Recovering consumer confidence has boosted online shopping in Europe this year, industry group Ecommerce Europe said on Wednesday, while low-cost marketplaces like PDD Holdings’ Temu have heightened competition.

Inflation has hurt shoppers’ spending power around the world and helped fuel rapid growth in online platforms selling cheap products.

In the United States, low income households – with annual income of $50,000 or less – have increased their online spending more than other groups, according to Bank of America research, a trend that points to greater price competition online in the critical holiday quarter.

Ecommerce turnover in Europe is expected to hit 958 billion euros ($1.05 trillion) this year, up from 887 billion euros in 2023, an 8% increase, or 5% in inflation-adjusted terms, according to the Ecommerce Europe report, which covers 38 countries in the region including Britain.

That would make this the first year since 2021 that ecommerce turnover is up after accounting for higher prices, which drove consumers to buy less and trade down to cheaper items.

“We’re not back at the levels of consumer confidence before the inflation crisis, but we are not far off,” said Anton Delbarre, chief economist at retail association EuroCommerce, which co-published the report.
“We are reaching a new normal that is slightly more pessimistic than the old normal.”

However, ecommerce association leaders in Denmark, Finland, and Germany said Chinese online platforms like Temu, which sells products such as hiking boots for 10 euros ($10.97) and smartwatches for 15 euros, are increasing competition for local players.

“German consumers have turned to cheap Chinese goods,” said Martin Gross-Albenhausen, deputy managing director of German ecommerce association BEVH.

Niels Ralund, head of e-commerce at the Danish Chamber of Commerce, said companies like Temu create unfair competition by selling in the European Union “without adhering to the same regulations that Danish webshops must follow”.

A spokesperson for Temu said it takes compliance with local laws and regulations seriously and is committed to supporting local businesses, inviting merchants from the UK, Germany, France, Italy, and Spain to join its platform.