Everything You Need to Know about Selling in Italy

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.

SELLINGITALY

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.

Quick Figures

  • 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.

Logistics

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.

Cybercrime report

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).

Legality

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

Pros:

  • 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

Cons:

  • 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.

Enter your email address to follow this blog and receive notifications of new posts by email.

Advertisements

Everything You Need to Know About Selling in India

If you’re considering expanding your business into Asia Pacific, India may be the place to begin. It’s the fastest-growing e-commerce market in the region, worth 16 billion USD in 2014. While only a small fraction of the population is online, 75% of them are below 35, the demographic most likely to participate in e-commerce. There are a few significant drawbacks which may prevent you from expanding into India, so here is a detailed look at everything you need to know before you make that decision.

SellinginIndia

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 growth of e-commerce has changed the way people shop all around the world. While still representing only a fraction of total retail sales, e-tailers are part of the foundation of the global digital economy, which in turn has an effect on the lives of everyone who takes part in the economy, whether or not they buy or sell online.

It is not just a matter of convenience. There are two key reasons why e-commerce has been so successful: first, it allows consumers to purchase and receive goods without ever leaving their home; and second, it allows barriers to commerce such as distance and geopolitical boundaries to be break down.

India is the fastest-growing e-commerce market in Asia Pacific, so if you’re getting ready to expand your e-commerce business into the region, India may be a good place to start. However, it is still primarily a cash-based economy and there are some restrictions which may limit what you’re capable of selling. To help you decide whether it’s the right cross-border market for your business, we’re going to take a closer look at the market trends and realities of selling online in India.

Quick Figures

  • Total population: 1.2 billion
  • Internet penetration: 11.4% (137 million)
  • Mobile penetration: 72%
  • Online shoppers: 20 million
  • E-commerce sales: USD 16 billion
  • M-commerce sales: USD 800 million
  • E-commerce annual growth rate: 37.4%

The reality is that India is an immature e-commerce market. As the above figures show, internet penetration is still low. Being the second most populous nation, that still represents a very large community of internet users nationally, but the number of online shoppers is also quite a small proportion of that group, with only 20 million people.

Still, 20 million is nothing to scoff at, and that number is growing, with the young, middle-class mobile-ready population in particular driving the growth of cross-border commerce. Hindi is the dominant language, but 20% of the population is fluent in English and that proportion is higher among younger demographics, the same demographics that are more likely to shop online. English-language websites can therefore be effectively marketed in India.

What You Need to Know

  • The US and China are the main countries for cross-border e-commerce sales to India.
  • The demand for international consumer products is growing more rapidly than domestic distributors can keep up with.
  • Consumer electronics, apparel and media products represent the vast majority of online retail spending.

Preferred payment methods

Credit card penetration is very low in India, with only 2% of the population owning a credit card. For online payments, credit cards represent 24% of total value, behind bank transfers (29.3%) and cash-on-delivery, which leads with 37.5%. The popularity of cash-on-delivery indicates a low acceptance for online payments. The lack of credit card penetration and low market share of e-wallets (1.5%) pose a challenge for international sellers.

However, m-commerce may be the solution. Already representing 4% of e-commerce payments, nearly triple those represented by e-wallets, the 10 million mobile shoppers in India spent 800 million USD in 2013. 30% of total e-commerce traffic comes from mobile devices and 14% of all websites visited via mobile device were e-commerce sites.

With 72% mobile penetration and e-commerce being driven by a younger, increasingly connected and mobile crowd, m-commerce is poised to become the driving factor in the continued growth of e-commerce in India.

Cybercrime report

As the second-biggest internet market after China, India is naturally a target for cybercriminals, accounting for 6.5% of all attacks. According to research conducted by Aite Group, 37% of Indian cardholders has experienced fraud in the past 5years, more than in any of the other 16 countries surveyed.

The Reserve Bank of India adopted PCI DSS in 2013 and has enforced two-step verification procedures, identifying the need for payment card security relatively early in the development of the local e-commerce industry. As a result, Sift Science has placed India low on its list of countries most subject to e-commerce fraud.

Legality

The legal restrictions may prove to be too much of a challenge for many e-tailers considering selling physical goods to India. India requires that cross-border retailers source 30% of their products and services locally, which means that businesses shipping all their goods from a centralised location will face significant barriers when selling to India.

However, there are no sales taxes on goods shipped into India and certain types of goods, including laptops and other consumer electronics, aren’t subject to duty. So it’s important to consider what type of goods you’re selling and where you are supplying them from when deciding whether India is a good market for your business.

Indian E-Commerce in Brief

Pros:

  • 20 million potential customers and growing
  • High demand for international consumer products
  • No sales tax

Cons:

  • Low credit card penetration
  • Low e-commerce penetration
  • 30% of products must be sourced locally

On the plus side, India is the second-largest internet market in the world and the fastest growing e-commerce market in Asia Pacific. Though still an immature e-commerce market, nearly the entire population has access to postal delivery to their door, which is rarely true in emerging markets, so the necessary infrastructure for e-commerce shipping and fulfillment is in place.

On the downside, it’s still a cash-based economy, with few people owning credit cards or e-wallets, which, coupled with the fact that e-tailers are legally limited in their ability to sell certain products, is why the U.N. Conference on Trade and Development called India one of the least e-commerce friendly markets.

Still, the number of internet and mobile device users is expected to more than double in the next 5 years, with most of the growth accounted for by young, middle-class, English-speaking consumers. This is an untapped consumer base whose loyalties are undecided and who are thirsty for international consumer products. Considering the growth of this audience, there may be the best time to begin selling in India, despite the hurdles.

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.

Enter your email address to follow this blog and receive notifications of new posts by email.