1. The Backdrop

The Netherlands, located in northwestern Europe, is a bustling country under a constitutional monarchy, which has a population of ~17 mn over an area of 41,543 sq. km. Its GDP has steadily grown from EUR 652.5 bn in 2013 to EUR 718.0 bn in 2017 (CAGR of 2.4%), and is forecast to reach ~EUR 740.2 bn in 2018, at a year-on-year growth of 2.9%. While the Dutch population will continue to grow by another 0.3% this year, much of the constituents here are under the 55 age bracket (68%). This means emerging tech-savvy trends are on the rise, which includes the penetration of the ecommerce industry. With an internet user base of 96% growing at ~2.4%, coupled with sound technological infrastructure, trends around e-products and e-services keep browsing ahead.

Specifically, the Netherlands ranks 14th out of 86 countries and 8th amongst 18 EU countries on the Inclusive Internet Index, which outlines the current state of internet availability, affordability, relevance and readiness. While availability is there, the country stumbles upon affordability, which highlights that cost of access is slightly high relative to income that can arise due to lesser competition in the internet market. Plus, there is greater need to incorporate much of the local language into the cyber platform (given the diverse linguistic field of the Dutch population), helping create cultural acceptance and in-turn boost usage of various platforms such as e-Entertainment, e-Health etc.  

Logistically, the Netherlands ranks 5th on the LPI (Logistical Performance Index), highlighting its efficient customs clearance process, trade and logistical services quality, as well as transport infrastructure. In terms of ease of doing business, SMEs in the country take advantage from the advanced infrastructure, with big players holding competitive cut-off times in comparison to other key European countries. While foreign competition such as Amazon raise the bars high, a well-rooted culture-driven strategy that differentiates and expands upon the product/service base yet keeps a control down the value chain on distribution, can help local players (especially SMEs) retain ground. It is also pertinent to build a high level of trust amongst users, given the vulnerable nature of the cyber environment.

On a macro level, the Dutch market seems promising ahead as each age bracket of users is adopting the electronic platform for multiple needs. For the “Digitieners” (aged 14-20) this is second nature, while the middle Millennials and Generation X make use of interactive “interneting” out of interest. Along with them, even the older generation of the Babyboomers (aged 56-71) is also keeping up with the latest trends, shuffling around networks such as Facebook or popular messaging apps such as WhatsApp. Social media penetration is also growing (yet quite subtly) amongst the population, signaling even more potential for growth. Hence, demand usability here will only further streamline itself. Meanwhile, from a government perspective, investment in telecommunications, human capital and provision of online services is also quite strong, while Brexit uncertainty has made the Netherlands a new EMEA base for American companies.

2. Growing Ecommerce

Core Drivers

The Dutch ecommerce sector has evolved significantly over the years due to the rise of the omnichannel shopping experience, generating greater participation and hence turnover.

Online shopping penetration (population wise) stands at 84% as of 2017 (representing 16.4 mn e-shoppers), with each e-shopper spending over EUR 1,697 during the year (up by 47.6% from 2014). Much of this is attributed to the growing consumer confidence around online shopping, with shoppers actively scouting for exclusive offerings in both national and international markets. Some popular domestic players here include Coolblue, wehkamp and bol.com, which have taken over much of the market share due to being able to cater towards a diverse set of needs. However, mere product offering is not enough. Delivery is also a pivotal aspect in the e-shopping chain, with Dutch customers demanding charge of the process at full convenience – i.e. having orders sent at the desired place and time, not necessarily common pickup points.

Apart from this, the payment mechanism and terms hold equal importance. Dutch customers want payment channel variety – with iDEAL being a must – as well as being able to avail credit sales. The extent of creating a personalized and user-friendly purchase experience, along with a responsive customer service and feedback mechanism, is crucial for performance here. Dutch consumers regularly make use of website and apps for comparison shopping, as well as read reviews before placing orders. Along with this, social media is largely used as a praise/grievance platform that firms must pay extra attention to, in order to curb out any crooked ends.

Promising Market with Promising Potential

Firms are taking steps to streamline activities across the value chain, given there is a promising market with B2C ecommerce and E-GDP contribution towards GDP growing at a CAGR of 15.07% and 17.9% between 2013-17, with the former projected to reach a turnover ~EUR 24.9 bn in 2018. Meanwhile, greater internet usage has increased the number of B2C websites by over 49.6% from 2013-17.

