2019 J.P. Morgan Global Payment Trends

2019 Global Payments Trends Report – Luxembourg Country Insights

LUXEMBOURG INSIGHTS REPORT


Luxembourg is a small but wealthy nation and this is reflected in the country’s e-commerce market, which is characterized by high smartphone penetration and solid growth. Given that its e-commerce sector makes up only a fraction of total retail in Luxembourg, there is plenty of room for development. To help our clients locate, attract and keep their customers, we have tracked and assessed e-commerce developments in 34 mature and emerging markets around the globe.

Introduction

 

Consumer spending increased in 2018, while unemployment fell, both of which are broadly positive for the e-commerce sector.1 This domestic demand, boosted by the effects of tax reform, should support robust economic growth in 2019 and 2020.2 Luxembourg’s online shopping market is small, but its affluent population means that growth has been strong in recent years.3 Also, the government has been moving to encourage more domestic retailers to provide online options, a long-standing problem in the market. 

This document is based on projected figures and is subject to change at any time.

Luxembourg online merchants forging partnerships with international giants to generate growth

 

At €0.74 billion,14 the Luxembourg market takes just a 0.1 percent slice of the €534 billion European online shopping market.15 It may be small but it is a market that has consistently generated double-digit growth in recent years. Perhaps as a result of such rapid expansion, growth is projected to slow to a compound annual growth rate of eight percent out to 2021.16 However, as an affluent nation with essential infrastructure already in place, Luxembourg’s e-commerce industry has strong foundations. Internet penetration, for example, is high at 98 percent and such technology acceptance will enable further gains.17

The average annual online spend, at €1,571, is almost a third (28.1 percent) lower than the European average of €2,186.18 At present, e-commerce accounts for only 4.8 percent of total retail within Luxembourg,19 suggesting the concept is not yet firmly entrenched in the populace’s everyday life. The government is supporting attempts to change this by backing new e-commerce platforms, such as Letzshop, an online marketplace for Luxembourgian consumers and retailers. The site was launched in September 2018 and aims to increase internet shopping offerings by facilitating online selling to retailers who cannot operate their own online sales channel. These businesses pay a €500 annual fee to be able to list their products on the site.20

Prior to the creation of Letzshop, only seven percent of Luxembourg-based merchants were selling online. Given this reality, consumers would typically spend their money abroad. The country, at 96 percent,21 has Europe’s highest rate of online shoppers who have shopped cross-border, and foreign purchases account for 27 percent of total e-commerce.22 The Netherlands, with its close proximity and strong logistics capabilities, is a particularly popular online shopping destination – Dutch sites wehkamp.nl, bol.com, HEMA and thuisbezorgd.nl are among the most used in Luxembourg. Other top e-tail sites include Zalando, Coolblue and H&M,23 and neighboring Germany, France and Belgium are key origin markets for cross-border shopping.24

 

International players use neighboring logistics hubs to enter Luxembourg market

 

Major international brands are now viewing Luxembourg and the Benelux region in general as an untapped opportunity. For example, at the end of 2018, Chinese giant Alibaba announced plans to build its first European logistics hub in Belgium, 160km northwest of Luxembourg City.25 Meanwhile, Swedish giant IKEA is set to enter the Luxembourg e-commerce market this year by offering online sales via its Belgian logistics hub and website, without opening any physical stores in the country.26

Given the importance of international online retail, Luxembourg is working to ensure that cross-border sales can be made as efficient as possible. In 2018, the government signed a memorandum of understanding with Chinese logistics specialist, Henan Chinese Group Imported Materials Public Bonded Center, on a pilot scheme to improve Luxembourg’s international e-commerce logistics.27

Delivery providers are also honing their efforts in Luxembourg, another factor that will support growth and raise expectations for delivery service and speed. Domestic postal service provider POST Luxembourg has partnered with DHL Parcel to capitalize on inter-European trade, especially of e-commerce cargo. The services will initially be limited to imports from Europe to Luxembourg but a second phase will see the rollout of export services from Luxembourg to international e-commerce markets.28 Amazon Prime launched in Luxembourg in late 2017, offering unlimited, free one-day delivery, which may drive expectations of fast, free postage as its use increases.29

Merchants should also co-operate with their logistic partners to ensure their returns policy is simple, efficient and cost effective. Returns are high in Luxembourg, with 25 percent of products purchased sent back.30

A smartphone-loving nation with high mobile commerce potential

 

