January 29, 2010, 12:00 AM

E-commerce will gradually emerge abroad, Forrester Research predicts

Of the two countries with the highest populations, China and India, China will grow more swiftly in online retailing, the Forrester report says. And keep an eye on South Korea, a country that is becoming an e-commerce powerhouse.

Zak Stambor

Managing Editor

Many e-retailers have tested the international waters, setting up shop either with full-blown e-commerce sites and warehouses dedicated to foreign countries or by offering special shipping services using vendors with U.S.-based operations. Many of the efforts are starting to prove successful.

“For e-businesses with international expansion plans around the globe, an initial entry into a new market tends to be followed by offerings in other countries,” writes Forrester Research Inc. analyst Zia Daniell Wigder in the new report, “The Global eCommerce Adoption Cycle.” “Companies often lead their international expansion with web sites targeted at the highly developed e-commerce markets of the U.K. or Japan and then look to emerging markets such as those in southern Europe or Asia at a later stage. Key to a broader market expansion is understanding how quickly newer online markets are embracing e-commerce and when they will be on par with the more developed online shopping markets.”

There are four key trends, the report says, that e-retailers eyeing international expansion must watch.

First, e-commerce is emerging gradually everywhere. E-commerce optimists tend to suggest that with more consumers having Internet access and a wider selection of online stores will result in e-commerce taking off more quickly in emerging markets like China and Brazil than it did in the U.S., the report says. While new online shoppers today enjoy a far richer e-commerce experience than they did 10 years ago, the adoption cycle is not short anywhere in the world, Forrester says. It takes years for the percentage of online shoppers to reach 50%, and online spending levels tend to creep up slowly in emerging markets where consumers have less disposable income, the report says.

Second, the U.S. is the largest e-commerce economy but does not lead in every single metric, Forrester says. The U.S. has the benefit of a large online population, a high percentage of online buyers and high per-capita online spending. However, South Korean consumers, for example, spend more time online and China has the most online users in the world, the report finds.

Third, China and India are adopting e-commerce at very different rates. Both countries have populations of more than 1 billion people, significant emerging middle classes and rapidly growing Internet populations, which is why they are often brought up in tandem as key emerging e-commerce markets, Wigder writes. However, these two markets differ significantly when it comes to Internet adoption and e-commerce. India’s online population is only about one-quarter the size of China’s, and some 37% of online users in China`s large urban areas are buying online, compared with only 7% in India`s large urban areas, the report says. That’s why the report suggests China will evolve far more quickly as an e-commerce market than India.

Finally, South Korea is emerging as an e-commerce powerhouse, especially in digital goods, the report concludes. South Korea’s consumers are big spenders and the South Korean market has nearly as many online users as France, it says.

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