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Thursday - May 25, 2000

Growth of European Online Retail Market Threatens to Reverse Lead

The early success of Internet-only, or dot-com, retailers is threatened as Western Europe's online market grows dramatically by 415 percent over the 1999 to 2001 period, to top EUR 14.7 billion by 2001, according to Jupiter Communications, Inc. Currently, dot-com players maintain a narrow majority of 51 percent market share of online retail spending. However, they are under threat from traditional retailers that are poised to steal online market share by leveraging their real-world supplier and customer relationships.

Research indicates that online commerce revenues are set to increase eightfold, rising from EUR 8 billion in 2000 to EUR 64 billion by 2005. Meanwhile, the number of online buyers will more than quadruple, reaching 85 million by 2005, up from 20 million in 2000, with the most aggressive growth expected during the next 24 months. Driving this growth is an increase in the volume and diversity of consumers' purchases. Jupiter's research further indicates that online shoppers are now buying a growing number of higher-consideration products; products and services that are higher in price and require some thought prior to purchase, such as packaged holidays and high-end apparel.

According to Evan Neufeld, vice president of international research for Jupiter, dot-com retailers have done a much better job than traditional players of exploiting the Internet retail channel in Europe. But with the vast majority of online revenues and shoppers still to come, this early lead does not ensure future success. "Dot-coms are leaving the door open for traditional retailers to reverse the tide," said Neufeld. "Selling low-ticket items with simple transactional sites and discounting won't develop the loyal customers or the good supplier relationships that retailers need to become profitable in the long run."

Focusing on securing these relationships is the key for all players who want to succeed in the European online market, whether they are traditional retailers or dot-com retailers. As the novelty of shopping on the Internet wears off, online buyers will turn away from simple incentives and will only return to these sites that offer them the best products and service.

"The real-world skill of building good supplier relationships is even more crucial as volumes rise and an increasing number of premium and branded products are sold online," said Nick Jones, analyst with Jupiter's European research team. "Suppliers are taking more interest in, and control over the way these goods are distributed and promoted online."

"As online shopping becomes mainstream, brick-and-mortar players have the opportunity to build on their off-line experience," added Jones. "Switched-on retailers can make the most of their existing relationship with suppliers to put attractive product propositions in front of online shoppers. Couple that with the immediacy that in-store purchasing offers, and traditional retailers can secure more of a consumer's wallet share." Jones concluded, "These assets are neutralised unless traditional retailers act now."


Monitoring Your Online Reputation
According to Fortune:

"In early March a posting popped up on Silicon Investor, one of the Web's most influential stock-message boards: Gadzoox was releasing its earnings in a few days and investors should be ready. If Gadzoox, a data-storage company in San Jose, missed the date, day traders were sure to pounce. The problem: The dates in the post were wrong. Within minutes Chris Munson, Gadzoox's CFO, received an e-mail in her box from a company called NetCurrents alerting her to the post and announcing that it had already posted a correction. "They are my eyes and ears where I can't be," gushes Munson.

Monitoring your company's reputation used to be easy: Hire a PR firm to talk to the world; hire a clipping service to find out what the world's saying. But in the Internet era, the game has changed. Suddenly disseminating information is simple, and corralling it, almost impossible..."

Click here for the full story (about a product called NetCurrents) [Link no longer active]

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Return to May 2000 News Archive