The rise of the global consumer
Digitisation is breaking all borders, opening up the massive opportunities developing countries around the world have to offer. By 2025 the number of online spenders is expected to grow to three billion, while the cross-border e-commerce market will increase from $401 billion in 2016 to $994 billion in 2020. With nearly two-thirds of this coming from high-growth markets such as Asia and Latin America, the opportunities for merchants to expand are unprecedented.
Businesses must realise the golden opportunity cross-border e-commerce has in store for them, multiplying their market base by several orders of magnitude. Investment banks have researched to find that there is an emergence of a wealthy middle-class consumers in developing and developed markets that are ready to shop online from foreign merchants. Growth in these developed markets will stem from tech-savvy consumers with sufficient income, while in developing markets improved internet connections will play a large role.
Businesses that want to become truly global will find a wealth of support. Logistics companies like DHL and FedEx offer practical advice for exporters, including detailed guides to handling paperwork. Additionally, complex steps such as getting an EU certificate of origin for manufactured goods can be done via an online portal such as Edge CTP. The form is automatically sent to a designated chamber of commerce to be stamped and forwarded online or in the post. It means even small companies can handle paperwork without much fuss.
In terms of payment processing and credit, handling global consumers has never been easier. The most sophisticated payment partner can handle 300 payment types, so consumers in all markets will be catered for, even those with poor banking infrastructure.
The local advantage
For businesses to thrive in these markets while taking advantage of borderless internet, payments need to be taken care of. Credit cards are seen as a global currency; however, this is quite an expensive option. It is important to think local when considering payments. For example, in India there is just a 1.25 percent credit card penetration. Meanwhile, in Latin America cash is the predominant mode of payment, accounting for 30 percent of all sales.
Consumer behaviour differs greatly from country to country as well as from region to region, therefore, it is imperative for merchants to have in-depth knowledge on local buying trends and payment preferences. Additionally, convenience is king and consumers always want a seamless and frictionless purchasing experience and thus, merchants must offer locally preferred payment options in high-growth markets.
Working with a local partner can be crucial for businesses in understanding the subtleties such as existing regulations and payment preferences in a country. Although regulations may deem archaic in some growth markets, they also can be very up to date and stringent. Examples of such include withholding tax in Argentina, and therefore, only products with enough margin can be sold. Additionally, in certain cases, India requires import licenses. PayU, being an Indian company, has a model that allows merchants to sell their goods and services without having to partner with numerous third parties or negotiate multiple contracts.
India has recently implemented advanced data protection laws, where data generated within India must be stored within the country. PayU’s data is held locally in India in a series of data centres that are far enough away from each other to withstand any typhoons. Similarly, Brazil has implemented such laws as well which are comparable to the EU’s General Data Privacy Regulation (GDPR).
Emerging markets offer a multitude of opportunities for global online merchants, however, having local market knowledge on matters such as payment preferences, compliance with local regulations is the only way merchants can realise such an opportunity while remaining compliant. PayU’s single API enables merchants with reliable and scalable access to PayU’s regional and local payment processors, enabling them to fulfil the unique needs of each market.
The borderless future
The rapid expansion of e-commerce is transforming many emerging economies, bringing an array of benefits for customers and entrepreneurs. While there are clear opportunities for multinational giants, local businesses could hold unique advantages. E-commerce has slashed the costs of and logistical challenges associated with starting a business, negating the need for brick and mortar stores. In emerging countries, this has empowered cash-strapped local businesses that would otherwise have been locked out of the market. This also gives local consumers the ability to buy from brands that don’t have a local store.
Even for large multinational corporations, the costs of opening brick and mortar stores in a foreign market can be substantial. However, it also might not be easy to build an e-commerce business in emerging economies. The most well-known challenges revolve around weak delivery infrastructure and payment security.
Based on such challenges, it is important for international entrants to be aware that treating emerging economies homogenously will drive them to failure. As every market, region and culture is different, international companies need to tailor their e-commerce platforms to meet local expectations. Local e-tailers are often at an advantage due to their detailed knowledge and experience of their markets. Some are even leveraging their physical store network to encourage hesitant consumers to try online shopping.
The explosion of e-commerce in these nations isn’t happening in a vacuum, with advances in online shopping stimulating the formation of new businesses that are working to find solutions to challenges around logistical issues and patchy payment systems. The combination of these factors is helping emerging markets to attract innovative products and new retailers, in addition to improving efficiency in developing countries.
The 5 key growth markets
E-commerce is growing at an unprecedented rate around the world, however, the five top markets are the following:
China: China is the world’s largest e-commerce market – accounting for 80 percent of the Asian region’s e-commerce and it shows no sign of slowing down. Its retail market is expected to be the first to reach $1 trillion by the end of this year. As Chinese rural villages are increasingly accessing the internet, primarily through mobile devices, e-commerce will reach $1.8 trillion by 2022 according to the research firm, Forrester.
Brazil: Brazil is considered Latin America’s largest online shopping market, with e-commerce developing on the backs of 120 million internet users. Global e-commerce players are investing heavily in the country, with Amazon having quadrupled the size of its warehouse earlier last year. Meanwhile, improvements in payment security and logistics are making Brazil’s internet users more confident in shopping online.
Poland: Poland ranks as one of the strongest e-commerce markets in Central and Eastern Europe, enjoying double-digit growth every year since 2012. Robust mobile commerce and the rise in mobile payments are helping e-commerce grow at substantially higher levels. Strong internet penetration rates and awareness of online buying safety are aiding the boost in the Polish e-commerce industry. The market, however, is dominated mainly by local players such as Allegro.
United Arab Emirates: The e-commerce sector in the UAE is not as developed as Western markets, yet the growth potential is vast due to a burgeoning young population, improving infrastructure and an increasingly comprehensive selection of goods available online. Business-to-consumer sales doubled from 2015 to 2017, and such growth is expected to continue at an annual rate of 20 percent until 2021, according to a report by Research and Markets.
India: Although e-commerce in India has slowed down in the past couple of years, it is still growing at a faster rate than other leading Asian markets. According to Forrester, Indian e-commerce is expected to experience a growth rate of approximately 30 percent by 2022.
With increasingly affordable smartphone and mobile data availability, alongside a growing middle class, almost half of the country’s internet users are mobile-only. This number is only going to rise with rural Indians coming online via smartphones. Simultaneously, local and foreign e-commerce firms are competing to gain the upper hand and are making major infrastructure and logistic solution investments. According to Morgan Stanley, only around 14 percent of Indians with an internet connection shop online, therefore, leaving a huge market potential of hundreds of millions of citizens.