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Understanding Europe's up and coming retailers – and the context in which they operate

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Understanding Europe's up and coming retailers – and the context in which they operate

The 2020 RetailX Europe Growth 3000
The 2020 RetailX Europe Growth 3000

Retailers selling products from fashion to fragrance, from sports equipment to auto equipment and many more feature in the first annual RetailX European Growth 3000, published in association with Rakuten Advertising and Ingenico ePayments. The index showcases the breadth and depth of a vibrant online and multichannel retail industry that has grown steadily over recent decades. Both familiar and less familiar names feature, with long-established businesses and recent start-ups contained in a listing that maps the sheer scale of the ecommerce industry across Europe. This listing comes at a time of wider challenges, from Covid-19 to Brexit uncertainty and a shift towards environmental activism, that may yet prove to contain opportunities for many of these smaller businesses.

 

Understanding the Growth 3000

This broad listing includes up-and-coming traders in a host of different sectors across 32 markets that are members of the EU and EEA plus Switzerland and the UK. These are retailers and brands that sell a wide variety of products in a wide variety of languages and currencies, selling products that are sometimes of broad appeal and at other times very niche. Some businesses may well deliver a more expert service within their niche than do their larger competitors.

 

RetailX analysis of the Growth 3000 (G3K) is focused firmly on performance, measured here through four dimensions that researchers consider key to success online for all businesses, whether small, medium-sized or large.

 

Find singles out retailers that are easily found in the first place and then measures how effectively they deploy on-site navigation and search to help shoppers find the product they are looking for – or to help browsers find inspiration. Mobile looks at the speed of mobile website services as well as whether retailers have a mobile app and offer multichannel services such as click and collect.

 

Delivery measures the flexibility of retailers’ fulfilment options, such as speedy delivery and click and collect – and how much they cost. Social looks at how retailers engage with their shoppers, and whether they offer options from sharing with friends to publishing ratings and reviews. It also includes the use of social payments and other third-party checkouts.

 

This year, research findings are drawn from the Top2000 retailers. Year-on-year changes are measured on the 1,878 transactional retail and brand websites that appeared in the Top2000 list both this year and last year. Many of these retailers are online-only, and multichannel measures are based on the 846 multichannel retailers that were tracked for the index both this year and last year. Figures for different markets are based on retailers that sell in that market, rather than those that have a physical base there. Some metrics, such as visual appeal are subjective: we indicate how markets and categories rank on those metrics rather than individual scores.

 

Martin Shaw, head of research at RetailX, says the report will give useful insights to those looking to understand how retailers operating in the same categories and markets operate. “We believe this index will also be useful to those looking to new markets and considering expanding the categories in which they trade. More businesses are now selling more products online than ever – this report will give them valuable understanding of their existing and potential markets operate, and the tools and approaches that successful retailers deploy.”

 

The broader context: Covid-19

This report comes at a time of upheaval across Europe as a result of the coronavirus pandemic and the continuing uncertainty around Brexit. During the spring of 2020 most major European markets introduced lockdowns, closing non-essential shops in order to safeguard against Covid-19. These lockdowns took place at slightly different times, starting first in Italy and Spain before moving to Germany, France and, later, the UK, but the effects on ecommerce and multichannel retail were similar. More shoppers have bought online, many doing so for the first time during lockdown. As a group the Growth 3000 are probably more protected from high street lockdowns since most do not have shops.

 

It’s likely that many shoppers will continue to buy online in the future. Certainly, larger UK online grocer Ocado believes that the coronavirus crisis is an inflection point for online grocery. Announcing plans to raise £1bn through debt and new equity, its chief executive Tim Steiner said in June 2020: “This current crisis is proving a catalyst for permanent and significant acceleration in channel shift globally.” And David Ashwell, managing director of AO Logistics – the distribution arm of electricals retailer AO.com – described the pandemic as “five years of channel shift from stores to online condensed into five weeks”.

 

Those Growth 3000 businesses that primarily trade online may well be better placed than larger multichannel businesses to deal with this. Among them are Growth3000 company Sosandar, the UK online fashion retailer, which showed in a June 2020 trading update that it could adapt quickly to changes in demand brought by coronavirus through a strategy of placing small orders and seeing them sell out. In the first two months of its 2020 financial year, from April 1 to May 31, it saw orders grow by 44%, year-on-year, and revenue by 62% as it was able to take a more agile approach and capitalise on the sudden shift in demand towards more casual clothing, and away from formalwear. The growth in Sosandar orders came at a time when IMRG figures suggested the wider clothing market was down by 24% in April, compared to a year earlier. During those two months, Sosandar says its losses reduced by about 55%. However, it also said the cost of adapting in the early days of pandemic meant that its pre-tax losses for the previous full-year – to the end of March 2020 – were likely to be higher than it had previously expected.


Continuing challenges

As retailers move beyond the Covid-19 pandemic, many are now looking to do so in a more environmentally-friendly and sustainable way, following a year of environmental activism featuring key figures including Greta Thunberg and the Extinction Rebellion protests. Brands of all sizes are taking action with steps ranging from reducing the amount of plastic in packaging to using sustainable delivery methods. They’re doing so in response to a plethora of research suggesting that sustainability is a key issue for shoppers, especially younger ones. To pick out just one, a January 2020 report from Conversity questioned 1,000 shoppers and found that shoppers of all ages were likely to prefer to buy from a sustainable retailer. The proportion opting to do so varied only slightly by age: younger shoppers aged between 16 and 34 (51%) were slightly more likely to make this choice, compared to those aged over 55 (48%). Sarah Cameron, director of customer experience at Conversity, said: “Mass movements, social media campaigns and high-profile influencers have had a profound and positive impact on the consumer psyche when it comes to sustainability. People are now thinking much more deeply about the wider environmental impact of the products they buy, and brands are starting to follow suit.”

 

Uncertainty still surrounds the exact nature of the UK’s future relationship with the EU. The UK left the European Union on January 31 2020, but the terms of the future trading relationship between the two are yet to be settled. If no deal can be agreed between them then the two would theoretically trade on World Trade Organisation terms – including a complex schedule of tariffs. While the UK has already published its schedule of the tariffs that would apply to imports, the tariffs applying to exports would depend on those set by other countries and trading areas.

 

Cross-border trade is likely to become more complex for those selling into and out of the UK – Europe’s largest ecommerce market. Until 2021 retailers do not pay tariffs to export or buy from the 31 countries of the European Economic Area plus Switzerland. It is possible, though currently looking unlikely, that a deal will be agreed that will simplify future tariffs.

 

This feature first appeared in the RetailX Europe Growth 3000 2020. Click here to download it. Click here to explore the RetailX series of research reports further.

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