European e-commerce customers are buying more but transportation providers will be challenged

Across Europe, consumers are buying more often and spending more money, according to our analysis of the results of a 2019 survey that Eurostat has just made available. While this should be great news for transportation providers, the catch is that customers have become accustomed to free shipping. In fact, according to the most recent IPC Cross-Border E-Commerce Shopper Surve y, 63% of customers received free shipping on their purchases, either because they were a member of Prime type loyalty programs or simply because this was part of the e-tailers standard offering. We have taken a look at this data and discuss what this means for transportation providers.

Customers have become increasingly likely to purchase online from all types of sellers - nationally and internationally. While customers predominantly purchase from sellers in the same country, the increase has been much large for cross border purchases. Between 2008 and 2019 the share of residents aged 16-74 across all 28 EU countries (including Britain) buying from national sellers has increased from 28% to 55%. Meanwhile the share of residents buying from other EU based and non EU based sellers has grown fourfold for 28% and 17%, respectively (see Figure 1). There are approximately 420 million residents in the EU aged between 16 and 74. Interestingly, almost 10% of customers are unaware of the location of the seller they are purchasing from. Figure 1 - EU Resident Purchases from National, EU, Non EU and Unknown Sellers 2008 - 2019

As customers have become more comfortable buying online, both frequency of purchases and amount spent has increased. In 2016, the number of people who had made 6 or more purchases over a three months period was 14% but by 2019 this had increased to 17%. In 2019, 32% of residents said they had spent more than 100 EUR over the three month period preceding the survey, up from 28% three years earlier (see Figure 2). Figure 2 - EU Resident Online Shopping Spending 2016 - 2019

Spending and frequency of purchases does vary across Europe. The biggest spenders are in the Nordics, UK, Germany and Austria and the most active online shoppers are in the UK. The interactive map below shows some of the differences between EU countries, as well as Norway, Switzerland, Iceland and Turkey.

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The most popular products are clothing and sporting goods, books and household items (mainly beauty products). The biggest growth over the last 11 years, however, has been in the grocery segment (see Figure 3). Figure 3 - Most Popular Products Purchases Online 2008 - 2019

Continued growth in online shopping has led to increased volumes for transportation providers, but the catch is that customers are both sensitive to changes in product price and even more sensitive when it comes to paying for shipping. The recent 2019 IPC Cross-Border E-Commerce Shopper Survey found that 63% of customers received free shipping. Furthermore, if purchases were to increase by 10 Euros, 36% would stop buying from China and 41% would buy slightly less from China. This is relevant, because the the changes to de-minimis rules will see Value Added Tax (VAT) apply to all purchases from January 2021. Many online platforms have absorbed the cost of shipping but as shipping costs have consistently outpaced revenues, service providers will be pushed harder to lower prices or risk losing volumes.

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