Luxembourg’s smartphone penetration rate is 70.5 percent, which is one of the highest out of the countries covered in this report series,31* and should bode well for the future of mobile shopping in the country. At present, sales of €0.14 billion a year, represent 18.5 percent of all e-commerce transactions in the country.32 Luxembourg’s mobile commerce market is projected to increase at a compound annual growth rate of 14 percent out to 2021, becoming a €0.23 billion sector.33

Interestingly, for a country with such high rates of smartphone ownership, mobile commerce via smartphone is yet to be fully embraced. There is still a strong preference in Luxembourg for laptops as the shopping device of choice, unlike smartphone-favoring countries such as Denmark and the Netherlands.34 Citizens also prefer to perform banking activities through their laptops rather than on their phones.35 This explains why browsers, taking a 55 percent share of sales, are the most popular method of accessing mobile shopping sites.36 However, the specific mobile commerce sector is growing faster in Luxembourg than the wider e-commerce market and this should see the influence of apps rise over time. If e-commerce brands and banks increasingly provide apps for their products,37 the appeal of browsers should wane.

When looking at operating systems, Apple, with a 54 percent market share, is dominating the market. Apple has increased its stake by four percent compared with 2016.38 Mobile commerce should also be boosted in the coming years by a desire to keep up to date with smartphone technology: 29 percent of Luxembourgers are willing to buy a new smartphone in the next 12 months.39

Cards set to grow rapidly to 2021

 

Cards are expected to be the fastest-growing payment method out to 2021, with use increasing at a compound annual growth rate of 26 percent.40 At present, cards are the second most-used method, at 27 percent, of all transactions and account for €0.2 billion in sales.41 Credit card use is particularly high in Luxembourg, with 3.05 cards per capita,42 and Mastercard® and Visa® are both well-used and recognized brands. In a reversal of the preference for debit seen in other European countries, fewer debit cards are in circulation, at 1.3 cards per capita.43 However, it should be noted that credit cards and charge cards (where payment is due on a specified billing date and cannot be spread out over several months, as with traditional credit cards) are collectively referred to as credit cards in Luxembourg. 

Bank transfers are the most popular payment method in Luxembourg, taking a 51 percent share of the e-commerce payments market, accounting for €0.38 billion of sales.44 A long-standing method that has been available for decades, bank transfers remain strong thanks, in part, to their ability to integrate seamlessly with multiple banking apps. Digicash is a popular domestic app-based bank transfer option, with around 20% of the market.45 Available for both Android and Apple devices, the app allows users to set weekly spending limits and payments are directly debited from a chosen bank account.46

Bank transfers are set to increase at a compound annual growth rate of 14 percent out to 2021, by which point their market share is set to reduce slightly to 45 percent.47 Digital wallets take a 10 percent share of the online payments space, a figure that is expected to grow to 13 percent by 2023.48  PayPal® takes a good share of this market, accounting for five to 10 percent of all additional payments.49  However, given the small size of the Luxembourg market, merchants should look to leverage their usage of international solutions, such as cards and international digital wallets, before considering more localized solutions like bank transfers.

Fraud rates high as criminals target financial services

 

E-commerce fraud rates are high in Luxembourg. Approximately five percent of online shoppers experience fraud each year, compared with an average of two percent in Europe as a whole.50 One reason for this is that Luxembourg, with its large financial services sector, is a frequent target for fraudsters. However, chargebacks on cards are low at 0.01 percent of transactions, as reported by merchants, which suggests that online banking is a key target for cybercriminals in the country rather than card-not-present transactions.51

Key takeaways

 

  •  At €0.74 billion, the Luxembourg market takes just a 0.1 percent slice of the €534 billion European online shopping market52
  •  It may be small but it is a market that has consistently generated double-digit growth in recent years53
  • Luxembourg’s smartphone penetration rate is 70.5 percent, which is one of the highest out of the countries covered in this report series54
  • Cards are the fastest-growing payment method to 2021. Credit card use is particularly high in Luxembourg, with 3.05 cards per capita55

 

Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

* J.P. Morgan 2019 Payments Trends – Global Insights Report series includes the following European countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Switzerland, The Netherlands, UK.

 

About J.P. Morgan

 

J.P. Morgan offers a full suite of payments services to enable a seamless connection across the payments continuum for clients. We bring our consultative expertise, data-driven insights, and local service around the globe to provide a more unified view of payables, receivables and cash management. Merchant Services is the payment acceptance and merchant acquiring business of JPMorgan Chase & Co. (NYSE: JPM) – a global financial services firm with assets of $2.6 trillion and operations worldwide.i According to The Nilson Report, it is also the top merchant acquirer of e-commerce transactions in Europe.ii

 

i JPMorgan Chase & Co. Q4 2018 Earnings Report 2018.

ii The Nilson Report, #1132 May 2018.

