The Globalization Of eCommerce In 2014

eCommerce players of all types continued to build out their global footprint in 2013. Asos launched new sites for Russia and China, for example, and eBay targeted shoppers in Brazil with a new mobile app. HP and Lenovo both launched online stores in India. Not all major online retailers pressed the gas pedal, however: Macy’s has taken a slow approach with its China initiatives, and Comprafacil, a leading Brazilian online retailer, recently faltered in its own market due to a variety of challenges. In 2014, we anticipate that:

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Five Key Online Retail Trends In Asia Pacific

We just published our new online retail forecast report for Asia Pacific (clients can read the report here). In our forecast, we look at top-line growth in five markets across Asia Pacific: China, Japan, South Korea, India, and Australia. China will be responsible for the lion’s share of growth in these markets, which, combined, will reach some $854 billion by 2018.

In the report, we note a number of trends across the region, including the following:

  • The heavy dominance of web-only retailers in many countries. In many markets in Asia Pacific, traditional retailers do not play as strong a role in eCommerce as they do in the US, UK, or even Latin America. Internet Retailer’s Asia 500 list, for example, includes just one traditional retailer among the top 10 retail websites in the region (China’s Suning). And while some markets like Australia see traditional retailers now playing a bigger role in eCommerce, in fast-growing eCommerce markets like India as well as China, web-only retailers are very much dominant today.  
  • The increased focus on omnichannel functionality. The strong role that many traditional retailers play in eCommerce in the US and Europe often translates into robust omnichannel initiatives. By contrast, it’s taken a while for many retailers across Asia Pacific to launch offerings that link their online and offline channels. Increasingly, however, digitally savvy retailers in the region are focused on developing new offerings. In Australia, for example, where traditional domestic retailers were long notably lagging (or absent) when it came to eCommerce, there is renewed interest not just in the online channel but also in building out key omnichannel features.
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Avoiding Missteps When Expanding Internationally

We’ve been having a series of conversations with brands and retailers recently about how to effectively plan for global online expansion. While approaches vary, eBusiness leaders cite similar challenges. In particular, two hurdles to successful international expansion tend to come up repeatedly in conversations:

“Our ROI scenarios are unrealistic.” In a survey of eBusiness professionals in the B2C space, we asked how quickly they expected to see a return on their investments in new global online initiatives. Over three-quarters said either in less than one year or in one to two years. By contrast, leaders of successful global eBusinesses frequently highlight the fact that payback on new initiatives takes at least two years, with many citing three years and up. As a result of this disconnect, eBusiness professionals overseeing new global businesses often find themselves falling short of expectations and struggling to secure the funds needed to succeed. Today, the mismatch between ROI expectations and performance is one of the leading reasons why new global initiatives fail.

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eCommerce in Brazil Charges Forward

I returned yesterday from a short trip to Brazil - I spoke at eTail in São Paulo on Monday and spent a few days meeting with retailers, vendors and agencies. Some of the takeaways from our conversations:

Omnichannel initiatives are gaining momentum. Omnichannel integration has been a topic of conversation among retailers in Brazil for several years, but it’s now slowly starting to happen. Today, most of the large Brazilian online retailers have established mobile sites or apps; by contrast, initiatives that integrate the online and offline channels are more nascent. Tactics like click-and-collect or ship-from-store, for example, are early stage but being explored by the more innovative players in the market. And while some forward-thinking Brazilian retailers have been quite advanced in terms of understanding cross-channel behavior, most have not taken major steps in this direction. Interestingly, retailers in Brazil have a particularly big opportunity in this area given that Brazilian consumers frequently supply a CPF (roughly the equivalent of a social security number) when they purchase online or offline – the savviest retailers are leveraging this customer data to identify and target omnichannel shoppers.

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Global eCommerce In The Age Of The Customer

Last week, Forrester published an updated version of our report on The Age of the Customer (the author, David Cooperstein, blogs about it here). The report discusses the fact that competitive differentiation has been based upon the power of manufacturing, distribution and subsequently information. We’ve now entered an era in which “the only sustainable competitive advantage is knowledge of and engagement with customers.”

The report gives great examples of brands that have used both digital and traditional channels to become customer obsessed and the benefits they’ve realized as a result. Yet for a large number of brands, the journey is just beginning. This early stage is often reflected in brands’ eCommerce offerings around the globe, many of which still reflect a product-centric rather than a customer-centric approach. Today we find that:

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Reaching Jet-Setting Shoppers Online

Over the past few years, extensive media coverage has been dedicated to the billions of dollars that tourists spend while shopping in the US and what retailers are doing to cater to these foreign buyers. Coverage of this trend has often focused on Brazilian and Chinese shoppers in major US cities (with travelers from both Brazil and China having been dubbed “walking stimulus packages”), but tourist shopping is not just relegated to large urban centers. Retailers in a variety of areas are looking to tap into the rising middle class of consumers abroad, many of whom are taking advantage of relaxed visa restrictions or circumventing sky-high prices in their home countries.

