EUROPEAN CONSUMERS PAY 46% MORE FOR GREEN RETAIL PRODUCTSPublished on May 31st, 2010 by PressUK
In spite of price premium, Green product sales set to rise 104% from EUR56 billion in 2009 to EUR114 billion by 2015
STRICTLY EMBARGOED UNTIL 31ST MAY 2010. Although environmental awareness and the shift towards Green initiatives now appear high on the agenda of many European governments, the Green retail market remains relatively small. It was only worth an estimated EUR56 billion last year, and accounted for just 2.5% of total European retail sales in 2009. The figures are not surprising in light of the fact that European consumers are currently paying on average 46% more for Green non-food items than the standard alternative, with Green food items costing on average 25% more. However, in spite of significant price differences, Green product sales will continue to gather pace, doubling from EUR56 billion to EUR114 billion by 2015 and taking a 5% share of the European retail market. At the same time, Green retail prices in Europe are also expected to drop by 13% over the next two years, reducing the overall ‘Green premium’ from 46% to an average of 40.5% by 2012.
Today?s report, produced by the Centre for Retail Research and commissioned by Kelkoo.co.uk, examines the recent trends in Green retail sales and provides growth forecasts for 2015 across Europe. The study defines ?Green? products as ones that are environmentally friendly, sustainable, avoid excessive inputs of energy for production or distribution, and can be easily recycled. The research also analyses the price difference between Green and standard goods across eight product categories responsible for 84% of total retail sales, and price comparisons are supported by a survey of 40 major retail businesses in Europe.
The importance of Green retail cannot be underestimated in the fight to combat global warming. It is estimated that products and packaging make up 52% of the average greenhouse gas emissions generated by households, the highest output behind transport (26%) and domestic heating (15%), according to European Union statistics2. As a result, stringent targets and requirements have been introduced to deal with car emissions, electrical goods, lighting and heating products, and better retail labelling. In addition, large businesses are currently spending approximately 0.16% of their revenues on climate change and promoting sustainability, with the retail sector spending the most at EUR715 million per year in the UK alone.
Although total sales of Green products have increased by 441% since 2000 from EUR10.3bn to EUR56bn, they still only account for EUR2.5 of every EUR100 spent on retail goods by European consumers. As a proportion of overall retail sales, Green market shares vary across Europe from just 2% in Spain to 3.5% in Germany. Growth has been primarily driven by changing consumer attitudes and behaviour, higher awareness of environmental issues, and the policies adopted by retail businesses and national governments. Since Green products represent such a small proportion of total retail sales today, the sector should continue to show strong growth irrespective of economic circumstances, as long as suppliers make Green products available at a reasonable price in order to fuel customer demand.
The price of Green products is considerably more than that of ordinary goods and remains the main barrier to mass consumer uptake. However, by 2012 the Green premium paid by European consumers will have dropped by 24% since 2006, shrinking the average premium from 54% to 40.5%. The price of energy efficient electrical goods is set reduce the most over the next two years, dropping by 19% – from 58% today to 47% by 2012 – while food and drink will see one of the smallest reductions (9.1%).
Price comparisons are difficult because the specification and production costs of Green and standard products are often very different. For example, organic foods may be more expensive but usually have the advantage of being relatively local, and may have taste advantages. New energy-efficient bulbs are expensive, retailing at EUR1.14 each on average compared to EUR0.45 or less for an ordinary bulb, but they consume less energy and have an expected life of up to nine years.
Typically, Green health & beauty (183%), electrical (58%), and cleaning and household products (42%) have held the highest premiums, while stationery (17%), baby products (20%), and food and drink items (25%) tend to carry lower premiums.
According to a survey of major European retailers conducted for the report, the steady reduction in the Green premium since 2006 reflects a combination of consumers seeking lower prices, the greater availability of Green products, and the attempt by retailers to use their buying power to make a wider proportion of the merchandise they sell environmentally friendly in an effort to support Green manufacturers.
The internet can also help break through the cost barriers as it offers substantial savings on Green products, albeit the discounts are not as significant as those on standard products. In Europe consumers can traditionally save an average of 15% on non-food items by shopping online, whereas the average Green saving is 11%. The biggest online savings can be made on Green footwear and clothing (16.8%), stationery (14.6%), and electronic goods (13.6%).
