7 Insights for US brands aiming to scale UK and EU eCommerce markets
Luke Jonas, Co Founder, NEST
The European eCommerce market is growing – with revenue estimated to reach $632 billion in 2023, making it around two-thirds the size of the American market. Unlike the highly competitive US market, Europe’s advertising landscape is both less saturated and less advanced, creating an opportunity for forward-thinking American brands to stand out.
Despite this, many American brands hesitate to expand into Europe. Cultural differences and misconceptions about the strength of Europe’s economy aren’t the only causes of this reluctance. There is a pervasive belief that Europe is a more challenging market to crack than it actually is.
But recent success stories, such as Carhartt, Victoria’s Secret and Glossier, have proven this belief wrong.
1. European eCommerce is Less Competitive than the US
A key advantage in expanding your ecommerce brand into Europe is far lower average CPMs. According to Nest’s aggregated Paid Social data, in 2023, Meta CPMs in Europe were 60% lower than in the US. Additionally, traffic costs in Europe are far less volatile and prone to sharp increases during competitive periods.
However, despite cheaper traffic costs, average conversions and AOVs are lower in Europe – with 56% smaller average basket sizes in the European market. So, it’s important to calibrate your CPA and ROAS accordingly.
Additionally, ad investment in Europe is likely to be more incremental than your US spend, as you’ll be targeting audiences new to your business. This is important to keep in mind when testing which regions are aligned with your brand.
2. Don’t Translate Anything Before Testing Broad in English
With more than 24 official languages in the EU, the European market is fragmented. Due to this initial barrier to entry, we suggest that American brands target English speakers broadly across Europe as an initial strategy.
There is a significant expat community across the continent. Plus, younger populations in most European countries are highly engaged with English language media, even in countries with lower overall proficiency.
By starting with a broad approach, you can gauge where demand exists for your products, shaping your next investment phase.
Once you have an idea of where your products resonate, we don’t recommend targeting Europe on a country-by-country basis. Instead, you should group the countries on the continent together in order to be more efficient with your spend, and give platforms more data for targeting and budget optimization.
A good place to start is always the UK and Ireland. Both countries have no language barrier, are more culturally similar to the US than other European countries, and have populations that like shopping online. In particular, London’s diverse and affluent population offers a niche for most brands. A great next step is the Nordics. These countries are high wage economies with populations that respond well to English language ads.
3. Where You Should – and Shouldn’t – Localize for European Markets
Meta offers tools for supporting ad localization, and Dynamic Language Optimization (DLO) is a highly effective tactic. You don’t need to fully localize in every market, at least at first. In the early phases of your expansion, three languages that we suggest you should definitely be localizing your ads and web pages into are French, German and Dutch.
French audiences respond much better to ads in their own language, and translations should aim to sound native instead of using direct translations. We also suggest running these ads in Belgium and Switzerland as both countries have large French-speaking populations. Free delivery is important to French consumers, and most French customers use Cartes Bancaires for card payments. One peculiarity of the French market is that there are just four weeks a year when you can run sales in France, with dates during the winter and summer.
DACH (Germany, Austria, and the German speaking regions of Switzerland) represents a huge opportunity.
However, Germany requires more localization than most of Europe:
• Establishing pricing at the beginning of the customer journey is key, as the German market is incredibly price-sensitive
• Getting logistics costs right is important, as Germans are known to have the highest returns rates in Europe
• Offering multiple payment options is essential, as this aligns with consumer expectations
• In the German market, native copy must be used and portray the correct tone
Finally, you shouldn’t overlook translation into Dutch for Benelux (Belgium, Netherlands and Luxembourg). Consumers in Dutch-speaking cities like Amsterdam and Antwerp are highly fashion-conscious, and buy a lot online.
We are seeing an increasing opportunity in Central Europe – with a growing middle class in countries like Poland and the Czech Republic. Additionally, audiences respond well to English language ads, and the centrality of the region makes warehousing easier.
Conversely, Southern European countries like Italy and Spain present challenges in scaling and audiences expect language localization. If your initial tests don’t perform well here, we suggest holding off until you have gained footing elsewhere on the continent.
4. Find a Route for Distribution
When it comes to setting up distribution, Benelux is a popular choice, with a strategic location at the entry to Europe. The Netherlands is also home to the continent’s largest port in Rotterdam. The UK is also a good option for initial expansion. While having warehousing in both the EU and UK brings initial costs with it, friction is unfortunately an inevitability in post-Brexit trade, and this approach could reduce your costs in the long-term.
VAT is something that you need to consider when selling in Europe. Similar to how Sales Tax differs between states, VAT differs between European countries – but as a general rule, VAT is far higher.
5. Err on the Side of Caution When it Comes to Data Protection
There are other legal and regulatory considerations to keep in mind. In general, the European market is more concerned with privacy. Some approaches to managing customer data that are legal in the United States, such as not opting users in for cookies, carry hefty fines in Europe due to GDPR regulations (a set of data protection regulations similar to the California Consumer Privacy Act).
The EU streamlines some of this, but there are also differences within Europe, and we suggest a risk averse approach to collecting and using customer data during your early stages of expansion. Post-Brexit UK has largely adopted GDPR’s approach to data protection, so we suggest treating it much the same as the EU here.
6. Europe’s Marketing Landscape is Both Less Sophisticated – and Less Homogenous
The European marketing landscape is typically not as advanced as its American counterpart, most brands have smaller marketing budgets and there is a far less advanced tech market.
This, combined with the cheaper traffic costs, is a big competitive advantage for American brands that have the right approach.
To truly dominate, we suggest full-funnel performance, brand and creative strategy, instead of relying on just bottom-of-the-funnel tactics. This will ensure you can build your brand, find the best audiences for your growth, and tailor your creative for maximum resonance.
Additionally, when it comes to measurement, the best practice approach in the US will mean you have a better vantage point than most European brands.
Despite it being a less advanced marketing landscape, there are new challenges to keep in mind in Europe. You need to be intentional about how you consolidate your ad structures across both Google and Meta, as across Europe there are countries with lower populations than most American states.
Cultural differences require different creative strategies and messaging to the US, which is far more homogeneous. This makes working with a local partner who understands these nuances more important.
7. Find a Partner with UK/EU Experience
When you are ready to expand into Europe, we suggest partnering with somebody on the ground. They will know what works and what doesn’t, so you can have confidence in your investment.
Additionally, they can help you navigate any regulations, and will work with localization partners to ensure you get the right tone in your translated creative.