Trends and Developments of European Cross-Border eCommerce

Electronic commerce is experiencing rapid expansion globally and on the European continent in particular. In 2019-2020 alone, its European share has grown by 10%, hitting the mark of €757 billion. What's more, the revenue in the European eCommerce market is projected to reach €685 billion in 2022 and €974 billion by 2025.

Find out which trends and developments drive such remarkable growth in this analysis backed up by verified data.

European Ecommerce Market in Numbers

The latest European Ecommerce Report published in 2021 provides excellent insights on the general market situation alongside a detailed breakdown of the 37 countries' and 5 regions' contributions to it.

As of 2020, when it comes to turnover, the positions among the European regions have been divided as follows:

1. 64% - Western Europe
2. 16% - Southern Europe
3. 8% - Central Europe
4. 6% - Northern Europe
5. 6% - Eastern Europe

Notably, the regions with the highest turnover growth rates from 2019 to 2020 were:

• 36% - Eastern Europe
• 28% - Central Europe
• 24% - Southern Europe

The countries with the largest shares of online shoppers registered in 2020 were:

1. 92% - United Kingdom
2. 91% - Netherlands
3. 90% - Denmark
4. 90% - Switzerland
5. 87% - Germany
6. 87% - Norway

These figures were majorly influenced by such events as Brexit, which was finalized on February 1, 2020, and the global COVID-19 pandemic.

The Influence of Internet Use on B2C eCommerce in Europe

The number of Internet users in Europe grew from 87% to 89% in 2020 and keeps following the upward trend to this day. For instance, in Western and Northern Europe, more than 95% of the population are active users of the world wide web. Eastern Europe demonstrates the lowest rate of Internet use at a 77% mark.

What's important for eCommerce is the fact that the number of online shoppers in Europe grew at an unmatched rate, rising from 66% to 71% in 2020.

Cross-Border Trends in the European Ecommerce Market

The Ecommerce market in Europe is influenced by a variety of events, both local and global. As a response to those, new trends evolve. Here are some of the main tendencies driving the European cross-border eCommerce at this time:

• Turnover Accounting to a Quarter of Overall Sales in Europe. The turnover of cross-border B2C eCommerce excluding travel is estimated at €146 billion, making it approximately 25,5% of the total sales in the EU16 area. For countries like Finland, Austria, Ireland, Sweden, Norway, and Switzerland, the share of cross-border shopping accounted for as much as 50% of the total eCommerce turnover in 2020.
• Drop in Cross-Border Purchases. Despite the impressive turnover, the results of a consumer survey demonstrate that cross-border eCommerce plunged in the majority of European countries in the period between 2019 and 2020. Even the top 10 countries leading in purchases from overseas experienced an average of a 20% drop at that time.
• China Persists as the Leader for Cross-Border Sales. According to IPC data, residents of European countries mostly conduct product purchases from China, with the country leading in 19 out of 26 countries. For some countries, particularly in Eastern Europe, it comprises over 50% of the international purchases turnover: Lithuania (65%), Latvia (61%), Poland (60%), Hungary (60%), and Croatia (50%).
• Global Marketplaces Stay in Trend. The leadership among online marketplaces facilitating cross-border shopping belongs to global industry giants like Amazon, eBay, and AliExpress. Europe-based companies, such as Zalando and Asos, are also popular among consumers.
• Sustainable Marketplaces' Popularity Increases. Due to the developing social consciousness, sustainable practices are on the rise, and eCommerce is no exception to the trend. Thus, online marketplaces that offer sustainable services, from packaging to delivery, are gaining more and more traction these days. These players include Redbubble, Etsy, Leboncoin, Threadless, Bol, and Rakuten.
• Cross-Border Retailers Retain Their Market Share. Even though a lot of consumers shop on online marketplaces, some also use the services of popular online cross-border retailers. Some examples of these retailers are H&M, IKEA, Pandora, and Lego.

More on Sustainable Practices: the Latest Ecommerce Developments

The concerns of European consumers around the environmental impacts of cross-border shopping have increased over the past few years. Consumers are also more aware of issues concerning human rights, fair labor conditions, and the sourcing of raw materials. Here are some numbers from a cross-border consumer survey to demonstrate it:

• 82% of respondents would like the packaging materials of their packages to be recyclable.
• 80% would prefer the packaging materials of my parcels to be reusable.
• 68% agree to receive their shipment a few days later for the sake of reducing environmental impact.

The sustainability figures were also positively impacted during the COVID-19 pandemic, with large shares of shoppers choosing to buy from local businesses in 2020:

• 44% in France
• 35% in Germany
• 28% in Italy
• 25% in the UK
• 22% in Spain

However, it's still unknown whether the driving factor for such great changes were indeed environmental issues or, rather, the supply chain issues.

VAT Regulations' Effect on European Cross-Border Shopping

The new VAT eCommerce regulations, effective from July 1, 2021, have also had a major impact on cross-border shopping across Europe. Due to the current legislation, cross-border merchants are now obliged to charge the VAT rate of the shopper's country of residence. This rule applies to all sellers above the micro-business threshold, obliging them to register their store for VAT in either the customer's country or the one-stop shop.

The updated VAT regulations are only applicable to countries operating in the EU Single Market. Thus, some places in Eastern Europe are still easily accessible to foreign retailers. However, the biggest obstacle faced by foreign online merchants when selling in this region is the local popularity of the cash-on-delivery payment method. This is due to the fact that many Eastern Europeans are unbanked and don't have access to credit cards.

European countries with the highest rates of unbanked residents are:

• Romania - 42%
• Ukraine - 37%
• Bulgaria - 28%
• Hungary - 25%

In contrast, countries like Norway, Finland, Sweden, the Netherlands, and Denmark boast 0% of unbanked adults.

Challenges Faced By European Cross-Border Ecommerce in the Future

The example of Eastern Europe proves that consumer payment preferences are crucial to the localization strategies of online retailers aiming for cross-border sales in Europe. Besides, the COVID-19 pandemic has made many businesses rethink their supply chains, and the trend for bettering them is not going anywhere in the near future. Merchants also have to focus on sustainable practices to appeal to wider audiences in the long term.

While those tendencies impose certain challenges to modern-day Ecommerce market players, tackling those aspects wisely is sure to open a multitude of possibilities for cross-border sellers and solidify their positions in the European market.