An improving economy bolstered by rising consumer confidence helped the U.S. leapfrog over China and Japan as the most attractive market for e-commerce development.
This story first appeared in the April 7, 2015 issue of WWD. Subscribe Today.
A.T. Kearney’s biennial Global Retail E-commerce Index places the U.S. at the top of the list with an attractiveness rating of 79.3, topping the 77.8 score of second-place China, the third-place finish of the U.K. (74.4) and the fourth-place finish of Japan (70.1).
China topped the 2013 study, followed by Japan, the U.S. and the U.K. Countries are rated on the basis of the size of the market, consumer behavior, growth potential and infrastructure.
“Although China’s economy has slowed down a bit, it’s still highly attractive,” said Hana Ben-Shabat, a partner at A.T. Kearney’s New York office and coauthor of the study. “But the potential for China is dependent on its infrastructure and, while that’s solid in the tier-one and tier-two cities that previously drove e-commerce development, it’s poor in many of the tier-three and tier-four cities where it will need to travel the ‘last mile’” in its e-commerce development.
The lack of infrastructure is one of the main reasons that India, the world’s second most populous nation after China, didn’t even make the list of the top 30 e-commerce markets, Ben-Shabat noted. The study points out only 39 million of India’s approximately 1 billion people are online buyers, with only 69 percent having more than limited access to broadband and mobile Internet. India failed to achieve a top 30 ranking in the 2013 study as well.
The U.K.’s move into third place reflects its relative maturity in e-commerce retailing, much of it attributable to its early moves into online grocery buying. While most U.S. grocers are regional, the smaller size of the U.K. has fostered the development of a number of national sellers, including Tesco, Sainsbury’s, Waitrose and Ocado.
Kearney’s research showed that 60 percent of U.K. respondents have bought groceries online in the last three months, versus just 26 percent in the U.S. For fashion and apparel, the figures were 87 percent in the U.S. and 85 percent in the U.K. Of 13 categories studied, none registered a higher score in either market, although electronics came close, with 83 percent in the U.S. and 84 percent in the U.K.
But, in the U.S., a well-developed infrastructure and growing openness to e-commerce purchases will spell opportunity in categories other than groceries, particularly in the home area. Just 46 percent of surveyed U.S. consumers have bought home appliances online in the last six months, 56 percent have bought home furnishings and 36 percent have bought other household items. Even as it struggles with infrastructure in its smaller cities, China has higher purchasing statistics in all three categories — 83, 65 and 84 percent, respectively.
Citing statistics from Euromonitor, the study estimates that global e-commerce sales grew 21 percent to $839.8 billion last year and should grow about 18 percent to close at the $1 trillion mark in 2015. Growth rates are projected to remain at double-digit levels through 2018, but they will decelerate, with 2018 seen advancing 13 percent to about $1.5 trillion.
U.S. e-commerce expanded 15 percent last year, to about $238 billion, making it the world’s largest e-commerce market.
Germany and France moved up one spot each from the 2013 study, to fifth and sixth place, respectively, but the biggest gain among European markets, or any cracking the top 30, for that matter, was from Belgium, up 15 spots to number nine.
With a relatively small population — 11.2 million — Belgians are highly connected and engaged, with e-commerce seen growing 25 percent a year through 2020, A.T. Kearney said. While Belgian retailers have been a bit slow moving online, companies in neighboring markets — such as Germany’s Otto Group under the 3 Suisses brand; Amazon’s French Web site; Netherlands-based Bol.com, and France’s Pixmania and Redcats — have moved decisively to fill the void.
“As the Belgian example shows, one thing retailers are finding is that e-commerce makes it possible for you to enter a market without a huge capital investment,” Ben-Shabat said. “You don’t have to open a store and take on a large overhead to get your brand in front of people and possibly pave the way for a store presence later.”
Four countries entered the top 30 in this year’s study — Mexico at 17, Spain at 18, Austria at 27 and Saudi Arabia at 28 — and four in the top 30 in 2013 — Slovakia at 17, Turkey at 22, the United Arab Emirates at 26 and Malaysia at 30 — fell out of the rankings.
In Mexico, almost half the population is connected to the Internet and about two-thirds of those connected make purchases online, contributing to a 32 percent increase in e-commerce sales to $6.6 billion in 2014 and the expectation of similar growth over the next five years, fueled by both foreign retailers and homegrown merchants such as Soriana, Liverpool and Coppel.
With Spain generating economic growth in 2014 for the first time in six years, online sales are seen growing at about a 16 percent clip annually for the next five years.
Amazon has a 7 percent share of the Spanish e-commerce market, focused on electronics, books and CDs, while local retailers such as BuyVIP and El Corte Inglés have made inroads in the fashion sector.
Except for Argentina’s 17-place drop, Brazil registered the largest decline from the 2013 study — down 13 places to 21st — as macroeconomic conditions eroded general economic conditions. Still, e-commerce grew 18 percent to about $13 billion last year and its highly connected population is expected to spur growth again this year, even as it battles expected economic contraction, a weak infrastructure and what A.T. Kearney described as “burdensome regulations and taxes.”