As a US-based eCommerce business, you have a big decision to make — do you continue to focus on growing your business in the US market, or do you take the plunge and embark on European expansion?
Before we answer this question, however, it is important to take a step back and examine the wider eCommerce situation. The pandemic has disrupted and reshaped much of the retail sector, permanently altering our shopping and selling habits.
Consumer priorities and expectations have changed, resulting in a greater demand for environmentally-friendly products and transparent business practices. Today’s shoppers also want convenience, competitive pricing, free delivery and fast shipping, which means that online retailers must constantly re-evaluate and adapt the way they do business.
Despite these challenges, the post-pandemic retail landscape represents a massive opportunity for eCommerce businesses. Global online retail sales amounted to an estimated total of $4.9 trillion in 2021, and this figure is expected to increase by 50% over the next four years.
In this article, we help you take advantage of these trends and decide which choice is the right one for your eCommerce business as we compare the differences between US growth vs European expansion.
Opportunities and challenges in the US market
The decision to focus on domestic growth or foreign expansion is a difficult call for any eCommerce business owner to make, and there is no one-size-fits-all solution.
First, let’s take a look at some positive statistics related to the US eCommerce sector:
- According to research by eMarketer and Insider Intelligence, the US has the second-largest retail eCommerce market in the world, accounting for a 19% share of total worldwide sales.
- Official figures from the first quarter of 2022 reveal an estimated $250bn in retail eCommerce sales, representing an increase of 2.4% since the fourth quarter of 2021.
- In 2021, a total of 14% of all US consumer spending was conducted online.
- 59% of the top 500 retailers were actively selling on US marketplaces in 2021.
It is clear from these figures that the US eCommerce sector is booming, but is focusing all your attention there the right choice for your business?
While there is no doubt that the market holds immense potential for online retailers, it is also extremely competitive. Amazon recently revealed that it collected $31.16bn in revenue from its advertisers in 2021, making it their most profitable segment of the year. If you want your business to stand out in a saturated market, you must be prepared to invest heavily in your advertising efforts.
Another downside to consider is the vast distances between major US cities, which often results in notoriously slow and expensive shipping. With many of today’s consumers expecting free shipping and same- or next-day delivery as standard, smaller businesses may struggle to compete in the US market.
Opportunities and challenges of European expansion
Because the US is considered a highly mature market, its current growth rate will inevitably slow down and plateau at some point. Businesses will then start rapidly expanding into European markets, so if it’s something you’ve been considering, it would be wise to get ahead of the competition now.
The EU eCommerce market has been growing steadily over the past few years and is showing no signs of slowing down.
In 2018 it generated $320.6bn in revenue, a figure that increased to $425.2bn by the end of 2020. By 2025, the EU eCommerce segment is expected to reach a total of almost $570bn.
The number of Europeans shopping online is also on a strong upward trajectory, going from 395 million in 2017 to 506 million in 2021. By 2025, it is estimated that Europe will have 570 million eCommerce users. It is clear that the EU market represents a huge opportunity for eCommerce retailers looking to broaden their horizons.
One of the major advantages of trading in the EU is the free movement of people, goods, and services. US-based businesses may also discover other benefits such as:
- Fewer administrative hurdles
- No charges for cross-border selling due to the single currency
- Greater clarity regarding rules and regulations
- Better protection for shareholders, creditors, and employees
- Access to a growing but not yet saturated market
Launching into the EU market gives you access to over 450 million potential customers across 27 member countries, without having to deal with many of the restrictions and challenges you may encounter in the US.
However, expanding into Europe will also have its own set of challenges, much of which will stem from navigating things like logistics, different languages and cultures, and international shipping rules and regulations.
When it comes to weighing up US growth vs EU expansion, only you can make the right decision for your business.
If you decide to expand, you’ll need an order fulfilment service you can rely on. ParcelPlanet can help you gain access to one of the biggest markets on the planet. We can provide everything you need from warehouse storage to order processing, tracking, courier services, and more.
Get in touch today and start the next chapter of your eCommerce journey as you expand into Europe.