Why is the Europe Market Worth Exploring for Brands Expand?

Industrials, Automotive, Consumer Staples Author: Steve Bu Jul 28, 2023 11:18 PM (GMT+8)

At the end of the 15th century, when Columbus first set foot on the American continent, subsequently visited by Italians who named the land the "New World." Behind them was the "Old Continent," where the ancient civilizations of Aegean, ancient Greece, ancient Rome, and medieval Christian civilization once flourished.


Later, on the Old Continent, the ebb and flow of history saw the rise and fall of dynasties, bourgeois revolutions, and two industrial revolutions that destroyed and rebuilt this vast market. Today, Europe has a population of six hundred million people (excluding Russia), with a relatively stable political situation, sound welfare system, and a high purchasing power that ranks among the world's top. Europe has become one of the world's largest and most profitable markets. In addition, the diversity of languages and open attitude toward immigrants have created diverse consumer needs. In consideration of these factors, this presents the best opportunity for companies from China to establish global high-end brands and explore new growth points.

Insights into the European Consumer Market

It can be said that massive immigration and constant wars and conflicts in history have turned Europe into a region with a diverse population, rich languages, and diverse cultural life. Europe is a typical developed country market, with developed countries accounting for more than 65% of the total. However, from the perspective of regional markets, the four major regions of Northern Europe, Western Europe, Southern Europe, and Central and Eastern Europe have drawn invisible dividing lines in terms of regional economy, income level, and population quality while constituting the geographical concept of Europe. This provides a sub-segment market and runway opportunities for a large number of small and medium-sized brands to expand overseas.

From the perspective of regional economy, Northern Europe (Sweden, Norway, Denmark, Finland, and Iceland) and Western Europe (the UK, France, Germany, etc.) are at the top of the European pyramid, mainly relying on the industrial sector and the service sector composed of trade, transportation, communication, and finance. Southern Europe (Italy, Spain, Greece, etc.) is in the middle, with tourism and agriculture holding the key to the country's economy, and the growth momentum is insufficient. Central and Eastern Europe (Hungary, Poland, Czech Republic, etc.), although most were formerly members of the Warsaw Pact, have relatively weak economic foundations. However, in recent years, they have been vigorously promoting "de-agriculturalization" and embracing the new energy industry.

In terms of per capita income, Northern and Western Europe have a per capita GDP generally above USD 40,000, especially Ireland, where high-tech output accounts for 40% of the total GDP, reaching USD 103,000. Therefore, prices are high, such as a bottle of convenience store cola in Ireland usually costs around 2 euros. The per capita GDP of Southern Europe is around USD 20,000-USD 30,000, and the middle class prefers cost-effective products due to the weaker economic risk resistance, fewer high value-added industries, and heavier government debt. The per capita GDP in Central and Eastern European countries ranges from USD 10,000-USD 20,000, with low price levels, and the purchase price of discount supermarkets such as Lidl and Aldi is already lower than that in second- and third-tier cities in China.


In terms of infrastructure construction, Europe has now established a complete network of highways and airports, with 74,500 kilometers of highways and 539 airports. The logistics and transportation conditions are superior. However, in the layout of new energy charging piles, Western and Northern Europe are still ahead. In terms of population quality, by 2021, about 22 EU regions have at least 55% of young people aged 25-34 receiving higher education. Ireland's enrollment rate has consistently ranked first, while countries such as Romania hover at the bottom.


For this reason, the e-commerce penetration rate in Europe shows a decreasing trend from west to east and from north to south. The average e-commerce penetration rate in the EU in 2022 was 68%, with Denmark (88%), the Netherlands (88%), Sweden (86%), and Ireland (85%) ranking higher, while Bulgaria (41%), Romania (46%), and Italy (49%) lag behind.

What Kind of Companies are More Suitable for Exploring Europe?

From the trend of going global in recent years, the appeal of the European market to Chinese companies is gradually increasing. On the one hand, this is due to their first-mover advantage in new technologies, supply chains, and innovative business models. On the other hand, the available talent pool and replicable experience are also rapidly expanding.

As the regulatory environment in the European market is not particularly friendly to local start-ups and the financing costs of small and medium-sized enterprises are high, this has provided opportunities for technology-based new business models that have already been validated in China. Currently, out-of-sea brands have a certain market space in both the To C consumer end and the To B enterprise end industries, such as new energy vehicles, charging piles, smart home hardware, e-commerce, financial technology, and SaaS enterprise services.

However, industries such as smart hardware and financial technology need to access local cloud services in Europe, and the EU's privacy laws (such as GDPR) and big data regulatory system require stricter compliance. In addition, it is necessary to be familiar with local brand building and social media promotion tones. As a result, finding local service providers as partners or directly acquiring local companies for resource integration and on-site team building has become the choice of many companies. When Alibaba Cloud (阿里云) landed its first data center in Germany, it reached a strategic partnership with the telecommunications giant Vodafone.

On the other hand, Europe has long been an important destination for overseas Chinese to make a living. For example, in the early years, Wenzhou businessmen dominated the Italian clothing and footwear industry, and now Qingtian people account for half of the Chinese population in Spain. It is worth noting that the overall retention rate of international students in Europe has also provided a high-quality talent pool for businesses in Europe. Overall, in the process of Chinese companies landing in Europe and quickly establishing a localized operating system, the presence of Chinese people is an important force. They can provide valuable experience on a range of issues, including how to deal with local governments and large companies, how to attract local employees to join, and how to handle cultural background differences.


A Wenzhou Restaurant in Paris

It is worth mentioning that, according to EqualOcean's in-depth observation in Europe, as the influence of the Chinese and Asian communities expands, out-of-sea To C consumer-oriented companies have also begun to see them as core user groups. The phenomenon of sacrificing product features for local integration has become increasingly rare.