In Depth

Developing The Global eCommerce Economy

Studying the global economy cannot be done without studying one key stakeholder — global shoppers. And to be more specific, how global shoppers use the Internet to drive commerce.

A new report from the United Nations Conference on Trade and Development provides a look back at shopping trends by regions, and forecasts its outlook for how those trends should develop, based on recent innovations and how the shopping habits of consumers are likely to influence the global economy. The report details 130 countries. The big takeaway? The growth rate in the number of online shoppers is expected to grow by more than 50 percent from 2013’s rate of ~1 billion online consumers to 1.62 billion by 2018.

The Information Economy Report 2015 delves into Internet use, prominence of secure servers, credit card penetration and postal delivery networks — and it uses those factors to create a metric that judges each region’s readiness for B2C eCommerce.

A country’s “eCommerce readiness,” is the degree to which the country is able to develop a national eCommerce strategy that streamlines commerce growth for its region — and potential across the globe, based on its cross-border trade arrangements.

According to the report, here’s how the eCommerce index breaks down in terms of factors mentioned above that were used to develop the B2C metric (Note: the U.S. is not in the Top 10 performers, according to the UN’s index). The Top 10 with the best eCommerce potential, in order are: Luxembourg, Norway, Finland, Canada, Sweden, Australia, Denmark, Republic of Korea, United Kingdom and Israel. When looking at the Asia and Oceania regions, Korea takes the top marks; in the Latin America and Caribbean regions, Chile was ranked the highest; and in Africa, Mauritius ranked highest. The U.S. came in 15th on the B2C eCommerce index. (See chart below). 

eCommerce Index

 Drawing analysis from  the research that was  used to rank the  eCommerce readiness  across the top regions,  the UN’s report  concluded that the  “highest-ranked  economies are relatively  small, rich and often  located at some distance  from major markets.” It  also indicated for online shopping figures, in countries with larger populations (China or Brazil, for example) they are performing better than the index figure predicts. From a brief review of the estimated number of global online buyers between 2013-2018 help show which countries are making up the largest online shopping share as it relates to number of Internet users (see chart below).

eCommerce 

Beyond ranking the top performers, the report’s index also chronicles eCommerce strengths and regions of the 130 regions. This metric, of course, varies by region depending on what type of infrastructure is set in place to enable eCommerce — particularly as it relates to delivery models and access to the Web. For example, the report’s findings indicate that the postal delivery system in places like Latin America, the Caribbean, Asia and Australia/New Zealand regions hinders eCommerce growth. But in some perhaps unexpected places like the Middle East and Africa, eCommerce is growing as the report shows the number of online buyers is anticipated to grow by 82 percent from 2013’s 93.6 million to 170.6 million in 2018.

“A number of factors act as potential constraints on eCommerce. Economic barriers include inadequate ICT infrastructure and use, unreliable and costly power supply, limited use of credit cards, lack of purchasing power and underdeveloped financial systems,” Kituyi wrote in the report. “Sociopolitical barriers include weak legal and regulatory frameworks (which influence whether people and enterprises trust online transactions), cultural preferences for face-to-face interaction, and reliance on cash in society.”

She notes, however, that as the eCommerce ecosystem develops, gaining new players in the industry that have brought enhancements to help buyers and sellers overcome those barriers, effective eCommerce structures across the global will continue to break down barriers that once kept populations isolated from the global shopping online network seen today, and accessible by billions.

To better understand the B2C eCommerce trends, breaking down the figures by region can also help explain the global shopper trends (See chart below).

global shopping

A few factors that have helped overcome those barriers include increased connectivity due to increasing number of Internet connections, mobile phone penetration and payment solutions that have lowered the barrier of entry for more consumers to have access payments methods that allow them to shop online. ECommerce companies are getting more backing by investors and are helping grow the local economies in developing countries, the report concluded, which has also helped connect more consumers to commerce by taking out some of the physical barriers that kept them from doing so before.

In 2014 alone, according to the UN’s report that compiled Nielsen’s stats, the global average for using a mobile device was around 45 percent, with the Middle East and Africa, Latin American and the Asia Pacific regions leading the way. North America and Europe were slightly behind with North America’s mobile shopping percentage under 30 percent and Europe’s being slightly above 30 percent (see chart below). 

Global eCommerce

Growing eCommerce has also been born out of businesses realizing they need to tap into a wider audience in order to both scale their business, but also reach new consumers. With more platforms and services being opened to new populations, there has been more involvement from regulators on a global scale to address eCommerce as a global industry instead of a local commerce sector. In turn, more consumer trust for online shopping has also grown.

“There is a growing readiness among enterprises and consumers to conduct business online as well as more awareness among governments and lawmakers of the importance of relevant legislation and regulation to enhance trust online,” Kituyi wrote. 

The report also digs slightly into mobile payments, which also appears to vary significantly by region based on where there is more of a need for mobile commerce versus regions where mobile commerce is viewed as more of a perk over a necessity. The report cites a figure indicating that mobile payments are only anticipated to account for 3 percent of the value of eCommerce payments by 2017. But in emerging countries, like several African regions, mobile money solutions remain some of the most viable eCommerce solutions due to “high degrees of financial inclusion, limited availability to fixed lines, cost of fixed lines and cost of the card infrastructure,” the report notes. 

To help increase global eCommerce, the UN Conference on Trade and Development provided a handful of suggestions for governments and businesses to implement, which included the following:

  • Ensuring reliable power is available to ensure Internet connectivity
  • Strengthen logistics and delivery infrastructure
  • Implement universal address and postal code systems
  • Ease cross-border trade by simplifying and standardizing trade laws, customs and duties
  • Work to strengthen electronic payments offerings and consumer adoption of online payments
  • Promote global and local eCommerce platforms and services that can be tailored to local markets to account for currencies, languages and payment and shopping preferences
  • Develop a legal and regulatory framework for eCommerce that addresses such issues as online privacy
  • Promote building eCommerce skills among small businesses

First and foremost, the report emphasizes, that “buying and selling online raise legal challenges that have to be addressed by both governments and the industry itself.” This means aligning laws that allow governments and eCommerce players to work together to promote cross-border trade.

“As the digital economy expands and more businesses activities are affected, it is important to consider policies that can help to harness eCommerce for sustainable development,” Kituyi wrote. “A national eCommerce strategy developed in collaboration with relevant stakeholders can play a useful role. Social attention may be devoted to facilitate the effective involvement of micro and small enterprises.” 

In order for global eCommerce to hit the marks it’s anticipated to, the UN’s report suggests that the industry must be able to identify the challenges and barriers that prevent eCommerce development. This includes addressing everything from logistics and trade facilitation, regulatory measures, e-payment platforms that enable more eCommerce. And as eCommerce grows alongside the global economy, this also means taking the proper measures to ensure consumer data is protected through standards that become universally adopted across the eCommerce industry. 

“Further shifts from offline to online commerce are expected in the coming years,” Kituyi wrote. “This will continue to change the ways in which consumers and enterprises interact. Some are better equipped to adapt to such transformations. From a policy perspective, it is important to create an environment that provides more equal opportunities for stakeholders in different locations and areas of society to take part in the progress.” 

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 edition of the FI Innovation Readiness Playbook examines how the innovation playing field is leveling as small FIs implement bolder strategies and larger banks adopt more measured approaches.

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