COLORADO - United States | As populous countries such as Brazil, China, and India develop increasingly acquisitive middle classes, opportunities for online sales to these countries are growing. Except for small mom and pop outlets, the brick and mortar retail sectors are poorly developed outside of major cities. Consumers in these and many other developing countries are looking online for more choices in apparel, electronics, and luxury goods.
Prior to 2010, international ecommerce consisted mainly of foreigners buying goods from American and European online sites. Now cross border shopping is becoming more balanced, with Americans and Europeans buying goods from websites based in countries where manufacturing takes place, such as India and China. Some of the sellers are the manufacturers themselves, but often individuals are selling to overseas customers on eBay.
Nielsen recently conducted a survey of cross border online shoppers in six countries: U.S., U.K., Germany, Brazil, China, and Australia, getting the opinions of more than 6,000 online shoppers who purchased from overseas vendors in 2012. The ensuing report, commissioned by PayPal, "Modern Spice Routes —The Cultural Impact and Economic Opportunity of Cross-Border Shopping," found that clothing, shoes, and accessories represent the largest cross-border online shopping category in five out of the six markets, with Brazilian shoppers opting for computer hardware. Nielsen predicts that cross border shopping will contribute 16 percent of total global online sales in 2013.
The top cross border ecommerce shopping categories from the Nielsen report are:
- Clothing, shoes, and accessories ($12.5 billion);
- Health and beauty ($7.6 billion);
- Personal electronics ($6 billion);
- Computer hardware ($6 billion);
- Jewelry, gems, and watches ($5.8 billion);
- Home electronics ($5.4 billion).
Characteristics of Foreign Online Shoppers
Seven out of ten online shoppers are mid-to-high income earners. The majority are between 35 to 54 years old, although the average age is younger in Brazil (25 to 44) and China, where most online shoppers are younger than 30.
Buyer protection is very important for Chinese shoppers who are trying to avoid the shoddy and counterfeit merchandise produced in their own country. Poor quality goods are a frequent complaint of individuals who buy from eBay China.
The advent of smartphones has been a great enabler of Internet shopping in developing countries. While people still may not be able to afford a home computer, they do buy smartphones with Internet access. According to Nielsen, in the six countries surveyed, mobile shopping revenues in 2013 have already reached $36.4 billion, more than a third of all cross border online shopping in these markets.
Purchasing via mobile devices is most pronounced in China, where 14 million cross border mobile shoppers comprise nearly 78 percent of the total online cross border shopping population. Chinese mobile shoppers have already spent $16.7 billion in 2013 according to Nielsen, almost half the value of all cross border online sales.
China, the Largest Market
In "Ecommerce Trends Point to Bright Future," my previous article, China is home to the largest ecommerce marketplace in the world, Alibaba. Online retail revenue in China was somewhere between $179 and $219 billion last year, representing six percent of China's total retail spending. That's with only 43 percent of the country online.
Alibaba offers online platforms but does not sell merchandise itself. Initially Alibaba was a B-to-B online marketplace, connecting overseas buyers with Chinese suppliers. With the rise of the middle class in China, Alibaba added two subsidiaries: Taobao (similar to eBay), which specializes in consumer-to-consumer commerce; and Tmall, which operates as a mall, linking small businesses as well as major brands to consumers, much like Amazon Marketplace. It doesn't have to manage inventories because it acts as a middleman. Tmall leads the business-to-consumer ecommerce market in China, with over 50 percent market share. Selling goods on Tmall is a good way for foreign brands to enter the Chinese market; several luxury brands sell on Tmall to establish a brand presence in China. Overall, Chinese consumers will buy 20 percent of global luxury goods sold in 2015, according to McKinsey Global Institute research.
The most popular way to pay for cross border online transactions is via PayPal, with about 80 percent of cross border online shoppers using it for overseas purchases. Alibaba has a payment subsidiary, Alipay, that holds payments in escrow until customers confirm that they are satisfied with their purchases. It accounts for about half of all online payment transactions within China. Both Alipay and PayPal offer buyer protection policies to customers.
The two most popular countries for Chinese cross border shoppers are United States and Hong Kong. Americans prefer to buy foreign goods from sites in the United Kingdom and China. In 2013, 34.1 million Americans are expected to engage in online cross border shopping, spending $40.6 billion. eBay is a favorite site for cross border shoppers in all countries.
Emerging economies offer new opportunities for American ecommerce merchants. The new middle classes have access to the Internet and are eager to buy discretionary goods that may not be readily obtainable in their home markets. It is often easier to sell via one of the local platforms to gain a foothold in these markets and to allow for sales in the local currencies.
Article sourced from Practical Ecommerce
By Marcia Kaplan