5 key facts about European e-commerce payments

May 20, 2019 10:41 AM

While the European Union positions itself as one common, homogeneous market, the reality is that the European e-commerce market is very diverse with both leaders and laggards.

According to the PPRO Payments Almanac, the combined value of e-commerce purchases in 2017 for the five most populous countries (Germany, U.K., France, Italy and Spain) amounted to $473 billion, of which the U.K. accounted for almost half, at $224 billion. Despite these countries having a similar-sized combined population to the U.S., their combined e-commerce sales are just a fraction of the U.S.’s sales at almost $742 billion.

One similarity between the U.S. and European e-commerce markets is the role Amazon plays in the internet ecosystem. According to eMarketer, Amazon controls 49.1% of U.S. e-commerce sales, which is seven times greater than the No. 2 player, eBay, which has a 6.6% sales share.

In Germany, Amazon owns about half the market, according Ecommerce News Europe. In Italy, Amazon is the No. 2 e-commerce site; in the U.K., it’s the largest player with only 16% market share; and in France it’s the largest online retailer. Only in Spain is Amazon just another online retailer without a significant share advantage over competitors.

Many European shoppers not only purchase domestically among local e-commerce stores, but they also enjoy shopping at foreign websites or local language marketplaces, such as eBay, that give them access to foreign merchants.

U.K. online consumers are the most prolific cross-border shoppers, with 57% shopping from foreign merchants, just beating out Spanish consumers who shop across borders at a rate of 55%. In contrast, German online consumers cross-border shop at only a 33% rate – the lowest among the five countries, according to the PPRO Payments Almanac.

Merchants from China are the biggest beneficiaries, as their country represents the largest cross-border trading partner to each of the five largest European countries.

Most Europeans enjoy shopping online, with participation rates of 80% or higher in many countries, according to a 10,000-person survey across several European countries by the global logistics and delivery company PostNord. In the survey, it noted that there is a significant generational gap in online buying habits, with a major drop off in e-commerce participation starting at age 50.

Another factor that can enable or hinder online shopping is simply internet penetration.

According to the PostNord Survey, countries that have high internet penetration also appear to have online shopping rates (79% or higher) – the U.K., Belgium and the Netherlands all have internet penetration levels of 95% of the population, Germany is at 90% and France and Spain are both at 87%. In contrast, Italy, which has an e-commerce shopping rate of just 61%, has an internet penetration level of only 63% of the country’s population.

When it comes to internet shopping, U.K. consumers are the kings and queens of the European e-commerce world as they outspend all other European countries and even the average U.S. citizen, with $4,183 in annual online purchases.

Based on data from the PPRO Payments Almanac, French online shoppers spend almost $1,900 per year while Spanish online shoppers only make just under $1,300 in purchases per year. Only Danish citizens come close to U.K. shoppers by spending $3,820 per year in online goods and services. On the other end of the spectrum in annual e-commerce purchase volume are Polish ($621), Hungarian ($451) and Slovakian ($377) shoppers.

Using payment cards to complete online purchases can often seem to be a “no-brainer” decision, but that’s not always the case. Also, when payment cards are used, it doesn’t necessarily mean that they will be using Visa or Mastercard networks.

Data from PPRO’s Payments Almanac reveals that German online shoppers prefer using bank transfers to pay for e-commerce goods and services – about half (49%) of online purchases by value are settled through a bank transfer. The second most popular payment option in Germany is an e-wallet (28%), followed by payment cards (11%).

In France, 55% of online purchases by value are settled by payment cards, however the vast majority (90%) are on local payment schemes. Only 4% of payment card volume is run on the Visa network, 3% on American Express and just 2% of the volume is on the Mastercard network. In the U.K., payment cards settle half (50%) of the e-commerce purchase volume, yet almost all of it (84%) is run through Visa, while Mastercard garners only a 15% share and American Express has a 1% share.

E-wallets tend to have a greater share than payment cards in most European countries, including four out of the five largest countries, due to their support of local payment methods. Only in Italy are e-wallets still in their early stages of growth. This limited penetration in Italy is likely due to a combination of factors such as low internet penetration (63%) and low e-commerce penetration (61%).

Smartphones are a major driver to boosting the e-commerce economy, and the European leader on this front is the U.K. In fact, U.K. online shoppers are on par with their Chinese counterparts — 57% and 56%, respectively — when it comes to reaching for their phone to make a purchase, based on mobile device share of e-commerce sales by country. According to the PPRO Payments Almanac Germany’s mobile device share of e-commerce is 40%, much higher than the U.S. figure of 35%.

While low internet penetration can be a barrier to overall e-commerce penetration, it is not necessarily a factor when it comes to the mobile device share of e-commerce volume. Also, smartphone penetration is not barrier when low, or even an accelerant when penetration is high, to fostering greater mobile e-commerce purchases.

For example, Sweden has a 90% internet penetration level and an 85% smartphone penetration level, yet just 29% of e-commerce purchase volume is made using a mobile device. It may be how consumers first began to use the internet or simply a cultural preference for shopping and payments. For example, only 53% of the Chinese population has an internet connection and just 56% own a smartphone, yet over half (56%) of Chinese e-commerce purchase volume comes from mobile devices.