Sector Trend Analysis – E-commerce trends in Spain

Socioeconomic profile

Country economic profile

Spain is the European Union's fourth-largest economy, its gross domestic product (GDP) being valued at US$1.3 trillion (Euromonitor, 2021). In 2020, the country's GDP fell by almost −11% in comparison to 2019, mainly due to lockdown measures imposed to contain the Covid-19 outbreak. The tourism sector, which contributed to 12.4% of the country's GDP and 12.9% of total employment in 2019 (National Statistics Institute, 2020), saw arrivals declined by 77% in comparison to 2019. The GDP in 2021 is projected to increase by 5.8% over 2020 with restrictions being gradually lifted as vaccination advances.

Demographics

In 2020, the population of Spain was estimated at 47.4 million. Females accounted for 51% of the population while males represented 49% of the population. The median age was 44.3 in 2020. The country has an ageing population, and this could impact the country's economy and provision of social services in the future. The majority of Spaniards live in urban areas (80.8%) compared to the rural population (19.2%). The number of households in Spain was at 19.4 million in 2020 with an average household size of 2.4.

Consumer income and expenditures

Middle-class households accounted for 28% of Spain's total population and the median disposable income per household was US$33,816.7 in 2020. The median disposable income per household in Spain decreased by −12.8% in 2020 over 2019. Consumer expenditure was US$742.9 billion in 2020, representing a decrease of −11.8% over 2019. Consumer expenditure accounted for 58.1% of Spain's GDP in 2020. Consumers spent 15.0% (US$111.7 billion) on food and non-alcoholic beverages, which represented 15% of total consumer expenditures in 2020. Consumer expenditure on food was valued at US$102.2 billion whereas consumer expenditure on non-alcoholic beverages was valued at US$9.5 billion.

Digital landscape in Spain

Spain is among the EU's Digital Economy and Society Index top five member states in terms of recent progress in the development of the digital landscape^{Footnote 1}. The connectivity rate in Spain is very significant. Indeed, 99.8 of the population was covered by at least a 3G Mobile Network and 98.1% of the population was covered by at least an LTE/WiMAX mobile network in 2020. During that year, 87.8% of Spaniards used a mobile phone to access the internet while 40.5% used a laptop, notebook, netbook or tablet. With the expansion of internet usage through mobile telephones, providers are offering attractive prices for bundles comprising of mobile and voice, video and data plans cheaper data services. Subscription to the internet was estimated at 78.8 million while subscriptions to mobile telephone were estimated at 56.3 million. The roll-out of 5G technology is forecast to expand the country's digital landscape. Spain is forecast to have 46.3 million internet users, representing 99% of the population by 2032. Telefónica, one of the major mobile providers, rolled out its 5G technology which is said to cover 75% of the population, while other major providers have also rolled out their 5G network and plan to expand it in 2021.

Spain has a significant number of internet users. In 2020, 41.6 million people were using internet, which represents 91.9% of the population. From 2016 to 2020, the number of internets users increased from 35.6 million to 41.6 million, which represents a growth of 4.0% during the period. The number of internet users is forecast to reach 44.3 million in 2025, meaning that 96% of Spaniards will be using the internet. Moreover, 95.0% of Spanish households had access to the internet in 2020 and this share is forecast to reach 96.4% in 2025. In 2020, 80.9% of the Spaniards accessed the internet on a daily-basis in comparison to 67.0% in 2016, showing a growth of 4.8% during this period. On the other hand, 89.3% accessed the internet once a week from 76.0% in 2016. In 2025, 90.9% of Spaniards are forecast to access daily and 94.2% are projected to access the internet once a week.

Spain has a high social media penetration. In 2020, 23.2 million Spaniards used Facebook, followed by YouTube (20.5 million), Instagram (15.9 million) and Twitter (14.1 million). Instagram was the social media that grew the most from 2016 to 2020, with a CAGR of 9.3%. In addition to helping users to stay connected with their family and friends, social media sites were also used to conduct formal and informal e-commerce. Independent sellers used these platforms to showcase their products in order to take advantage of the large audience these sites offer. More established brands also use these platforms for marketing purposes to stay in touch with their customers. For many brands, social media presence is integral to their marketing activities.

Spain is divided into seventeen autonomous communities (regions). In 2020, Navarre had the highest percentage of households with access to the internet in the country with 97.1%, followed by Community of Madrid (96.8%), Catalonia (96.5%), Balearic Islands (96.0%) and Aragon (95.4%). That year, Castilla y Leon (93.6%), Galicia (93.5%) and Castilla La Mancha (92.3%) had the lowest percentage of households with access to the internet. From 2016 to 2020, Castilla y Leon is the autonomous community that saw the highest growth with 4.8% whereas Community of Madrid recorded the lowest growth. For the 2021-2025 period, Castilla la Mancha is forecast to record a CAGR of 0.5%.

Community of Madrid and Navarre were the regions with the highest percentage of households with access to broadband with 96.6% in 2020 each. The regions were followed by Catalonia (96.3%) Balearic Islands (95.7%) and Aragon (94.9%). The regions with the lowest percentage of households with access to broadband were Andalucia (93.5%), Extremadura (93.5%), Castilla y Leon (93.1%), Galicia (92.8%) and Castilla La Mancha (92.0%). From 2016 to 2020, Cantabria was the region that recorded the highest growth with a CAGR of 5.2%. For the 2021-2025 period, Galicia and Castilla La Mancha are forecast to record the highest growth with both 0.5%.

In 2020, 98.7% of Spanish households possessed a mobile telephone from 96.7% in 2016. The percentage of households possessing a telephone mobile is forecast to reach 99.5% in 2025. The percentage of households owning a personal computer increased by a CAGR of 1.4% from 2016 to 2020, increasing from 77.1% to 81.5, whereas the share of households possessing a laptop increased by a CAGR of 4.2% during the 2016-2020 period, reaching 75.9% in 2020. Possession of tablets recorded the largest growth from 2016 to 2020 with a CAGR of 13.6% during this period, reaching 55.7% in 2020. Tablets are also forecast to continue to lead the way in terms of growth during the 2021-2025 period, with a CAGR of 5.2%.

E-commerce retail market

With the Covid-19 pandemic and lockdown measures instated in March 2020, sales through e-commerce in Spain significantly surged. Sales through e-commerce increased by 41.0% in 2020 in comparison to 2019. In 2020, total retail sales in Spain were valued at US$231.5 billion from US$222.9 billion in 2016, recording a CAGR of 0.9% during this period. During that year, the store-based channel was the leading distribution channel, representing 89% of total retail sales, with the non-store channel accounting for 11%.

Within the non-store channel, e-commerce represented 78.7% of total sales. Sales through e-commerce increased from US$8.6 billion in 2016 to US$20.1 billion in 2020, representing a CAGR of 23.5% during this period. Sales through e-commerce are forecast to record a CAGR of 6.2% from 2021 to 2025, reaching 27.2 billion in 2025. The moderate projected growth is due to the financial uncertainty that the pandemic has generated, resulting in consumers shopping less across all categories. Also, since the covid-19 crisis was unprecedented, causing a boom in e-commerce, the reopening of stores and physical outlets will translate to a return to physical shopping.

Although e-commerce boomed during the pandemic, the infrastructure that supported e-commerce was well-developed in Spain. Companies that were already active in the e-commerce environment before the pandemic saw their sales increase much faster than their counterparts with a limited e-commerce presence. Those companies quickly adapted to the changing environment and experienced a less arduous transition from a physical environment to a digital one. Young people were the ones mainly driving the e-commerce industry. Indeed, according to a study noted by Euromonitor International^{Footnote 2}, young people aged between 25 and 34, completed on average five online payments per month, in comparison to four times per month in the general population in 2020. By the way, the general Spanish population shopped online three times per month in 2019.

In 2020, sales through e-commerce increased across all categories. Sales were more important in priority goods, such as food, home entertainment or equipment to work from home that ensures that consumers do not have to leave their house. E-commerce sales of consumer appliances recorded the highest growth with a CAGR of 54.5% from 2016 to 2020.

Sales of food and drink, however, was the leading category in terms of sales in 2020. Sales of food and drink were valued at US$3.3 billion, representing 16.5% of total e-commerce sales. In 2020, food and drink e-commerce increased by 55.0% over 2019. From 2016 to 2020, this category recorded a CAGR of 22.5% and is forecast to grow by 6.9% from 2021 to 2025. Food and drink e-commerce sales, however, began to decline as restrictions eased in 2020. It is forecast that the re-opening of foodservice outlets will contribute to the food and drink e-commerce decline, in comparison to 2020, bringing back this category to moderate growth. The first lockdown showed the lack of preparedness to support the surging demand for online shopping, resulting in long delays and forcing some retailers to temporarily close physical outlets^{Footnote 3}. In order to keep up with the demand created by the lockdown, some retailers teamed up with food delivery services such as Deliveroo and Glovo.