 

Global Payments Trends Reports

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For more information, please contact:

 

Your J.P. Morgan Relationship Manager or visit: https://www.jpmorgan.com/europe/merchant-services/payment-insights

 

Information contained in this document has been prepared by third parties or obtained from sources which are believed to be reliable; but neither Chase Paymentech Europe Limited nor any of its affiliates warrant the completeness or accuracy of the information contained herein. Chase Paymentech Europe Limited and any of its affiliates shall have no liability to the user or to third parties, for the quality, accuracy, timeliness, or for any special, indirect, incidental or consequential damages which may be experienced because of the use of or reliance on the data or statements made available herein. Third party trademarks, brand names, products and services are only referential and Chase Paymentech Europe Limited and its affiliates disclaims any sponsorship, affiliation or endorsement of or by any such third party.

 

Chase Paymentech Europe Limited, trading as J.P. Morgan, is regulated by the Central Bank of Ireland. Registered Office: J.P. Morgan, 200 Capital Dock, 79 Sir John Rogerson’s Quay, Dublin 2 D02 RK57, Ireland. Registered in Ireland with the CRO under the Registration No. 474128.

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1 Western Europe Economic Research, JPMorgan Chase Bank, September 2018.

2 OECD.org: Luxembourg - Economic forecast summary (November 2018). Accessed March 2019.

3 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

4 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

5 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA, 2017.

6 World Bank Open Data. ‘Luxembourg.’ Accessed December 2018.

7 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via E-Commerce Foundation, 2016.

8 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

9 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Eurostat, 2017.

11 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ECB Statistical Data Warehouse, 2018.

14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via E-Commerce Foundation, 2016.

15 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

17 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Eurostat, 2017.

18 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

19 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via E-Commerce Europe, 2017.

20 Delano.lu, September 2018. ‘Ecommerce arrives in Luxembourg.’ Accessed November 2018.

21 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Eurostat, 2017.

22 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been estimated for J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

23 Webinterpret.com, 2018. ‘Selling online in Luxembourg.’ Accessed December 2018.

24 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via IPC Cross-Border E-Commerce Shopper Survey 2017, 2018.

25 Lecho.be, November 2018. ‘Alibaba confirme que Liège sera son premier hub européen.’ Accessed December 2018.

26 Delano.lu, October 2018. ‘IKEA wants to enter Luxembourg market from Belgium.’ Accessed December 2018.

27 Delano.lu, July 2018. ‘Chinese to test e-commerce logistics pilot in Lux.’ Accessed December 2018.

28 AirCargoWorld.com, June 2018. ‘DHL Parcel adds POST Luxembourg partner to delivery network.’ Accessed December 2018.

29 LuxTimes.lu, November 2017. ‘Amazon Prime launches in Luxembourg.’ Accessed December 2018.

30 Ascendia.com, March 2017. ‘IPC Cross-Border E-Commerce Shopper Survey 2016.’ Accessed December 2018.

31 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

32 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

33 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

34 Deloitte.com, 2017. ‘Global Mobile Consumer Survey 2017 – Luxembourg.’ Accessed December 2018.

35 Deloitte.com, 2017. ‘Global Mobile Consumer Survey 2017 – Luxembourg.’ Accessed December 2018.

36 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

37 Deloitte.com, 2017. ‘Global Mobile Consumer Survey 2017 – Luxembourg.’ Accessed December 2018.

38 Deloitte.com, 2017. ‘Global Mobile Consumer Survey 2017 – Luxembourg.’ Accessed December 2018.

39 Deloitte.com, 2017. ‘Global Mobile Consumer Survey 2017 – Luxembourg.’ Accessed December 2018.

40 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

41 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

42 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ECB Statistical Data Warehouse, 2018.

43 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ECB Statistical Data Warehouse, 2018.

44 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

45 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

46 BGL.lu, 2018. ‘Digicash app: mobile payment.’ Accessed December 2018.

47 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

48 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

49 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

50 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, via Eurostat, 2017.

51 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Kount and Eurostat, 2017

52 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via E-Commerce Foundation, 2016.

53 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

54 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

55 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via ECB Statistical Data Warehouse, 2018.

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