China Leads in E-Commerce Potential

China has taken the top spot as the country with the most online retail ROI potential, according to the management consulting firm A.T. Kearney’s annual ranking of the top 30 countries in online retail.

This year’s A.T. Kearney Global Retail E-Commerce Index includes a combination of 30 developed and developing markets with China occupying the top position, and the G8 countries–Japan, the U.S., the U.K., Germany, France, Canada, Russia, and Italy–all within the top 15.

A.T. Kearney looked at 186 countries to determine the ranking of the top 30 countries, evaluating each on four dimensions and nine variables and then ranking the retail e-commerce growth opportunity for each country. The higher the ranking, the more near-term ROI potential a country has in online retail.

With e-commerce being increasingly viewed by retailers as an efficient and effective global expansion vehicle, many developing countries made their way onto the ranking this year. E-commerce allows less developed markets to shortcut the traditional online retail maturity curve as online retail grows at the same time as physical retail becomes more organized.

The also list includes 10 “small gems,” as A.T. Kearney calls them–countries with populations of less than 10 million that have active online consumers and sufficient infrastructure to support online retail, including Singapore, Hong Kong, Slovakia, New Zealand, Finland, United Arab Emirates, Norway, Ireland, Denmark and Switzerland. Because of the investment profile required for global retailers or pure-play e-tailers, these small gems can be powerful online retail markets.

Globally over the past five years, online retail has grown at a 17 percent compound annual growth rate, with growth particularly strong in Latin America (27 percent) and Asia Pacific (25 percent).

Additionally, the study found that mobile is becoming a critical e-commerce enabler. Ninety-three percent of mobile phone owners in Brazil and 51 percent in the U.K. use their devices to learn about retail offerings.

Social media is also having a major impact, but in different ways. Developing markets such as China encourage shoppers to write post-purchase reviews in exchange for loyalty points or online coupons. In developed markets, online retailers such as Amazon mine purchase reviews for insights on products, instruction manuals and supply chain hiccups.

The study found that there are three very distinct kinds of retail e-commerce markets:

  • China, Brazil, and Russia lead the Next Generation Markets, where consumer online practices are well developed, but the market lacks one of the big three capabilities–Internet accessibility, logistical infrastructure or financial systems. Developing these capabilities (as each of these markets is working hard to do) will quickly make these countries critical e-commerce targets for global retailers. Argentina, Italy, Slovakia, Chile, Turkey, Venezuela, UAE, Ireland and Malaysia complete this group.
  • Australia, Canada, the U.S., and Nordic and Western European countries are Established and Growing Markets. Countries in this category have high Internet penetration and use, but logistics and last-mile strategies make the first three (Australia, Canada and the U.S.) higher-growth opportunities than the Nordic and Western European markets. There is still considerable room for growth in these markets.
  • Japan, South Korea, Singapore, Hong Kong and New Zealand fall into the third and final category Digital DNA Markets, with high technology adoption rates, advanced infrastructures and a track record of innovative, new ways of shopping online. Growth may be slower, but these consumers understand online retail.  New entrants will have to be sophisticated, with exciting online offers, new omni-channel experiences and innovative last-mile strategies.  

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