Retailers looking to expand their business internationally might do well to consider selling online in China or Japan. Those two countries take first and second place, respectively, in a new index of the 30 best countries for online retailing from A.T. Kearney.
The consultancy’s 2013 Global Retail E-Commerce Index ranks countries’ attractiveness for online retail based on four factors: online market size, consumer behavior, infrastructure (including logistics and payments capabilities) and growth potential. The data come from market research providers Euromonitor, the International Telecommunications Union, the World Bank and the World Economic Forum.
With the world’s largest population (1.36 billion), most Internet users (517 million) and most online shoppers (220 million), China is set to grow its annual $64 billion e-commerce market to $271 billion over the next five years, A.T. Kearney says. (The $64 billion includes only sales from established brands, what Chinese analysts call business-to-consumer e-commerce, according to Parvaneh Nilforoushan, one of the study’s co-authors. Counting so-called consumer-to-consumer online sales, including sales on Taobao, the eBay-like site that dominates online sales in China, e-retail sales in China amounted to $210 billion in 2012, according to Bain Capital.)
Spurring those increased web sales are planned infrastructure improvements in the country, more widespread Internet access, rising wealth among Chinese consumers and their increasing willingness to spend. Chinese shoppers are also highly social, with 80% of them reporting that they use social media to research products before buying and 66% saying they leave reviews after purchasing, the firm says.
Dominating e-retail in China today is Alibaba Holdings Group Ltd., which is No. 1 in the Internet Retailer Asia 500 and operates online marketplaces Taobao and Tmall. E-marketplaces like those account for roughly half of e-commerce in China, A.T. Kearney says.
Japan is ahead of China in areas like payments and logistics, and that its annual e-retail market will grow from $52 billion today to $80 billion over the next five years, according to the report. Although the country isn’t nearly as large as China—Japan has 100 million Internet users and 75 million online shoppers—its population is quick to adopt technology, including smartphones and tablets, according to the report, which didn’t provide specific figures. Therefore, retailers in Japan need to focus on wowing shoppers with top-of-the-line web sites and delivery services, A.T. Kearney says.
Online retailers Amazon.com Inc., No. 4 in the Asia 500, and Rakuten Inc., No. 2, together account for 40% of China’s e-commerce, the firm says. Both have been investing in logistics improvements in Japan. Amazon has opened six fulfillment centers across the country in order to offer same-day or next-day delivery to consumers in major cities, while Rakuten purchased French logistics provider Alpha Direct with plans to use its technology in Japan.
In addition to more mature e-commerce stalwarts like the United States and United Kingdom, developing nations—including China and Brazil—account for 10 of the 30 nations in the index. Those countries can be easier for e-retailers to enter, as their physical stores and infrastructures are growing alongside, and thus not in opposition to, Internet retail, A.T. Kearney says. Consumers in developing nations are also beginning to use smartphones at a rate closer to developed nations, the firm says.
India, despite having the second-largest population of any nation in the world, didn’t make it into the index because only 10% of its population has access to Internet and its financial and logistics infrastructure are poor compared to other countries.
The index also reveals 10 countries that A.T. Kearney calls “small gems” because their populations number below 10 million, but their consumers are active online and their transportation and communications networks are sufficient to support online retail, the firm says. They are: Singapore, Hong Kong, Slovakia, New Zealand, United Arab Emirates, Finland, Norway, Ireland, Denmark and Switzerland.
Here is the full list of 30 countries, with their overall e-retail attractiveness score, out of 100:
1. China, 84.0
2. Japan, 83.3
3. United States, 82.8
4. United Kingdom, 75.7
5. South Korea, 72.2
6. Germany, 70.4
7. France, 65.2
8. Brazil , 50.9
9. Australia, 50.8
10. Canada, 49.7
11. Singapore, 45.3
12. Argentina, 44.2
13. Russia, 44.1
14. Hong Kong, 43.4
15. Italy, 41.9
16. Sweden, 41.8
17. Slovakia, 41.2
18. New Zealand, 40.8
19. Netherlands, 40.2
20. Chile, 40.0
21. Finland, 39.9
22. Turkey, 39.9
23. Venezuela, 39.3
24. Belgium, 38.0
25. United Arab Emirates, 37.8
26. Norway, 37.5
27. Ireland, 37.4
28. Denmark, 37.2
29. Switzerland,37.0
30. Malaysia, 36.8