E-commerce in Italy is in an interesting position for sellers and buyers alike. Considering it is a European country, the urban population is relatively low and, with an internet penetration of less than 60%, the infrastructure for e-commerce remains underdeveloped. Because there are few options in the domestic market, cross-border activity is flourishing, with almost one third of Italian consumers participating in cross-border e-commerce, and most of the growth is driven by the high mobile penetration rate. Let’s take a look at the Italian e-commerce market and how your business can benefit from selling in Italy.
In the Everything You Need to Know series, we take a look at a specific e-commerce market to help you decide whether you should expand online sales across borders. As a provider of comprehensive payment processing services, we at DalPay specialise in cross-border commerce and have first-hand experience facilitating business in over one hundred markets worldwide.
Online marketplaces vary significantly around the world in a wide number of ways, such as their level of economic development, shopping habits, preferred payment methods, access to technologies, legality, logistics, etc. Because of this, there are a great many factors to consider when choosing which international markets to expand to. This series is designed to provide you with all the information you need to choose which countries are a good fit for your business and to begin selling across borders.
Unless otherwise noted, figures in this article are sourced from:
The European Union has made considerable strides in the last two decades to create a single, unified European economy, from the introduction of the euro in 1995 to the official integration of the Single Euro Payments Area (SEPA) just last year.
Despite the harmonisation of the currency and payment systems throughout the Eurozone, the countries of Europe will always have their own differences in culture, language and payment habits. SEPA makes cross-border e-commerce within Europe much more accessible to businesses on or off the continent, but no matter how easy it is, there will always be regional differences in how people shop and Italy is no exception.
- Total population: 60 million
- Internet penetration: 58.5% (36 million)
- Mobile penetration: 159%
- Online shoppers: 15.8 million
- E-commerce sales: EUR 11 billion
- E-commerce annual growth rate: 18.2%
Italy has become a very attractive target market for online retailers looking for new countries to expand to for a number of reasons. Thanks to initiatives by the European Union, it’s easier than ever to do business in Italy, especially for businesses that already operate elsewhere in Europe. Though still a relatively small e-commerce market, Italy has the third largest economy in Europe and 30% of online shoppers buy from businesses across borders, amounting to roughly 5 million potential customers and growing.
Italy also has one of the highest mobile penetration rates in Europe. 21% of mobile users make mobile purchases at least once a month, and retail apps in Italy show a year-over-year growth of 74.8%. As m-commerce becomes increasingly synonymous with online retail, merchants selling across borders gravitate toward mobile-ready markets.
What You Need to Know
Top e-commerce categories
When making cross-border purchases, Italian consumers mostly buy from the UK and Germany. The most popular product category is airline tickets, followed by consumer electronics and apparel. Niche online retailers have the most success in Italy. There is a significant demand for high-end cosmetic and fashion brands as well as niche products marketed to young consumers more accustomed to shopping online.
Preferred payment methods
The most common method of online payment in Italy is by credit or debit card with 25.6%, followed by e-wallets with 22.7%. The leading credit card in Italy is Visa, followed by MasterCard, with the two providers accounting for 99% of the total credit card market.
One of the reasons why e-commerce is underdeveloped is that Italy is still very much a cash-based economy. Many consumers are not comfortable buying online. Because of this, in tandem with the high mobile penetration, omni-channel retailers can drive e-commerce revenues by leveraging online retail inventory at the point-of-sale, i.e. “order-in-store, ship-to-home”. Allowing consumers to purchase in a physical store and have the products delivered to their homes can help grow acceptance of online payments in Italy.
The reverse is also true. 51% of Italian consumers have said they prefer to shop from an online retailer that offers in-store pick-up, and 59% prefer the ability to return items in-store that were purchases online. Italian consumers also have a high expectation for delivery services, with 63% citing free delivery as a major factor in their purchasing decisions.
Italy is the eurozone’s third largest economy, and with the growth of credit card usage in recent years, card fraud has followed suit. Card fraud in 2013 accounted for a total of EUR 56.8 million, with half of that being attributed to counterfeit fraud largely associated with cross-border payments. Card-not-present transaction account for EUR 14.2 million in fraud losses and lost or stolen cards account for over 10 million. Still, Italy’s total fraud rate of 2.1 compares favourably to that of France (7.4) and the UK (5.9).
International sellers planning to expand their e-commerce operations into France will have to familiarise themselves with local legislation as well as, if they are based outside of Europe, the legislation of the European Union.
For example, under the European WEEE regulation, it is mandatory to register the number of physical products being put to market, as well as the number of items taken back from the market (as in the case of returns), or risk thousands of euros in fines. Products imported from outside of the EU are subject to duties, while inter-EU deliveries are subject to the EU Directive on the VAT-system.
Italian E-Commerce in Brief
- One of the largest economies in Europe
- Over 15 million online shoppers
- Widespread acceptance of cross-border e-commerce
- Very high mobile penetration rates
- Few barriers to entry
- E-commerce relatively underdeveloped
- Cash-based economy
It is no secret Italy’s economy has been in turmoil in recent years. While the recovery is well underway, there is still a wide income disparity across the country. Due to the economic instability, many Italian consumers are hesitant to participate fully in e-commerce and harbour concerns about the security of online payments.
However, e-commerce in Italy broke EUR 10 billion in 2013 and is showing five years of consistent, stable growth. The economy is now one of the strongest in Europe and the mobile penetration is one of the highest. The result of this is that the demand for online retail is growing faster than domestic providers can keep up, and Italian consumers are turning to cross-border retailers for their e-commerce needs.
Expanding into a new international market is a risky venture but a very rewarding one if done correctly. For the latest information about how you can build and maintain a strong e-commerce enterprise and keep it compatible with legislation and buying habits at home and abroad, subscribe to the DalPay Blog and follow us on Facebook and Twitter for the latest industry news.