Trends in the Green Premium: Europe
|Green Premium 2006||Green Premium 2010||Green Premium 2012-13||% Change 2010-12|
|Food & Drink||27.8%||25.3%||23.0%||-9.1%|
|Health & Beauty||212.0%||183.1%||168.0%||-8.2%|
Source: CRR report May 2010
European Spending on Green Goods
Green retail sales are set to more than double over the next five years, from EUR56bn in 2009 to EUR114bn by 2015 – representing 5% of total retail sales in Europe and easily exceeding the growth rates of conventional retail merchandise. Organic food and drink (EUR18.3bn) and consumer electronics (EUR15bn) accounted for the largest share of consumer spending last year, representing EUR6 in every EUR10 (60%) spent on Green retail products. Germany, France and the United Kingdom have consistently accounted for the highest overall Green sales revenues since 2000, spending EUR14.4bn, EUR10.6bn, and EUR9.3bn respectively in 2009. However, when it comes to spending per household, the European average currently stands at EUR386 per year, with Switzerland top (EUR555), Spain bottom (EUR314), and France (EUR413), the UK (EUR352), and Germany (EUR364) ranking fourth, fifth, and sixth overall.
European e-commerce sales of Green products are currently worth EUR 3.5bn, making up 6.2% of all Green retail spending. Consumers buy Green products online not only because they are 11% cheaper on average, but because it may be more convenient or the items themselves may not be available from nearby stores. The largest online sales of Green items were stationery (EUR1.1bn) and electrical goods (EUR948 million), which together represented 60.5% of online Green transactions. By 2015 online Green retail spending across Europe is expected to reach EUR10.6bn, equivalent to EUR70 per household on average. This is an increase of 203% from 2009 levels (EUR3.5bn), and will represent 9.3% of the Green retail market.
European households are also set to increase their Green spending from an average of EUR386 in 2009 to EUR751 per year by 2015. Germany (EUR30.2bn), France (EUR21.7bn), and the UK (EUR19.8bn) will remain the biggest Green economies, whilst Switzerland (EUR1,133), Sweden (EUR873) and Denmark (EUR843) will account for the highest individual Green household spending per year in Europe. French households are expected to spend EUR841 on average, while UK household spending will be marginally below the European average at EUR749.
Growth is expected in all retail categories by 2015, with electricals (EUR45.7bn), food and drink (EUR27.7bn), and stationery (EUR10.6bn) accounting for 74% (EUR84bn) of all Green retail spending. Due to rising energy prices, higher interest in energy efficiency and tighter regulation, sales of Green consumer electronics and lighting are expected to go mainstream and overtake food and drink as the largest area of Green consumer spending – soaring 203% from EUR15.1bn in 2009 to EUR45.7bn by 2015. By comparison, food and drink is forecast to grow the least out of any category, growing by just 51% (from EUR18.4bn to EUR27.7bn), as a result of greater consumer awareness of price differences and an unwillingness to pay higher prices, as well as growing scepticism about the health benefits of organic products.
As one of the highest profile Green innovations of the last decade, hybrid cars are becoming increasingly common on European roads. Sales have increased from 19,000 units in 2005 to 70,849 in 2009, and are expected to reach up to 245,000 units by 2015, although this would still only represent 1.9% of overall private vehicle sales. The hybrid market is forecast to be worth up to EUR6.2bn in 2015 – an increase of 265% from 2009 levels (EUR1.7bn) – with the price of hybrid cars expected to fall by approximately EUR1,100 during this period, as a result of increased competition and economies of scale.
Bruce Fair, Managing Director of Kelkoo UK, comments: “Green only accounts for 2.5% of all retail spending in Europe today and is set to represent 5% of the retail market by 2015. We can expect availability, Green price premiums, and consumer demand to change over the next few years, but probably the single most important factor preventing a greater take-up of Green merchandise in stores and the internet is price. Sales of Green products will not become commonplace until suppliers give consumers better price incentives in-store and online to follow their consciences.
“Changing consumer buying patterns caused by the recession may have meant that sales of the more expensive Green options, such as organic foodstuffs, have suffered but interest in energy-saving appliances and lighting has grown, as these products tend to save consumers money in the long-term.
“The average European household currently spends over EUR386 per year on Green retail goods and we predict this will rise to EUR751 by 2015. The fact that consumers can save around 11% on non-food items by doing their shopping online, compensates for Green premiums and will help drive sales over the next few years.”
For further information visit Kelkoo.co.uk or read our latest Green Buying guides at: