European startups
(Last Updated On: March 5, 2021)

The European business to consumer (B2C) ecommerce market is booming. Revenue has increased considerably in recent years, with growth expected to continue at its current pace well into the future. Later this year, ecommerce revenue is predicted to top £361,305m, as startups and growing brands take full advantage of the opportunities that many European countries provide.

Across Europe, annual growth rates are expected to reach 5.2%. Experts predict that the market revenue will hit £441,935m by 2025. So, the future is definitely bright for B2C ecommerce businesses in Europe. But which countries provide the most advantageous platforms for the world’s most ambitious startups?

To find out, let’s learn more about how European rules and regulations can help ecommerce startups make a name for themselves. We’ll look at how far different infrastructure setups and business incentives might affect the potential of startups operating across Europe.

We have scored each factor out of 2 which then gave each country an overall score out of 10. The ranking is made up of economic health, business environments and any other factors that might impact the potential of emerging companies. It unveils the very best countries in Europe for ecommerce startups – and what makes them exceptional.

See a full breakdown of the stats here.

Economic health

One of the deciding factors in the true potential of any startup is of course the economic health of the country that it is based in, and that of any markets it intends to sell in. Looking at data published by the Organisation for Economic Co-operation and Development (OECD), we can see that several European countries have high GDP projection growth rates for 2021.

We can expect countries with the highest projected growth rates to provide the best possible platforms to launch new startups. The overall projected growth rate for Europe in its entirety has been estimated at 3.6% for 2021. This decreases slightly to 3.3% as we head into 2022. But in some European countries the outlook is far better.

In France, the projected growth rate of GDP currently stands at 6%. The figure is also higher than average in Italy and the UK, where projected GDP growth rates are 4.3% and 4.2% respectively. Countries like these should therefore provide a good base for ecommerce startups in Europe.

Not all countries in Europe have high projected GDP growth rates in the coming months and years, however. In the Netherlands, the rate stands at 0.8%, which could make success more difficult for startups based here.

Business environment

The environment in which a company chooses to do business will of course play a huge role in determining how fast a company can grow, and what obstacles it might face as it does so.

American business magazine Forbes regularly evaluates countries for their business-friendly credentials. Each year, it publishes an annual ‘best countries for business’ list showing the countries it deems best for businesses of any size. The magazine’s research takes a range of factors into account, including innovation, infrastructure, market size, freedom, investor protection and many more. Countries are then ranked according to the benefits they provide, with each of the predetermined categories given equal rating in the overall results.

European countries that consistently rank well according to Forbes include the UK, which tops the list for 2018, Sweden, which sits in second position and the Netherlands, which is ranked third for its business environment.

Denmark has been ranked seventh on the Forbes list, with Switzerland following closely behind in the tenth spot. Other well ranked countries include Ireland (no. 11), Finland (no. 13) and Germany (no. 14) and Norway (no. 15). Not all European countries appear towards the top of the list, though. Ukraine was ranked much lower, at no. 77.

Forbes is considered a credible and reliable source of information when it comes to business data, but it’s worth noting that articles published online by the magazine aren’t solely the work of its own staff. Journalists and editorial writers from all over the world can publish their work under the Forbes name, so pay careful attention to sources when using data found on the site.

Incentives

Many European countries nurture startups, providing support packages designed to propel them as they grow. Factors such as corporate income taxes inevitably impact the profit margins of businesses. This can make a real difference to the outlook of smaller startups. For this reason, some countries reduce corporate income tax rates for small businesses.

European countries with the lowest income tax rates for small businesses include Lithuania, where it stands at just 5% (a reduction of 10% from the country’s standard rate of 15%). In Portugal, the small business rate of 17% is almost half the average rate of 31.5%. Similarly, in the Netherlands the corporate income tax rate of 25% is reduced to 16.5% for small businesses such as ecommerce start-ups.

While not all European countries currently provide income tax relief for small businesses, a good proportion do. And in many cases the savings on offer are considerable. Some European countries also provide other government-sponsored incentives for start-ups. These include small business grants, structural and investment funds and grants made available through the European Social Fund (ESF).

Infrastructure quality

Quality infrastructure opens doors to businesses. So, it’s another vital consideration when thinking about the best countries in Europe for ecommerce start-ups. Not only does good infrastructure make life better for citizens, it also enables faster economic growth. This allows businesses to be way more competitive.

Research published by Statista reveals which European countries provide the best landscape for startups, in terms of available infrastructure. Ranking the infrastructure of countries from best to worst, Statistica calculated that the best European country, is the Netherlands.

The Netherlands took the top spot with a rating of 94.3 out of 100. Other top performers include Switzerland, which scored 93.2, Spain, which scored 90.3, Germany, which scored 90.2 and France, which scored 89.7. The lowest ranking European countries were Romania (71.7), Bulgaria (71.3) and Ukraine (70.3).

Ecommerce start-ups that thrived in 2020 and ones to watch in 2021

The European market provided the right environment for success for a good number of startups over the course of 2020, despite the enormous economic challenges that the year had in store. Many ecommerce companies thrived in Europe, with several becoming household names thanks to their skyrocketing growth.

Companies on the rise

The likes of Deliveroo, Gousto and Gymshark, all of which are based in the UK, achieved great results in 2020. In fact, they are projecting considerable growth in 2021 too. It wasn’t just UK startups stealing the show, either. Estonian taxi service app Bolt began to compete with the likes of Uber and Lyft. Its incredible success made the company’s 27-year-old owner Markus Villig the youngest person in Europe to have built a business worth over $1 billion.

Other notable brands which thrived in 2020 include Karma, a Swedish company. It enables its users to purchase heavily discounted food from outlets where it would be otherwise disposed of.

The platform has over 1 million users. Not to mention, and as of 2020 had raised $16.7m in funding. They have also prevented over 1,200 tonnes of food from going to landfill.

Look back at 2020 and you’d be forgiven for thinking that few businesses could thrive in such difficult economic circumstances. The truth is, many European startups were doing exactly that. While a good number of brands took advantage of rapidly changing demand for particular products and services, they were also supported by the business environments that they operated in.

Conclusion

Europe provides a hugely beneficial springboard for the launch of new ecommerce startups. In fact, many countries offer all the incentives and economic potential that brands need to succeed. Examine the data in more detail to find out which European countries offer the best benefits for ecommerce startups, and where brands stand the best chances of succeeding.

Notes
*Predicted GDP projection growth for 2021: OECD.org
**Business Environment: Forbes official ‘Best Countries for Business’
***Reduced Corporate Income Tax Rates for Small Businesses in Europe: TaxFoundation.org (Dec 2020)
****Infrastructure quality: Statista ranking of countries according to their quality of infrastructure