Packaged food e-commerce market

Sales of store-based packaged food in Spain totalled US$39.7 billion in 2020, recording a CAGR of 2.1% during the 2016-2020 period. In 2020, e-commerce sales of packaged food were valued at US$1.6 billion, recording a CAGR of 16.7% from 2016 to 2020. Dairy was the highest-selling e-commerce packaged food category with sales valued at US$347.3 million, followed by ready meals (US$225.5 million) and baked goods (US$204.9 million). Although all categories significantly grew during the 2016-2020 period, processed meat and seafood was the category that recorded the largest growth, with a CAGR of 42.3%, followed by sweet spread (24%) and dairy (23.1%).

Packaged food was largely sold through store-based channels in 2020. Indeed, 95.4% of package food was sold through store-based channels while 3.9% of sales were made through e-commerce. Although sales were predominantly made in store-based channels, sales through e-commerce experienced the most important growth during the 2016-2020 period. Total e-commerce packaged food sales grew by a CAGR of 16.7% from 2016 to 2020, whereas sales in store-based channels increased by 2.1% in the same period. Across categories, e-commerce sales of soup recorded the highest growth, with a CAGR of 42.3%, followed by confectionery (24.0%) and edible oils (23.1%). Store-based packaged food sales of baby food and baked goods both declined by −1.7% from 2016 to 2020, while sales of edible oils decreased by a CAGR of −0.7%.

Goods and services e-commerce

In 2020, total good and services e-commerce sales totalled US$48.2 billion an increase of 14.6% over 2019. During the first week of confinement in Spain, e-commerce sales increased by 50%^{Footnote 4}. From 2016 to

2020, good and services e-commerce sales grew by 25.0%. Goods and services e-commerce sales are forecast to reach US$75.6 billion in 2025, recording a CAGR of 8.8% during the 2021-2025 period. In 2020, retailing was the largest industry in goods and services e-commerce sales, representing 55.7% of total sales, with sales valued at US$26.8 billion.

Foodservice sales represented 9.8% of good and services e-commerce sales, totalling US$4.7 million, an increase of 27.3% over 2019. With foodservice outlets closed to lockdown and consumers unable to eat-in, e-commerce foodservice sales were boosted by home delivery and takeout. From 2016 to 2020, foodservice e-commerce sales increased by a CAGR of 67.4%. Foodservice e-commerce sales are forecast to reach US$10.4 billion in 2025 and are projected to record a CAGR of 6.6% from 2021 to 2025.

Cross-border e-commerce

Domestic e-commerce sales represented 71.0% of all total e-commerce sales in Spain in 2020, with US$14.3 billion whereas foreign e-commerce totalled US$5.8 billion. From 2016 to 2020, domestic e-commerce recorded a CAGR of 25.3% whereas foreign e-commerce grew by 19.7%. Foreign e-commerce, however, is forecast to lead the way in terms of growth during the 2021-2025 period with a CAGR of 6.8% while domestic e-commerce is forecast to grow by 5.9% during this period.

In 2020, mobile e-commerce accounted for 39.5% of total e-commerce sales in Spain. Smartphone penetration in Spain is among the highest in Europe and Spaniards use their phones at a higher rate than the European average^{Footnote 5}. From 2016 to 2020, sales through mobile e-commerce significantly saw a growth of 62.4%, mainly boosted purchases made by consumers obliged to stay at home because of the lockdown. Sales through mobile e-commerce increased by 61.4% in 2020 in comparison to 2019. Orders from food delivery applications largely contributed to the increase of mobile e-commerce, even though other industries such as apparel or home electronics also saw increase in sales. Consumers have a preference for using retailers' applications for shopping online, pushing many retailers to develop mobile apps to give consumers a pleasant shopping experience.

E-commerce by device type

In 2020, foodservice e-commerce sales made via mobile devices were valued at US$4.4 billion, followed by personal computers (US$189.1 million) and tablets (US$62.7 million). Foodservice e-commerce sales by mobile increased by a CAGR of 73.2% between the 2016-2020 period, while sales by personal computer and tablet grew by 20.5% and 42.6%, respectively. For wearable devices, foodservice sales made increased by a CAGR of 165.9% during the 2016-2020 period. From 2021 to 2025, foodservice e-commerce sales made through personal computers are forecast to grow by 48.2%, followed by mobile (16.6%) and other devices (89.6 %).