Around 56.6% of this stems from services, out of which booking flight tickets & accommodation tops the charts with a revenue of EUR 3,395 mn in 2017. This is followed by a 43.4% share from products, with clothing as the popular category (EUR 2,293 mn of revenue). Despite the difference in exposure to electronic platforms, e-purchases here are actually well distributed amongst various age categories. Online retailers are capitalizing on this market, with leading BoI.com generating Dutch consumer sales of over EUR 950 mn. A host of national and international players such as Coolblue, wehkamp and Zalando also follow suit, generating a revenue of EUR 615 mn, EUR 540 mn and EUR 530 mn respectively.  

Meanwhile, the global mobile revolution holds potential to create a greater ecommerce footfall, as more and more customers utilize their smartphones/tablets to browse websites, download apps and find alternatives. Currently, ABOUT YOU and Mode and AliExpress are the two popular shopping apps, having the number of downloads surpass 91,789 and 70,277 respectively.

While safety is a current hindrance towards a complete mobile-shopping adoption, this will change in the future. Services and devices such as Google Home and Amazon’s Alexa are also set to enter the space, especially when there is potential for greater penetration in the Dutch market (in terms of increasing consumer online preference that stands at 24% as opposed to a 76% offline market), in comparison to other European nations such as Germany, UK and France. Preferences are also opening up; while Dutch online sellers dominate the sphere, international shopping has also cropped up with countries such as China becoming the go-to eShop for Dutch consumers (constituting 59% of cross border expenditure). Meanwhile, the UK, Germany and US are next in line, constituting a share of 24%, 19% and 6% respectively. The fact that social media advertising is on the rise highlights why international destinations have become so popular. In-fact, due to social media adoption advertisers realize a huge potential in this space; this medium is now the fastest growing online advertising category and the second largest in terms of revenue.

3. Key Challenges

While ecommerce will further embed itself within the Dutch market over the coming years, there are some crucial issues/challenges that players must watch out for.

Unrealizable Sales

In a sense, establishing a clear set of business processes governed by preset codes is crucial, especially because the ecommerce marketplace deals with a range of stakeholders along the value chain that may be dispersed over different parts of the globe. This in part involves drafting feasible credit/return/ exchange policies that effectively manage credit risk (given that credit sales are in great demand here) and lower the chances of customer default/returned goods, given the presence of EU’s mandatory 14-day refund clause. Having an undue long and open credit policy beyond that can put pressures on cash flow and sales realization. Meanwhile clothing and footwear items, which are popularly returned back due to problems with size/looks/comfort, can accelerate unnecessary wear & tear. Extra caution must be given in providing realistic pictures, with ample information on size selection.

Efficiency & Personalization Loopholes

Achieving sustained efficiency, in terms of delivery speed and timing, as well as providing products/ services that are regarded as value-for-money (factors being crucial amidst Dutch customers) can be challenging at times, due to unforeseen circumstantial events. Due to rising competition and greater price/product transparency, the pressure on quality and efficiency is even more. Players must therefore ensure there are backup plans available across the supply chain, merchant list, as well as final delivery channels, in order to mitigate much of the uncontrolled risks. This also means being able to understand the cultural context and provide a personalized customer experience, given that a consumer journey is far from singular. It is a complex process where they will jump around online/offline options for a tailor-made omnichannel journey, which largely is proactive rather than reactive in nature (necessitating the use of data analytics to predict preferences beforehand).

Security & Compliance Bottlenecks

Regulatory compliance and security are key challenges amongst ecommerce dealers, especially because cyber risk is at play. Once consumers start perceiving the system as vulnerable (i.e. due to phishing, fraud), they will lose trust and move on. Meanwhile, a lack of physical identity checks can also bring firms into contact with false profiles/customers. Proper fraud prevention would mean enabling surveillance systems to authenticate identity and track products at every stage.

Risk management systems should also be in place to take care of confidential information for both security and compliance, given the prevalence of the GDPR (General Data Protection Regulation) that comes into force this year, wherein consumers must be able to control and protect their own data. Along with this, taxation structures and implications – especially around cross-border sales – must also be understood and adhered to.

4. Way Forward

Given the advent of the digital age, coupled with an increased acceptability for electronic services in a highly internet-concentrated country such as the Netherlands, the ecommerce marketplace is here to stay and grow on. Various stakeholders – brand owners, e-financial service providers, online retail heads, industry experts etc. – all believe that the key lies in being able to partner upstream/downstream for better cultural intake and controllability on operations, as well as utilize social networking platforms to get close to customers for fist-hand knowledge.

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