China and four other regional markets will surpass North America and Europe.

Online retail sales in five of the largest markets in the Asia-Pacific region will soon surpass all e-retail sales in North America and Europe combined, Forrester Research Inc. predicts. Each of those five markets is quite different, however, and requires a distinct strategy for international brands hoping to sell online.

Taken together, online retail sales in the five markets are massive and growing rapidly, from $398 billion in 2013 to $858 billion in 2018, a compound annual growth rate of 16.61%, Forrester projects in the report, “Asia Pacific Online Retail Forecast, 2013 to 2018,” by analyst Zia Daniell Wigder. By comparison, Forrester predicts e-retail sales in these five markets—China, Japan, South Korea, India and Australia—will reach $768 billion in 2017, nearly 17% more than the $658 billion Forrester predicts in 2017 for the U.S., Canada and Western Europe combined. (Forrester has not yet issued 2018 e-commerce projections for the U.S. and Europe.)

China dwarfs the other countries in the region in online retail sales, and web-only retailers play a larger role in these five countries than in most of the rest of the world, Wigder says in the report. Global brands are paying more attention to online opportunities in the region, and are well represented among the 70,000 brands selling on the large Tmall online marketplace in China, she says. Tmall and its larger sister site, Taobao, which caters to smaller sellers, are both owned by Alibaba Group, the dominant e-commerce company in China and No. 1 in the Internet Retailer Asia 500.

Mobile phone adoption is high in most of these Asia-Pacific markets. And online marketplaces like those operated by Alibaba and competitor Jingdong in China, Rakuten and Inc. in Japan and eBay Inc.’s Gmarket in South Korea, play an outsized role in the region. But Wigder advises foreign retailers and brands against blindly applying a blanket strategy to the region. “Brands must understand that marketplaces play different roles in each country, for example, and that mobile adoption rates and usage vary greatly across the region,” Wigder writes in the report.

Here are highlights of the report by country:

  • China: Online retail sales will grow from $294 billion in 2013 to $672 billion in 2018, a growth rate of 18%, as China surpasses the U.S. as the world’s largest e-retail market. Alibaba’s Taobao and Tmall dominate, accounting for more than half of consumers’ online purchases. “Brands looking to launch online retail offerings in China must recognize this extreme market concentration,” Wigder says. Leading companies are investing heavily to improve deliveries, a notorious weakness of e-commerce in China.
  • Japan: A much more mature market than China, Japan’s e-retail sales are growing more slowly: from $59 billion in 2013 to $96 billion in 2018, a growth rate of 10%. While Japan is among the world’s leading luxury markets only 2% of Japanese luxury shoppers say they have bought luxury goods online. Mobile sales are high, and mobile devices are used widely for offline payments in shops and public transit.
  • South Korea: E-retail sales will grow from $19.3 billion in 2013 to $31.8 billion in 2018, a growth rate just over 10%. Broadband speeds are among the highest in the world, contributing to the high percentage of online consumers who shop via the web. Many global brands are absent from South Korea, although the country boasts the largest overseas operation of U.K. retail chain Tesco, which, Wigder says, includes a profitable online division.
  • India: By far the least developed in e-commerce among the major markets, India is growing rapidly. Online retail sales will grow from $2 billion in 2013 to $16 billion in 2018, increasing more than 50% a year. Restrictions on foreign investment in e-commerce have kept major retailers like Inc. and Wal-Mart Stores Inc. from entering the market “with their standard online business models.” International computer and consumer electronics brands have been among the first to sell online in India, while “most apparel and beauty brands selling directly online have not yet prioritized India.”
  • Australia: While its population of 23 million is less than half that of the other four countries covered in this report, Australia has embraced e-commerce. Online retail sales will grow 10% a year from $23 billion in 2013 to $38 billion in 2018. Australians buy a lot from foreign online retailers, encouraged both by a relatively small number of domestic players and the fact that the first A$1,000 in purchases made from a foreign retailer enter the country duty-free. Purchases made under this exemption, the government reports, totaled $6.23 billion in 2011-12. More global brands are entering the online space in Australia, taking advantage of the relatively minor localization required for brands that operate in the United States or United Kingdom.