Retailers are reducing risk by testing brands with online channels.
Management consultant A.T.Kearney has created a four point plan for online retailers wanting to expand into emerging markets.
The company has also revealed an e-commerce index that identifies the largest emerging markets for online sales.
China is the top-ranked country in the Retail E-Commerce Index with sales of $23 billion and anticipated growth of 29% a year. Brazil is second with sales of $10.6 billion. Russia comes in third with $9.1 billion in online sales.
Mike Moriarty, A.T. Kearney partner and study co-leader said China has the potential to grow even more dramatically. “China’s infrastructure challenges hinder realisation of the country’s full e-commerce potential. Delivery infrastructure varies outside of metropolitan hubs and inhibits the efficiency and effectiveness of the ‘last mile’ of online retail product delivery,” he described.
Hana Ben-Shabat, another A.T. Kearney partner and study co-leader said e-commerce is an attractive starting point for brands and retailers trying to enter the emerging markets.
“Online retail in developing markets presents retailers with attractive growth prospects either by adding e-commerce to already existing store networks or as a market-entry vehicle. Entry via the online channel allows retailers to build their brands and learn about consumers without having to invest in store opening,” she said.
A.T.Kearney’s four point plan offers a roadmap into these high growth markets.
1. Develop a customised value proposition – retailers must adjust their websites, payment methods, shipping options and business models to the local market.
2. Manage the customer experience – retailers must manage the customer experience from product purchase to return. In markets where logistical infrastructure is a challenge, retailers must be transparent with consumers about shipping timelines and deliver against them.
3. Do not underestimate local players – domestic players dominate online retail in developing markets. These local retailers have insights into online consumer preferences and e-commerce challenges, and are developing best practices in online retail.
4. Think long-term – it takes time in developing markets to navigate the market, learn about online consumers and build a reputable brand.