Internet sales have grown remarkably in recent years in Europe. In the technical consumer goods (TCGs) category, according to our POS Tracking data, online’s share of overall sales in terms of value passed the 10% mark about ten years ago. It exceeded the 20% milestone in 2014 to reach almost 24% in 2016. But is this trend set to continue? This is the big question and the cause of many a sleepless night for retail managers and sales and marketing directors.
Online’s share of overall sales in Europe varies between countries and product groups
Our POS Tracking data shows that many markets in Europe can be considered mature in terms of e-commerce, with their online sales accounting for 20% or more of overall sales of TCGs in 2016 (see infographic).
Diving deeper into our POS data, online’s share of overall sales for certain categories of TCGs in certain countries is particularly strong at close to – or more than – 40%. This is the case with:
photographic equipment in the Czech Republic, Ukraine, Slovakia and Great Britain
IT products in the Czech Republic, Slovakia and the Netherlands
telecommunication with Czech Republic and the Netherlands
small domestic appliances in the Czech Republic and the Netherlands
Other categories of products that you might think would sell better in a physical store where they can be seen and tried first, also sell well online. Internet sales of vacuum cleaner robots, for example, have reached about a 60% share of overall sales of this product in Germany, the Czech Republic and the Netherlands (see table below). Online’s share of overall sales of wearables in Germany, Great Britain and the Netherlands, and drones in Germany and Great Britain, have achieved a similar level. In some cases, it has increased its share further still recently.
But this trend isn’t just impacting the sales of the latest generation of TCGs. More traditional white goods such as tumble dryers are also selling well online in certain countries. In the Czech Republic and Great Britain, for instance, online’s share of overall sales for this product is about 50%.
Drivers of – and differences in – online sales penetration
The balance between online and traditional channels’ share of overall sales is fluid and influenced by a range of factors including category idiosyncrasies, retailers’ strategies and shopper behavior. One of the biggest drivers of online sales has been retailers’ pricing strategies. As internet sales have matured, we’ve observed a general move by retail players towards aligning their online and offline prices in line with consumers’ belief that a product should be priced the same regardless of whether it is sold online or in a store (GfK FutureBuy, 2016).
In Germany, for example, on average, the same TV is priced the same whether it is bought online or offline, and has been for the last couple of years. Our POS data shows that online’s share of sales for TVs in Germany is about 20%. However, there are examples where a product is priced lower online, as is the case with drones, in Germany, and online’s share of sales is higher at 61%.
Pricing strategies impact on channel choice
Price Index Development 2008 – 2016, Germany
1 Top 50 identical items sold online and offline | 2 Based below 50 items
Saving money, however, is only one motivation that drives consumers’ purchase journeys and channel choices. While the online option is often chosen for financial and convenience reasons, seeing and feeling a product before purchasing it clearly drives shoppers to visit physical stores.
Top five factors driving consumers’ channel choice
GfK FutureBuy 2016
Consumers currently favor an omnichannel approach
The differences between online and traditional shopping channels have so far led consumers to use them both on their path to purchase. What the availability of internet shopping has done is provide consumers with a level of transparency on pricing, among other things, that has encouraged them to adopt an omnichannel approach to shopping. They know that by conducting their own research across online and offline channels before making a purchase they can get the best deal.
So, what of the future of online sales?
Will the growth in online sales share of overall sales continue? If consumers favor using channels for different reasons, will we instead arrive at a point of balance between online and offline sales in the future?
There is one certainty: we cannot sit back and wait to find out. The retail world is constantly changing. Neither online nor traditional channels’ share of overall sales of TCGs is fixed. To the contrary, they will continue to fluctuate and be influenced by Connected Consumers’ shopping behavior, and retailers’ – successful or unsuccessful – strategies and tactics for driving channel choice.