China is the ecommerce market with the greatest potential among developing economies.
The assessment comes from AT Kearney’s 2012 Retail eCommerce Index, which examines 30 developing nations and ranks the top 10 based on the retail ecommerce potential.
China tops the national rankings based on an online retail market worth $23bn, second only to the US. The market is predicted to explode over the next five years, growing at 29% a year as Chinese infrastructure and online purchasing behaviors evolve. While multiple categories are popular among Chinese online shoppers, consumer electronics and apparel are the largest two categories.
Mike Moriarty, one of the study’s co-authors, said: “China’s infrastructure challenges hinder realisation of the country’s full ecommerce potential. Delivery infrastructure varies outside of metropolitan hubs and inhibits the efficiency and effectiveness of the ‘last mile’ of online retail product delivery.”
Brazil is ranked number two in the index, partly based on the country’s online market potential. Brazil’s active online user base delivers $10.6bn in online retail sales, the largest in Latin America. The market is predicted to expand 12% a year over the next five years as online shopping enters the mainstream across most retail categories. Appliance and consumer electronics are the most common products sold online in Brazil. Online apparel sales are marginal as the fashion-savvy Brazilian consumer values the social experience that comes with in-store shopping.
Russia is ranked number three in the 2012 e-Commerce Index, driven by a large online user base and a significant online retail market. Russia has 60 million internet users, the largest online population in Europe, and 15 million online shoppers. Russians also own 1.8 mobile phones per person and browse the web regularly on their phones. These market dynamics translate into a current online retail market size of $ 9.1bn – and the market is projected to grow 12% a year over the next five years.
The report also identifies four key success factors for entering emerging markets with an online or multi-channel strategy:
1. Develop a customised value proposition: retailers must adjust their websites, payment methods, shipping options and business models to the local market.
2. Manage the customer experience: retailers must manage the customer experience from product purchase to return. In markets where logistical infrastructure is a challenge, retailers must be transparent with consumers about shipping timelines and deliver against them.
3. Do not underestimate local players: domestic players dominate online retail in developing markets. These local retailers have insights into online consumer preferences and ecommerce challenges, and are developing best practices in online retail.
4. Think long-term: It takes time in developing markets to navigate the market, so learn about online consumers and build a reputable brand.
