European marketplaces are seeing falling sales due to a flagging economy, logistical challenges and fierce competition from US and emerging Chinese brands such as Shein and Temu. Who does hold out – and how?
Declining revenue share
In 2023, total international online trade in Europe accounted for 237 billion euros in sales (excluding travel and services), up 32% compared to 2022. In that market, European web shops accounted for 107 billion euros in sales, according to a new research report by Cross-Border Commerce Europe, the platform promoting cross-border e-commerce across Europe.
The research maps the top 500 European e-commerce players with a focus on their cross-border performance. With cross-border sales of 5.2 billion euros, Ikea remains the unapproachable leader in that ranking, followed by Zalando, H&M, Lego and Zara. Worryingly, however, that top 500 saw sales fall by 18% to 50 billion euros in 2023. That decline is due to an unstable macroeconomic environment, logistical challenges and fierce competition. European players are losing ground to US and Chinese challengers, including marketplaces and social media apps.
Aggressive competition
Chinese marketplaces in particular know how to aggressively bypass regional competitors. The falling share prices of listed companies such as Zalando, ASOS, Farfetch, Boohoo and Yoox illustrate the challenges they face in competing with Asian sellers.
The Brexit had a major impact on the cross-border business of Asos and Farfetch. Cross-border sales from the UK fell -1.8% to an all-time low of 27.5 billion. Germany overtook the UK as the largest cross-border market in Europe.
Growth for D2C
Conversely, sports retailer Decathlon has successfully built a loyal customer base. The platform’s main strength lies in its in-depth knowledge of local consumer preferences. Shein’s impact on major European fast fashion retailers such as Inditex (Zara) and H&M also remains limited. Both are closing weaker-performing shops and improving their digital and hybrid offerings.
The report further highlights a clear shift within the Top 500, with an 8% increase for the direct-to-consumer channels of brand manufacturers such as Lego, Nespresso, Adidas and Philips.
Embrace social commerce
Faced with aggressive pricing and overwhelming product offerings from Chinese e-commerce platforms, European companies should prioritise quality, reliable delivery times, social engagement and local services, advises Cross-Border Commerce Europe.
The report also points out that social commerce platforms such as TikTok Shop and Instagram are not passing trends; they represent the most significant market disruption since the advent of the internet. European sellers must embrace social commerce to remain competitive in the changing retail landscape.
