China and Brazil rank as the top two emerging markets for e-commerce development, according to an A.T. Kearney study released today, with China a far more attractive target for apparel sales.
In the consulting firm’s first Retail E-commerce Index, a companion to the Global Retail Development Index (GRDI) released earlier this month, China received the highest overall score — 78.1 — in a weighted evaluation that included online market attractiveness, online infrastructure, digital laws and regulations and more conventional retail development criteria. China received a 100 percent evaluation for market attractiveness, the only one of the top 30 markets outside the U.S. to do so. China’s $23 billion a year in e-commerce sales are second in the world to those of the U.S., which comScore previously said were $167.79 billion in the 12 months ended March 31, and consumer electronics and apparel are the top two categories for online purchasing. E-commerce is expected to grow 29 percent a year in the next five years.
Brazil finished second in the study with a 76.9 ranking, its $10.6 billion e-commerce market, the largest in Latin America, and anticipated 12 percent annual growth rate in the next five years providing much of its potential. The study pointed out that apparel remains of marginal interest to Brazilians, who have tended to prefer the social experience of shopping for their clothes.
China and Brazil finished third and first, respectively, on the GRDI survey for 2012. By contrast, Russia ranked 26th on the GRDI but finished third in the e-commerce study, its 59.7 ranking bolstered by 60 million Internet users, a quarter of whom shop online, and a ratio of 1.8 cell phones per person. Russia’s e-commerce market totals $9.1 billion and is expected to grow 12 percent annually for the next five years.
Filling out the top 10 were Chile, second in the GRDI study; Mexico, the United Arab Emirates, Malaysia, Uruguay, Turkey and Oman. All except Mexico, which finished at 28th in the GRDI study, were among the top 15 markets in the earlier report.
“Our greatest surprise was how well developed many of these markets were already in e-commerce,” Hana Ben-Shabat, partner at A.T. Kearney and co-leader of the study, told WWD. “You take the top three markets in this study and you’re looking at more than $42 billion in e-commerce already.”
Some less developed markets actually had an advantage in their e-commerce potential. “In some cases, the first time people communicated on a phone, it was a mobile phone,” she said.
China tends to have strong infrastructure in major cities, in contrast to lagging conditions outside of them. “In the big towns, you can deliver, even to individual residences, quickly and efficiently, but when you move to the second and third tiers, things become more difficult,” she said. “If you’re talking about a luxury brand’s $4,000 handbag, the brand can afford shipment via a FedEx or DHL or the recipient can foot the bill. That’s not necessarily the case with a pair of jeans or some cosmetics.
“In e-commerce, road infrastructure is a big deal,” Ben-Shabat added. “And it’s the last mile that counts.”