E-commerce marketplaces are projecting a slowdown in holiday sales and growth in Europe

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Retail consumer demand has dropped across Europe. With the rising cost of living, inflation rates, and interest rate hikes, the concerns that the region might enter into a recession have further grown. Consequently, consumers have reduced their spending, thereby resulting in weak retail sales in Q3 2022. With footfall declining on high streets and shopping malls, e-commerce marketplaces are also embracing a much weaker holiday sales season in Q4 2022. For instance,

• In October 2022, Amazon, one of the leading global e-commerce marketplaces, announced that the firm has forecasted its slowest revenue growth for any holiday season in years for Q4 2022. Notably, these projections are based on the economic environment in the European region, where consumers are finding it challenging to deal with the rising cost of living, and therefore, had to cut down on their household budgets.

The ongoing war in Ukraine, along with the surge in fuel costs, has hit the European economies hard, and this has become evident in consumer spending. In the United Kingdom, consumers fear recession as the government continues to hike interest rates to halt double-digit inflation. Notably, consumer spending in the United Kingdom is even less compared to the pre-pandemic period.

While many product categories have been impacted by declining consumer spending, luxury and furniture sales were the most severely hit. This consumer sentiment is expected to further carry in Q4 2022, and as a result, Amazon has forecasted a growth of 2% to 8% in the quarter, one of the slowest in many holiday seasons over the years.

With Germany and the United Kingdom being the biggest growth market for Amazon after the United States, the cut down in household budget across Europe has sent the firm’s share tumbling 12% in extended trade on 27^th October, resulting in a US$140 billion wipe out of its market capitalization. As the firm continues to struggle with rising inflation and interest rates, it has also slowed down the rollout of new facilities. Furthermore, the firm has leased out some of its warehouses and enacted a hiring freeze in parts of its business.

In Q3 2022, the United States dollar has gained consistently on the Euro. This alone has added US$900 million in foreign-exchange headwinds for the firm. Furthermore, the higher delivery fees and expenses also ballooned in Q3 2022, thereby increasing the operating losses for its international segment. Again, the declining Euro means that products and services have become more expensive for European consumers, which is also adding to the slowdown in sales for e-commerce marketplaces, such as Amazon.

PayNXT360 expects consumer spending to remain subdued over the next few quarters, as consumers in Europe continue to deal with higher interest rates and the rising cost of living. Furthermore, the shift to offline shopping channels is also going to impact the net e-commerce sales in Q4 2022. After two years of the global pandemic outbreak, consumers are willing to go shop for products from physical stores. The need to socialize and experience offline retail again is, therefore, projected to affect the growth of e-commerce sales over the next few quarters.

From the short to medium-term perspective, PayNXT360 expects e-commerce marketplaces to record a slowdown in growth, as the current macroeconomic environment continued to put pressure on consumer spending. Furthermore, these players are expected to reword their expansion strategy, as firms focus on cost-cutting rather than scalability over the next few quarters.

To know more and gain a deeper understanding of the B2C E-commerce market in Europe, click here.