AT Kearney released an intriguing report – The 2015 Global Retail E-Commerce Index. Their research analyzes retail e-commerce around the globe and ranks countries according to its proprietary Global Retail E-Commerce Index.™
The biggest news for this year’s index is that e-commerce continues to grow strongly in big markets and small with only a few exceptions. The index ranks countries by several criteria: online market size (40%), consumer behavior (20%), growth potential (20%) and infrastructure (20%) weighted to arrive at an overall Online Attractiveness Score.
30 Countries Profiled
The following chart shows results from the top 10 the 30 countries profiled in this report. The results are intriguing.
The change in rank shows some interesting results with Belgium moving up 15 points and Russia up five points. The largest markets as expected, maintain the highest online attractiveness scores though France, Belgium and Australia are relatively small-sized markets yet still attractive as an online marketplace.
The Consumer Behavior rankings for China (59.4) and Russia (66.4) are lowest of the top 10, reflecting the lower adoption of online shopping in these two countries. Conversely, the growth potential of China (86.1) and Russia (51.8) is highest although Belgium (48.3) has still more growth potential. As expected, China and Russia have the lowest scores for infrastructure, not surprising for large size countries with lower levels of online shopping market maturity.
Global E-commerce Growth
The report highlighted strong e-commerce growth around the globe:
“Across the world, the past year brought a continuation of the impressive growth of retail e-commerce around the world. Sales increased more than 20 percent worldwide in 2014 to almost $840 billion, as online retailers continued expanding to new geographies and physical retailers entered new markets through e-commerce (see figure 2). Perhaps the biggest expression of this boom was in the stock markets, which gave e-commerce companies skyrocketing valuations. This was highlighted by Alibaba’s record-setting $25 billion initial public offering in September, which valued the China-based company at about $170 billion.”
The report notes that brick-and-mortar retailers now recognize the importance of omnichannel marketing in order to grow in-store and online sales together. It also acknowledges the challenges still faced by competing with Amazon large online retailers.
Ironically, Amazon and online retailers such as Singapore-based Zalora are starting to build brick-and-mortar stores in order to expand their business, improve customer service and increase distribution.
Overall, sales dipped slightly in Southeast Asia which researchers said was a pause before that market resumes its fast growth which will soon overtake China and the US in total sales in the future.
“In Latin America, while Mexico jumps into the rankings at 17th place, Brazil and Argentina fall steeply in the Index, not surprising in light of their slowing macroeconomies. Fundamental infrastructure challenges—logistics and transportation in Brazil, government regulations in Argentina—may hinder e-commerce growth in the future,” the report says.
Researchers pointed to the early stage of e-commerce development in India where there are “only” 39 million online buyers out of a population of one billion at present. “In 2014, e-commerce in India increased 27 percent to $3.8 billion, and over the next five years spending is expected to grow 21 percent, slightly higher than the global average. Amazon announced a $2 billion infrastructure investment in July, and homegrown Flipkart announced that it raised $1 billion in capital.”
Four overall themes
- E-commerce IPOs
- Connected consumers
- Need for omnichannel.
Products & Cultural Patterns
Electronics (77%), fashions (76%), services (76%) and books (71%) proved the most popular purchases online globally with variations noted by country and providing some interesting food for thought regarding cultural differences. Only 40% of US buyers bought appliances online compared to 83% in China. 88% of Germans bought fashions and apparel online in contrast to only 47% of South Africans. 79% of Indians versus only 46% of Japanese and 43% in China bought tickets online.
Explaining some of these differences will make interesting cocktail conversation. These differences also highlight some of the challenges for global businesses selling products across multiple markets.
The report points out five unique market highlights.
China remains most attractive market for its size and potential despite the recent economic slowdown. The country has several large ecommerce players including Alibaba, Tmall and JD.com as well as Amazon and eBay. Consumers are comfortable buying online in China though there are big differences shopping preferences in different regions, cities and rural areas. Infrastructure presents a barrier to faster growth in the short-term.
Though slow to e-commerce, retailers in Belgium are quickly adapting. Infrastructure is sound and consumers are comfortable buying online both locally and cross-border like many other European markets.
Mexico presents opportunity: “Unranked in 2013, Mexico jumps to 17th place this year as the country’s e-commerce market grows rapidly thanks to a young, connected population that is increasingly willing to shop online. Almost half of Mexicans are connected to the Internet, and of these users, roughly two-thirds make purchases online. Total online sales increased 32 percent year-over-year to $6.6 billion in 2014, and similar growth is expected over the next five years.”
Unranked last year, Spain jumped into 17th place. Despite an economic slowdown employment, Spain is starting to show signs of growth again and it has connected consumers and solid infrastructure.
Brazil also represents ecommerce opportunity with its highly connected consumers, well-developed mobile services and the popularity of social media. Despite a 1% drop in economic, the government is spending to build infrastructure and companies are investing in logistics.
Global E-commerce Growth Ahead
The AT Kearney report is positive news for global brands, nimble local e-commerce companies, makers and manufacturers looking for new markets and venture capitalists looking for opportunities.