Increasingly, retailers are looking at ways to engage these shoppers, with some turning to the online channel:

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A Few Thoughts On eCommerce in Argentina

I spent several days in Buenos Aires last week which was fantastic – great fun and really helpful in terms of understanding what’s happening in the eCommerce market. Wednesday was the annual eCommerce Day event: It was packed with well over a thousand people in the audience.  I presented on global eCommerce trends that are set to impact the market in Argentina, and also met with a number of online retailers.

A handful of takeaways from these conversations:

eCommerce in Argentina is still at an early stage. There is tremendous interest in driving eCommerce in Argentina, but the real growth is yet to come. Today’s roughly $2B online retail market is dominated by MercadoLibre, with traditional retailers like Falabella, Garbarino and Walmart increasingly making the online channel a priority. Newer entrants like Dafiti are also carving out a niche in categories such as apparel.

Intra-regional cross-border eCommerce is very limited today. There was much discussion about cross-border eCommerce with China, but today little cross-border eCommerce exists within Latin America itself.  Online retailers are anxious to tap into consumers in other countries in the region, but few have made concerted efforts in this area. 

Most mobile initiatives are relatively new and focused exclusively on smartphones. Most online retailers’ mobile initiatives are in their infancy in Argentina. Many larger retailers are just rolling out mobile offerings (both apps and websites), and virtually all are focused on smartphones rather than tablets.

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Finding Technology Partners To Take Your eCommerce Brand Global

Back in July, I wrote about our upcoming report on tools and technology for eCommerce globalization. We’ve just posted the report (clients can view it here) – in it, we dive into the types of eCommerce solutions that brands are turning to as they expand globally and highlight some of the vendors that excel in these areas.

Overall, brands expanding internationally are looking for their technology partners to help them:

Launch international offerings quickly and efficiently. It’s common for companies to ponder global online expansion for years, then decide to build and launch new offerings in a matter of a few months. It’s generally up to the eBusiness leader to manage these rollouts, often with a limited budget. eBusiness leaders who know that global expansion is on the horizon must plan ahead and select technology partners that can help them meet these (often highly ambitious) goals.

Reach consumers through more than just the website. Global eCommerce expansion used to mean launching a series of new websites in different countries, perhaps with a mobile offering following several months or even years after the initial rollout. Today, however, eBusiness leaders need to plan for nearly simultaneous offerings across a variety of devices and touchpoints. eBusiness leaders are also increasingly relying on their technology partners to assist with additional channels such as marketplaces.

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The Urban-First eCommerce Approach: Looking To Emerging Markets

During grad school, I spent a summer teaching economics to university students in Uzbekistan – our summer campus was up in the mountains a few hours outside the capital city of Tashkent. To receive packages, we would have to request that the sender ship them to the university’s main office in the capital. When enough packages had arrived, the office staff would scramble to find someone to drive up to the summer campus to deliver them. The wait was often 2-3 weeks.

Last-mile deliveries are still a huge challenge. Years later, last-mile delivery to less urban areas continues to confound businesses around the globe. In almost every emerging market in the world, delivery times are still far quicker for consumers living in the big cities than those in more rural areas. A laptop ordered from a major online retailer in Brazil, for example, takes almost three weeks to get to the Amazonian capital of Manaus versus approximately one week to Rio or São Paulo. In Russia, the difference in shipping times between Moscow and Vladivostok is similar. Many online retailers piece together a variety of different courier networks or are forced to rely on local postal services to reach the most far-flung customers.

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Trends In Early-Stage eCommerce Markets

As brands eye a growing number of eCommerce markets around the globe, it’s important to understand the trends that mark early-stage markets and how these trends often evolve with time. The following factors suggest that an eCommerce market is still in an early phase:

Purchase decisions are made largely based on price. It is common to hear about consumers in early-stage eCommerce markets using the Internet to seek the lowest prices available on products. In markets like China and Russia, conventional wisdom shows that consumers go online to bargain hunt. However, over time, this dynamic gives way to consumers electing to buy from trusted retailers and those that provide a superior customer experience.

Online purchases are dominated by consumers in tier one cities. As eCommerce starts to take off in new markets, it tends to be the consumers in the largest, wealthiest cities that comprise the bulk of eCommerce markets. Whether it’s São Paulo and Rio in Brazil, Beijing and Shanghai in China, or Moscow and St. Petersburg in Russia, the top few cities tend to represent the lion’s share of early eCommerce revenues. Within the first few years, however,   revenue growth starts to shift to smaller cities where offline product selection is more limited and the online channel helps fill the void.

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