The convenience of paying with smart wearable devices shows some growth potential. Consumers are being given more options to make payments. Various methods of contactless payment are available and retailers are leveraging these new tools to offer improve customers' shopping experience. If security was an issue in the adoption of e-commerce, more and more Spaniards are now buying online or using credit cards, Apple pay or Google pay for practically everything. Recently, Banco Santander added Fitbit Pay and Garmin Pay as payment options while launching the first digital payment bracelet in collaboration with MasterCard. Another example is the inclusion of Samsung Pay in El Corte Ingles store credit card. Bizim is another method of payment with significant growth, and recently Renfe, Spain's national railway company added this method of payment through an agreement with Banco Santander^{Footnote 6}. Amazon explores the development of voice payments with its Echo devices, mainly used as personal assistants to control music and video streaming^{Footnote 1}. A seamless voice payments technology would improve consumers' online shopping experience.

Competitive e-commerce landscape

The Spanish e-commerce landscape is dominated by classified sites and marketplaces. During the 2016-2020 period, Amazon.com Inc remained the largest e-commerce retailer in Spain. In 2020, The company held a 19.4% e-commerce market share in the country, followed by El Corte Inglés SA (5.0%) and Alibaba Group Holding Ltd (4.8%). Amazon took advantage of its logistical advance to cement its leadership in the e-commerce industry during the pandemic. The company expanded its warehouses, improved its transport and logistical facilities to support the booming online demand. Consumers turned to its site to procure home essential items, such as personal care and home care products as well as home work-out equipment and consumer electronics and appliances. Alibaba Group Holding Ltd recorded the largest growth from 2016 to 2020, with a CAGR of 70.3%, followed by Zalando SE (43.5%) Amazon (32.3%) and Mango (30.3%).

Conclusion

Although restrictions have started to loosen in many European countries, including Spain, with advances in vaccination, the uncertainty caused by the Covid-19 pandemic and the surge of variants will keep authorities on their guard. Therefore, it is unlikely to see the situation go back to what it was before the pandemic in the short term. We can expect that many people will continue to work from home and some health measures would remain in place, encouraging many people to continue their routine adopted during the lockdown. Therefore, e-commerce and online purchases will likely continue to remain a habit that consumers have gotten used to, although it is not expected to see the type of growth that the first lockdown provoked. Nonetheless, e-commerce is likely to maintain its pace, especially in the short term with the emergence of more Covid-19 variants, creating a fear of more infection waves. E-commerce figures are likely to grow and stabilize at some point, as in other EU countries.

Technological innovation creates new opportunities to develop contactless services and payments. In addition to food delivery and take-out, online groceries and shopping saw a boom during the pandemic. Many stores offered a click and collect services, limiting contacts. Technological innovation is used to improve the delivery of public service. For example, Madrid public transit company EMT has partnered with MasterCard to develop electronic and contactless payments solution with a biometric system that uses facial recognition as a payment method^{Footnote 4}. Mobile e-commerce is forecast to represent half of the total e-commerce sales in 2025. Therefore, retailers that will pay more attention to growing their mobile e-commerce presence, especially by app-based sales platforms, will be better positioned to take advantage of the opportunity that mobile e-commerce offers.

The Spanish economy took a major hit with the lockdown measures imposed to contain the Covid-19. As a result, many people lost their employment, thus reducing their purchasing power. Consumers will likely be cautious with their spending due to the uncertainty surrounding the evolution of the situation.

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Resources

• Euromonitor International. March 2021. Country report: E-commerce in Spain
• Euromonitor International. March 2021. Country report: Food and Drink E-commerce in Spain
• Euromonitor International. March 2021. Country report: Mobile E-commerce in Spain
• Euromonitor International. April 2021. Country report: Digital Landscape in Spain
• Euromonitor International. April 2021. Country report: E-commerce (goods and services) in Spain
• National Statistics Institute. (2019). Tourism Satellite Account of Spain. Year 2019
• Statista. (February, 2021). COVID-19: foreign visitors drop in Spanish holiday destinations 2020
• The Canadian. June 16 2021. Renfe incorporates Bizum as a payment system thanks to an agreement with Santander

Sector Trend Analysis – E-commerce trends in Spain
Global Analysis Report

Prepared by: Saidouba Camara, Market Analyst

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