eCommerce remains a growing business on a global scale. The total value of physical goods ordered via digital channels is expected to grow by 15.5% in 2017. Driven by rising wealth and connectivity in certain regions, we will see many newcomers to placing their first digital order. More than 1.7 billion people around the world will place at least one online order next year, and this number will top two billion in 2019. But there is a very heterogeneous picture behind these high level numbers. Let us have a closer look across different regions and examine the critical success factors in each region.
Consumers in North America are used to waiting several days to receive their goods. But in metropolitan regions the expectations are going to change: Faster delivery, on par with Europe and Asia, will become far more commonplace. Amazon is setting the pace with their Prime program and same-day delivery in select markets. Retailers and brands have to investigate how to offer similar experience, maybe even by partnering up with Uber and Lyft or a third-party delivery provider like Deliv.
Ship-from-store is one prerequisite to speed up delivery time, but will also become a more common approach for rapid geographic expansion into new markets. Leveraging a flagship store’s inventory in Asian shopping hotspots, e.g. in Hong Kong, Tokyo and Seoul to serve local ecommerce shoppers, helps to avoid high investments in regional distribution centers.
China requires a different approach. After making investments into the China market, and solving most technical hurdles, retail brands will focus on ROI; specifically, localized marketing and website optimization. And with that, the game will get tougher. Why? Competition for dollars in the world’s largest ecommerce market is fierce and getting fiercer, and marketplaces still dominate.
With all that in mind, many fashion CEOs will look further south to Southeast Asia. Approximately half a billion people live in this region and are just about to start their digital journey. Strong, reliable internet connectivity, a rising middle-class and an excellent logistical infrastructure will outpace global ecommerce growth. Malaysia and Indonesia, in particular, will see a lot of new consumers in the game, leading to high digital growth rates with 20% and above for the next five years.
2017 will also be an important year for European economics. It is not only Brexit, but several nationalist movements in various countries that will lead to higher barriers to entry, and more regulations, making it more challenging than ever for global brands to set up shop there. Europe will become less unified, requiring more resource-intensive market-by-market solutions.
At the same time, the mature markets – UK, Germany, France – are growing slower compared to other regions. Local players dominate these super-powers in European ecommerce, so global brands entering Europe will focus on niche, largely untapped markets like Portugal and Belgium.
Following the age of the transparent customer, the age of the transparent retailer is about to begin. Consumers protect their own personal information – e.g. by sharing less private moments on Facebook and Twitter. But they demand that retailers disclose production conditions and location, details about materials and ingredients and their overall sustainability.
The comeback of Russia: Global premium and luxury brands will rediscover the Russian upper class, who are now shopping digitally first. Setting up operations for Russia isn’t easy, but the investment will be well worth it for certain brands.
It will be interesting to see how other emerging markets, like Turkey, UAE or India develop in 2017. But compared with other global business opportunities, these countries will remain niche players. Specifically, in India, despite its enormous population, a robust infrastructure for banking and logistics – a key prerequisite for ecommerce – is still missing.
Something that unifies all markets in the east and west is the strong disruption by mobile devices along with emerging mobile payment options. Although the trend is global, the solutions are local. Apple Pay is present in multiple countries but far from global availability. Many consumers use local wallets that are only available for a few markets, such as WeChat payments in China or Naver Pay in South Korea. This goes in line with the fragmentation of social commerce. Again, purchases driven by social influence are surging globally. There are first markets in Asia where social media marketing is more important than traditional search engine marketing.