CEO Roland Smith will retire and Troy Rice will oversee e-commerce as Office Depot’s new chief operating officer.
A new report puts China ahead of other emerging markets.
China holds the most e-commerce potential among emerging markets, but still suffers from a lack of reliable transportation options and relatively low Internet availability, two problems that could dampen growth, according to a new report from consultancy A.T. Kearney.
Its inaugural e-retail index of emerging markets, entitled “Online Retail: The New Frontier for International Expansion,” puts China at the top of a list of 10 countries with potential for big e-commerce growth. The company calculated growth potential by assessing such factors as overall market attractiveness, online infrastructure development, digital laws and regulations, and retail development. China beats out such countries as Brazil, Russia, Chile and Mexico (see below for the rankings).
That’s mainly because of what the report calls “China’s vast online retail markets—at $23 billion, second in the world behind the United States.” E-commerce has increased by a 78% compound annual growth rate since 2006, the report says, and will reach $81 billion over the next five years. (The report’s spending figures do not include business-to-business e-commerce, but only "consumers purchasing goods in key categories," a spokesman for A.T. says, explaining the differences between the report's projections and those offered by other analysts, which are often higher.) The report goes on to say that China has 513 million web users—the largest online population in the world—along with 164 million online shoppers—who tend to spend their money most often on consumer electronics, apparel and beauty products.
But size doesn’t insulate China from challenges that affect the country’s e-commerce potential. Consumers living in the country’s rural areas use the Internet less often than do shoppers living in cities. Additionally, deliveries of products bought online can be hampered by poor roads and transportation outside of metro hubs, the report says.
“China’s infrastructure challenges hinder the realization of the country’s full e-commerce potential,” says Mike Moriarty, A.T. Kearney partner and report co-leader. “Delivery infrastructure varies outside of [urban areas] and inhibits the efficiency and effectiveness of the ‘last mile’ of online retail product delivery.”
Following are the rest of the top 10, along with notes from the report:
2. Brazil. Online consumers there will spend $18.7 billion by 2017, up from $10.6 billion this year, the e-commerce spending boosted in large by the country’s growing middle class, and by shoppers visiting group-buying sites that operate similarly to Groupon. Still, the country faces challenges related to logistics and online payment security.
3. Russia. The largest online population in Europe will create a $16.3 billion online retail market by 2016, up from $9.1 billion now. Only about 20% of Russian households possess a credit card, and the reliance on cash, along with relatively slow delivery times, remain challenges. Online retailers also have to work to win over the trust of consumers who are poorly protected by consumer-advocacy laws, and who suffer regular Internet censorship.
4. Chile. Unlike shoppers in Russia, Chilean consumers have embraced non-cash payments that make online purchases easier, with the average household having four credit cards. The online retail market there is set to double to $1.5 billion over the next five years.
5. Mexico. Its online retail market will triple to $4.4 billion by 2016, though relatively few consumers have Internet access, and those shoppers who enjoy web access often struggle with slow connections. But retailers are trying out what the report calls innovations, such as enabling shoppers to select products online, print out a voucher and then pay for goods in person at stores.
6. United Arab Emirates. The federation has a 76% Internet penetration rate and a strong retail presence, factors that will lead to growth in the U.A.E’s $227 million online retail market.
7. Malaysia. The Asia state can boast that half its households own computers and that 56% of its population connects to the web. That, plus the relatively high use of credit and debit cards, and the “high-quality logistical infrastructure,” will help to double the $250 million online retail market there.
8. Uruguay. With the highest Internet penetration rate in Latin America—48%—and 70% of its Internet users making online purchases, Uruguay’s online retail market of $46 million will double by 2016.
9. Turkey. Straddling two continents, the country offers relatively quick delivery of online goods and an Internet base that spends 30 hours per month online, and benefits from relatively strong consumer protection laws.
10. Oman. Perched along the edge of the Arabian Peninsula, the country may be small but has computers inside half of its households and 62% of its population connected to the Internet—including through mobile devices, as most citizens own more than one phone.