In 2016, international e-commerce is set to reach an inflection point as online marketplaces such as Alibaba and Amazon continue to make it easier for shoppers around the world to discover and shop from global brands. Remarkably, eMarketer projects that one-quarter of the world’s population will make at least one online purchase this year. And the erosion of national boundaries will signal a massive land grab for the mindshare of foreign consumers as the growth of large e-commerce players generates more demand from global online shoppers to buy goods from brands outside their country of residence.
The catalysts for this e-commerce trend are rooted in three separate, but interdependent factors.
- Growth in mobile networks and smartphone adoption have resulted in millions of newly connected individuals joining the ranks of e-commerce shoppers. Using 4G network expansion as a measure of the growth of mobile networks, Cisco Systems predicts 4G will account for 26% of all connections by 2019, up from six percent at the end of 2014, and that 68% of all mobile data traffic will travel over 4G networks, up from 40%. And the proliferation of low-cost smartphones in emerging markets ensures retailers can capitalize on increased connectivity as “feature phones” now account for just 25% of mobile phone shipments worldwide, according to BI Intelligence. These conditions are facilitating a more seamless transition for consumers migrating to a predominantly online shopping world, especially in regions with a general absence of retail infrastructure.
- The growth of the middle class around the world ensures that brands aren’t just able to reach new populations in general, but also new segments of high-value consumers. By 2030, the Brookings Institution projects that the global middle class population will nearly double in size to 4.9 billion. Increased connectivity and greater disposable incomes in Asia and South America are combining to create the world’s next generation of online shoppers. Shoppers in Asia, Europe, Brazil and Mexico make 24% of their online purchases from websites outside their own country, according to UPS. This trend is largely being driven by consumers who are seeking better prices or unique products that both enhance their lives—meaning they want their outward appearance (home, personal style) to reflect their growth in income and financial stability—and project a heightened sense of status. Many of these shoppers are affluent, or newly affluent, and want to look the part.
- Improvements in payment solutions, retail infrastructure and shipping logistics are supporting growth in markets like Latin America and Asia-Pacific. For example, U.S. retailers such as Neiman Marcus, Saks and Bloomingdale’s have adopted Alibaba’s Alipay, the dominant payment method in China. As a result, Chinese shoppers are now able to buy from these websites. And PayPal’s newly launched China Connect service is a logistics network that ensures goods ordered on eBay from foreign sellers get to their Chinese buyers. Enhancements such as these are eroding what were essentially artificial boundaries on e-commerce, and as these boundaries continue to fall, the connections between retailers and global shoppers will only grow stronger and more pervasive.
Collectively, these three factors have created a very tangible and attractive channel for U.S. retailers looking to reach global shoppers. And the barriers to entry are often vastly overstated.
So strike while the iron is hot. Those that dawdle may be left in the dust as the race to capture foreign consumers’ mindshare is already under way.
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