July 12, 2012
One of the topics I’ve spoken about at recent industry events is how global eCommerce markets evolve – more specifically, how markets shift from an early stage to one in which consumers spend lavishly online and buy across a wide variety of categories.
After interviewing dozens of companies about their experience expanding into different global markets, and after reviewing internal and external data, we’ve noted that markets tend to go through four phases as they reach the stage of well developed eCommerce. We identify these four phases as the following:
Phase 1: Connecting and Entertaining. In this phase, consumers are starting to go online and connecting with others through the online channel. Some 10-15 years ago, consumers were likely to go online and engage through email or chat; today, social networking has joined the ranks of one of the early activities of online users. Socialbakers’ estimates of Facebook users by country indicate that the network’s top five markets outside the US are Brazil, India, Indonesia, Mexico and Turkey – in such markets, the number of Facebook users today often surpasses the total number of online users just five years ago.
Phase 2: eBusiness Basics. In this phase, consumers are comfortable enough online to start engaging in activities such as online banking, and are starting to purchase early-stage categories online like travel. In places like Southeast Asia, visits to online banks are reported to be increasing steadily. Online travel, too, is booming in areas where online retail is still nascent: A 2011 report by India-based investment bank Avendus, for example, estimated that online travel purchases represented 87% of the eCommerce market in India.
Phase 3: Comparable Goods Purchases. In this phase, consumers start to shop for goods online that can be easily compared across sellers, e.g. consumer technology purchases or books and media. In a report my colleague Sucharita Mulpuru wrote back in 2008, she identified the categories with the most tenured buyers in the US as books, software and music purchases. Today, these categories – alongside others with tenured buyers like consumer electronics and computer hardware – dominate sales in many emerging eCommerce markets.
Phase 4: Subjective Goods Purchases. In the last phase of eCommerce adoption, consumers’ online purchases start to include those where there is traditionally a strong desire to touch, test or try on the items prior to purchase. This phase tends to include categories such as apparel, beauty and grocery. Today, consumers can turn to more sophisticated website tools – as well as extensive customer feedback – to make more informed purchases online. However, issues like inconsistent sizing and a lack of a returns culture have prevented apparel sales from shifting online in certain markets. In the grocery sector, there are many countries in which few online options even exist for those interested in buying.
While there are certainly exceptions to this linear progression, we see this framework applying across a variety of markets. Clients interested in more details – and in which countries typify each phase – can read our recently published report on The Evolution of Global eCommerce Markets.