A guide to e-commerce in the BRIC countrieson Thursday 1 August 2013 Written by David Martin
Worldwide, companies of all sizes are adopting globalisation strategies, reaching out to prospective consumers in far-flung regions.
The long-term expansion solution for organisations is website localisation. It attracts a foreign audience, gains their trust and manifests a company's presence.
A more short-term solution, however, is to look at getting products posted on some of the many e-commerce sites that exist around the world. In the UK, most of us are familiar with Amazon and eBay – the cornerstones of Western e-commerce. While they have expanded into developing markets, their market share often remains relatively small, far behind the likes of Jing Dong in China and Casasbahia in Brazil.
These platforms, meanwhile, boast millions of visitors per month, and yet remain relatively unknown to most of us in Western Europe.
E-commerce is the next logical frontier in business expansion, and is seeing a rapid rise in all the BRIC (Brazil, Russia, India, China) markets. In China, for example, an expected 30 million people are expected to shop online for the first time up to 2015, while Russia now boasts more internet users than any other country in Europe.
Here we take a look at the culture of e-commerce in the BRIC.
Like its expanding middle class, Brazil has experienced a fantastic year-on-year rise in e-commerce. In 2011, total e-commerce revenue was $11 billion, up to 26 per cent from 2010. In 2012, revenue was up to $11.2 billion.
While thriving, however, Brazil's e-commerce industry was not exactly the best regulated. However, government legislation announced last month stipulated that all e-retailers in Brazil must display official registration numbers, addresses and contact details, while fully disclosing all terms and conditions. Long overdue legislation, many would say.
The overwhelming majority of online sales are electronic items, almost 40 per cent. However, fashion and accessories are fast catching up. Sites such as Amo Muito, Netshoes and Comprafacil offer a wide variety of clothes now and are seeing a surge in registered users, while the more established e-retailers, Buscapé and Casabahia are still very much electronics focused.
In terms of sheer numbers, the rising popularity of e-commerce that we're seeing in China is unprecedented. And the good news for these sites is that the majority of the Chinese consumer market also tends to buy from mass retail sites, rather than official product sites.
Spearheading the market is Alibaba, which is not just China's but the world's leading B2B e-commerce site, with a host of other B2C retailers on its book, including Tmall, which accounts for almost 40 per cent of the B2C market.
But ignore the competition and risk missing out big time. Jing Dong, formerly known as 360Buy, is China's second largest B2C retailer, accounting for 16 per cent of the market and supposedly boasts hundreds of millions registered users.
Although their focus is very much on Chinese products, Jing Dong is one of the growing e-commerce organisations experiencing rapid growth. Though not quite up to Alibaba's level of market penetration just yet, the site is looking to expand globally and attract a host of Western brands to sell their products through its service.
Although it's still some way behind the likes of China, India has seen a sharp uptake in demand for consumer goods. According to Ernst & Young estimates, in 2011 travel made up as much as 93 per cent of all online purchases in India; a year later that number was down 78 per cent with online retail fast catching up. Estimates predict that by 2015, online travel and online retail sales will be split almost evenly down the middle.
Unlike in Brazil, online retail in India is dominated by fashion, with online store Myntra.com boasting 30 per cent of the market share in online fashion. Last financial year, it earned revenues of roughly $65.6 million, but failed to turn a profit. Next year, it expects profit to more than double, when it should turn a profit for the first time, and potentially see online retail really take off in India.
Internet penetration in Russia surged to about 70 million people in 2012, which means it now boasts more internet users than any other European country. A further 20 million are expected to log on in the next two years. By contrast, ten years ago, less than 10 per cent of the population was online.
The demands for e-commerce are set to skyrocket and, as result, e-commerce has presented a number of entrepreneurial opportunities within Russia, with online fashion retailer KupeVIP, launched in 2009 by Oskar Hartmann, is leading the pack in luxury fashion retail . In its first year, it was singing up a brand every day.
However, KupeVIP refuses to touch electronics and books. Ozon, part of the German-based trading company, Otto Group, also a long-established player in Russian e-commerce, successfully takes that mantel. According to The Next Web, Ozon reported revenues of $492 million last year, a year-on-year growth of 67 per cent. CEO, Maelle Gavet, has also stated that the company’s long-term goal is to capture 80 per of Russia’s e-commerce market share.
There is, however, one area where Russia needs to develop for online retail to truly seize its potential: logistics. Ozon and KupeVIP have invested in their own streams of delivery, which makes them more the attractive options, though it may hamper online retail smaller companies looking.
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