In 2015, China overtook the US as the largest online market in the world. Emma Herrod takes a look at some of the predictions for ecommerce in China and developing and mature markets around the world.
ONLINE SPENDING is predicted to reach £182.8bn in Europe this year, according to research by the Centre for Retail Research on behalf of RetailMeNot. The past year has seen ecommerce grow strongly across Europe with total retail spending online rising from £111.23bn in 2013 to £156.67bn in 2015, an increase of 40.9%. These figures are driven by the increased use of mobile, which RetailMeNot predicts will develop even further in 2016.
By the end of 2016, mobile devices will be responsible for 25% of retail sales in Europe, and mobile will mainly be the driving force for growth in ecommerce across the continent. The European average spend on mobile devices is £554.86. While this is 16% more than the average annual spend in the US (£781.25), shoppers in the UK are expected to spend almost double this, up from £618.86 in 2015 to £907.61 in 2016.
Across Europe, annual spend per online shopper is expected to rise as well, increasing from an average of £820 in 2015 to £901 in 2016. In the UK alone, online shoppers will spend £1,311 each, up 11.7% compared to last year and 15% more than German online shoppers who come in second in Europe with an annual spend of £1,142 per shopper.
In addition, British consumers will be spending more this year on individual purchases. Brits’ average online shopping basket is predicted to increase from £55.36 to £60.19, the highest expenditure per transaction seen across Europe. On mobile devices, Brits will spend an average of £47.35 per transaction, compared to £41.62 in Europe and £55.21 in the US.
As shoppers become more confident making purchases on mobile devices, consumers are shopping more frequently. This year, Brits will make 19 purchases on mobile devices, up from just 8 in 2014, putting the UK ahead of both Europe and the US, where shoppers are predicted to make 14 purchases.
CROSS BORDER & FURTHER AFIELD
By 2018, cross-border ecommerce in Europe will surpass a value of £31.8bn (€40bn), according to analysts at Forrester. It predicts an average 11% year-on-year growth with online transactions accounting for 16% of all general retail trade.
Taking this as a starting point, Dutch post and parcels carrier, PostNL, has summarised the main points of difference between shoppers in some of the key markets in Europe and further afield, including attitudes toward returns and delivery preferences.
Delivery to a home address is still the most popular option in most EU countries and in the US. And while click-and-collect continues to be a very popular supplementary option in the UK (both in-store and via networks), French shoppers are happy with click-and-collect facilities and lockers available on hypermarket sites. In Germany, automated lockers have been commonplace for a number of years and continue to be widely used.
Looking further afield, China is now the largest ecommerce market in the world. With £323bn (€405bn) spent online within its borders and cross-border trade running at £15.5bn (€19.4bn), the country overtook the US in 2015 as the biggest global market. The government, and leading retailers such as Alibaba are investing in infrastructure to boost the market further.
Showing the variances of research studies, Boston Consulting Group puts the Chinese ecommerce market at $6.5 trillion by 2020, an increase of 50% over today’s level, while China’s Centre for International Economic Exchanges predicts the nation’s international online retail will account for 30 – 40 per cent of total world trade by 2025.
While the days of staggering year-over-year ecommerce growth in China are gone, current growth rates (7% in 2015) are solid and more consistent with other mature markets in the region, such as Japan and South Korea, reports Forrester. Nevertheless, China will continue to dominate online retail revenues in the region reports its ‘Asia Pacific Online Retail Forecast, 2015 To 2020’ study. It puts China’s online retail market at the $1.1 trillion mark in 2020, nine times larger than Japan’s £86bn ($122bn) market and 17 times larger than South Korea’s £45.8bn ($65bn) market.
The online markets of China, Japan, South Korea, India and Australia already surpass the combined figure for online retail in the US and all of Western Europe, with China and India being the two largest and the fastest-growing ecommerce markets of Forrester forecasts across the globe.
India is the fastest-growing ecommerce market in the region, but not without obstacles. The smallest ecommerce market in this forecast, India’s online sales will grow more than fivefold by 2020 as the number of online buyers and per capita online spending increase rapidly. However, in addition to underdeveloped logistics and challenging last-mile connectivity, India’s cash-based culture still poses a huge challenge for ecommerce firms.
Japan, South Korea, and Australia are mature ecommerce markets with high internet and broadband subscriber penetration, a large percentage of online shoppers and high per capita online spending.
Meanwhile, AT Kearney, which publishes an annual ‘Global Retail E-Commerce Index’ highlighting the countries with the highest potential for online growth, reports that Mexico is poised to grow dramatically over the next five years. Internet penetration was expected to reach 53.8% in 2015 and should grow 6.7% annually to reach 67.4% (84.9 million users) in 2019.
Concurrently, retail generated £3.25bn ($4.6bn) in 2014, and the market is expected to grow annually by 26% to reach £10.25bn ($14.5bn) by 2019. When other online services, including travel, are added into the figures, the Mexican market is predicted to reach £29bn ($41bn) in sales by 2019. With more Mexican consumers using the internet and smartphone costs dropping, the time has come to bring the online shopping experience up to international standards. Retailers that succeed could see enormous sales, reports the company.
Due to its high potential for online growth, Mexico ranks higher than Spain, Chile, and Brazil. That spells opportunity for retailers that quickly improve their online operations to tap into this marketplace. Three factors fuel the boom: the population’s growing internet usage, supportive regulatory reforms, and the falling cost of smartphones. In fact, AT Kearney believes that mobile is the sweet spot. Mexico has a growing population of young people who are buying smartphones and making purchases online at an increasing rate. Retailers that focus on this demographic and invest in mobile commerce even more than laptop- or PC-based ecommerce could reap the greatest rewards.
However, Mexican retailers lag behind those in other parts of the world when it comes to having an effective online presence. From adopting easy-to-use website formats to offering a broader range of products, more-efficient searches and attractive promotions, the country’s retailers have a lot of ground to cover. Faster shipping and more options for delivery and in-store pick-up will be important. And knowing how to meet the competitive challenges posed by online-only start-ups, which have lower cost structures that let them enter the market more easily, will be vital.
