02 - 03 October, 2019
Radisson Blu Scandinavia Hotel, Copenhagen
E-commerce Boom in Emerging Markets Presents New Opportunities and Challenges for Retail Logistics
As internet access and mobile browsing continue to on its upwards trajectory in emerging markets, many global studies are indicating that the growth in online transactions worldwide is set to accelerate. Clearly, this trend represents great opportunities for retailers to expand their operations – but with such expansions come logistical challenges. The question, then, is do retailers invest resources into catering for a rising foreign demand, or do they continue to concentrate on mature markets where ecommerce and logistics infrastructure is already strong?
An Emerging World of Opportunities
The Seventh Annual Emerging Consumer Survey – published by the Credit Suisse Research Institute (CSRI) – reveals that consumer confidence across the surveyed emerging markets of Brazil, China, India, Indonesia, Mexico, Russia, South Africa and Turkey has continued to improve over the past year. Propelling this positivity is the growing middle class who are increasingly shopping online for products and services. Another factor driving the growth of ecommerce is the fact that traditional bricks and mortar locations in these regions remain relatively underdeveloped.
If we assume that internet usage across these countries matures to the same extent already found in developed markets, the potential for an additional 1.25 billion shoppers to appear online over the next few years is quite plausible, according to the CSRI. In addition, Eric Miller, Head of Client and Content for Global Markets, Credit Suisse, notes that the organisation’s analysis of the survey data reveals that “a further 10% of surveyed households have succeeded in entering middle income territory in the last three years”, creating a consumer base that is ready to spend, and is becoming increasingly equipped to do so online.
As Urs Rohner, Chairman of the Credit Suisse Research Institute and Chairman of the Board of Directors of Credit Suisse Group comments: "The 2017 Emerging Consumer Survey explores current growth opportunities presented and new consumer cultures across the emerging world. This year, we observe a changing pattern in the spending behaviour of the emerging middle class. We also find that a more ‘conscious’ consumer is on the rise across emerging economies. Smart businesses will capitalise on these developments. Digital technology continues to be the facilitator of changing consumer behaviour. With more than a billion consumers yet to come online in our surveyed countries, the potential is significant."
Poor Logistics Infrastructure Remains a Key Challenge
India has moved into the top spot in this year’s Emerging Consumer Survey, with Indonesia and China taking the second and third positions respectively. Russia, Turkey and Mexico hold the bottom three places. Across all countries surveyed, however, the potential is there and the number of online consumers rising rapidly.
Indeed, emerging markets may eventually surpass mature markets due to the sheer size of the population. And where physical locations cannot reach these new customers – particularly in remote, rural areas – e-commerce can. What’s needed, however, is for retailers seeking to expand operations in developing countries to invest in logistics models that will enable new products to reach new populations – and here the challenge lies.
E-commerce supply chains in emerging markets are evolving in varying ways as a result of differing regulatory, cultural and economic factors. In Brazil, for instance, the growing number of internet users has created a boom in e-commerce, which in turn has increased demand for warehouses, particularly in Sao Paulo, and logistics clusters are only steadily emerging. Most emerging Asian markets, although large, are nonetheless fragmented and burdened with poor logistics infrastructure, with local logistics firms currently having only partial coverage. This is forcing e-commerce firms – such as China’s Alibaba – to build their own logistics systems at huge costs, which impact ROI and profits significantly.
A similar problem with underdeveloped logistics infrastructure can be seen in India, which continues to complicate deliveries. Another challenge the country faces is in recruitment of less-skilled workers who are English-speaking and able to handle customer service and fulfilment. As Venkat Viswanathan, founder and chairman of global analytics firm LatentView Analytics, told Retail Dive last year, “They [ecommerce retailers] need people who speak English but aren’t highly skilled, and multiple companies are going after the same group. There are lots of niche players fighting for the same pool of workers as they try to scale their businesses.”
Online Retail Spending to Grow to $2.5 Trillion in Emerging Markets by 2025
Whilst emerging markets are increasingly presenting an increasing wealth of opportunities for e-commerce, shortcomings such as poor logistics infrastructure are creating barriers that must be overcome if the potential is to be tapped. Nonetheless, as internet access continues to grow and the middle class expands with increased spending power, the growth of e-commerce will continue. CSRI forecasts that online retail spending in the surveyed group of markets may grow from $1 trillion today to in excess of $2.5 trillion by 2025, and that, indeed, is giving retailers in developed countries something very interesting to think about.
If you want to find out more, download the agenda to see the great activities, speakers and sessions planned for this year.