Up until a decade ago, “e-commerce” was just about the most futuristic concept you could get. The idea of buying goods and services through your computer – and avoiding the crowded streets, packed supermarket car parks and chaotic shopping centres in the process – seemed like something out of a science fiction novel.
But why? Well, it was partly down to the lack of companies offering such a service, partly down to a lack of confidence among customers, who felt sceptical about sharing sensitive information on the internet, and partly down to the wider cultural mindset. According to the Italian national sentiment, shopping was something done offline – only then could you touch the quality of a product with your own hands and forge a human relationship with the shopkeeper. These principles formed the basis of Italy’s commercial culture and facilitated the birth of droves of small workshops and family companies.
In the digital era, however, the days of such habits seem numbered. Past is being replaced by present in the time it takes to swipe left or right.
E-commerce is having its moment in Italy too. Already a widely consolidated phenomenon around the world, it’s started to generate record-breaking numbers on the peninsula too. According to the B2C E-Commerce Observatory, supported by the Politecnico di Milano School of Management and Netcomm, the e-commerce industry in Italy was worth €27 billion in 2018 – a 16% increase on the 2017 figure.
In simple terms, that’s growth of nearly €4 billion in the space of just 12 months. It’s a massive boost that means just one thing – that the Italian market is ready to take the next big step towards the e-commerce industry of tomorrow.
Travel and tech: how we spend our money online
But there was another record broken in 2018. It was the year in which the online market for products officially overtook its great rival: services. While online sales of material goods registered a 25% increase on the previous year, pointing to strong momentum and vibrancy, the services market seemed to slow down, with growth of “just” 6%. In other words, while the online market for goods feels like it’s in its youth, at the start of an upward curve, online services seems to be entering a more mature phase.
There is a consolation prize, however. The leading segment of the e-commerce remains tourism, which generates revenue of nearly €10 billion every year.
Next up are hi-tech products from the IT and electronics segment, worth €4.6 billion, followed – rather surprisingly – by clothing, which is worth nearly €3 billion and has finally overcome its biggest barrier to the world of online shopping: the need to physically try on clothes before buying them.
Fourth place goes to home and furniture products, though this segment has registered the biggest growth of any in the industry, with a huge 53% increase on 2017.
The food and grocery segment proved to be a highly dynamic one. Though it might only be the sixth-biggest segment in the wider industry (one behind insurance), it has seen growth of 34%, hinting that the world of e-commerce might finally be ready to embrace sales of food products. This is no minor piece of news, if we consider that goods in the food and grocery sector have always been those on which Italians have spent the most. Could there be a boom around the corner?
Global e-commerce sees 20% growth
While in Italy online shopping has increased by 16%, the global market is continuing to experience growth, combining a 20% increase on 2017 with overall revenue of a whopping €2,500 billion.
So which country has the largest e-commerce industry? Surprise, surprise: it’s China, where 18% of all purchases are made online. China alone contributes €1,000 billion to the global industry and has registered growth of 19% on its 2017 figures. In other words, China is a veritable e-commerce giant that accounts for nearly half of the global industry.
The industry in the United States of America is about half the size of its Chinese counterpart, with revenue of €620 billion and an online sector that accounts of 17% of the country’s overall retail industry.
The European market is similar to the States in terms of revenue, with €600 billion, though the online market has a much lower penetration rate at just 10%. To put it another way, nine out of every ten purchases made in Europe occur offline, via the traditional – physical – channels.
But is the entire European market lagging behind? Not so, according to Alessandro Perego, the Scientific Director of the Digital Innovation Observatories at the Polytechnic University of Milan. Perego is keen to point out that some markets, such as the UK, France and Germany, are more developed than Italy.
The main reason why Italy is failing to keep up with its European neighbours is the poor accessibility of e-commerce in the country. In some sectors, such as food, providers simply do not have the coverage necessary to effectively serve their customers. In Italy, four out of five people would be unable to do their supermarket shop online and receive an acceptable level of service, even if they wanted to.
Italy’s online customers: who are they, how many are there and how do they buy?
As the world of e-commerce grows, so to the number of customers interested in taking advantage of the benefits associated with buying goods and services online increases.
In Italy, nearly 24 million people make purchases online. That’s an 8% increase on the previous year.
The good news is that nearly 18 million of them are regular internet shoppers, accounting for 92% of market revenue on their own. Loyal, consolidated and inclined to spend, these people are happy with their decision to go digital and continue to support the growth of the industry with each click they make.
On the other hand, just under six million Italians can be classed as occasional internet shoppers who have either been attracted by a promotion or forced to fill up a virtual basket rather than push a trolley due to nothing more than a lack of offline options. This elusive, largely unprofitable group of users generates just 8% of all e-commerce revenue in Italy. The challenge, therefore, is to turn these people into loyal users and convince them to get back on the internet to buy their products and services. It’s about persuading them to choose the comfort and convenience of e-commerce over the security of traditional retail channels.
But exactly how do Italians make their online purchases?
It’s no surprise that the preferred device for making online purchases is the computer, which still accounts for 62% of the total figure (albeit a slight increase on the previous year). Second place is taken by smartphones, with 31%, an increase of 6% on the previous year.
What are we buying on our phones? It’s mainly clothing (45%) and food (32%), followed by tourism and transport (18%) and insurance (9%). Why are these last two segments less popular? It’s simple: because the average cost of a purchase in these segments is more expensive, the emotional engagement is higher and the purchasing process is significantly more complex.
Purchases made via tablets have decreased, meanwhile, falling from 8% in 2017 to 7% in 2018.
Exports: the next challenge for e-commerce in Italy
Why be content with 24 million Italian internet shoppers when you could – potentially – tap into a market of nearly 2 billion online customers around the world? There truly is a huge number of potential purchasers of online goods and services – and they’re reachable with just a few clicks.
But just like Italian customers have seemed scared of making purchases online, selling online is proving to be an obstacle for Italian companies.
This comes as a result of insufficient investment in infrastructure and logistics, unclear and inaccessible legislation governing trade with other countries, and the difficulties involved in managing the distribution chain of critical products like food – which are also the most appealing abroad.
If we take a look at the current situation, we see that exports – i.e. the value of online sales made by Italian companies to foreign internet shoppers – are worth nearly €4 billion, an increase of 9% in the space of 12 months. It’s not a bad return – but it’s still way below the potential Italian companies could be taking advantage of in European Union countries (which account for 50% of our web export revenues) and the USA (where we generate 25% of our overall revenue).
So which sectors have the biggest impact on the performance of Italian companies in the export market? There’s tourism, particularly thanks to operators in the world of transport, and clothing, which generates 60% of export revenues alone. Lagging way behind are IT and furniture, which contribute 6% and 5% respectively to Italy’s online export revenues.
What to do, then, to turn the corner? It’s vital that we see investment in online technology and use physical infrastructure to provide customers with a digital service, at the same time as we improve customer experience by making it more personalised and innovative.
The good news is that Italian companies seem well-placed to rise to the challenge – to take that big next step, become real players in the world of e-commerce and confirm Italy’s leading status in the quality shopping sector.