce hinge on attention to detail. There is no one silver bullet that guarantees success. Businesses must learn to navigate and interpret socioeconomic factors, leverage data analytics to gain consumer insights, and enhance user experience elements such as seamless website navigation, mobile optimization, and robust security measures to ensure consumer trust.
For e-commerce companies, high competition is probably one of the biggest challenges, says Laura:
“Nowadays it is easy and rather cheap to create a website. This means that companies must work extra hard to generate revenue. At the same time, they need to ensure competitive pricing, provide flawless consumer experience, and maintain security. This is not an easy task, especially when competing with large online retailers.”