Global online sales up 20% offering retail opportunity

Global online sales increased 20 percent last year and the United States took the international lead over China.

The U.S. placed second to China in 2013, but gained the No. 1 spot because of continued growth, an improving economy and higher consumer confidence. U.S. growth in e-commerce increased 15 percent last year, according to the A.T. Kearney Global Retail E-Commerce Index for Market Opportunity. Globally, online sales rose 20 percent in 2014 to $800 billion.

Retailers can look at the study to devise global online strategies and identify market investment opportunities, while learning about the tradeoffs and barriers to success, A.T. Kearney said in a press statement.

One key to international success is to become a first mover, said Parvaneh Nilforoushan, principal in the retail practice of A.T. Kearney, a global strategy and management consulting firm.

"Being a first mover in the online space allows retailers to immediately learn about consumer preferences, test products, build brand recognition, and secure valuable distribution and logistics partnerships," she told FierceRetailIT. Retailers that are not "first to market" can be very successful in the United States and other geographies by understanding the local online consumer, tailoring their offerings accordingly, and executing against the customer promise.

The report identifies four overall themes that color this year's Index findings as they relate to business strategy, customers and channels. These include internationalization, the rise of e-commerce IPOs, the continuously connected consumer and the need for omnichannel strategies.

Among other findings in the report, the Asia Pacific e-commerce market continues to grow and will soon be the largest online sales region. In Latin America, Mexico entered the index in 17th place, but Brazil and Argentina fell sharply because of slowing macroeconomics. Fundamental infrastructure challenges–such as logistics and transportation in Brazil and government regulations in Argentina–may slow their future e-commerce growth.

With its massive population, it is surprising that India did not make the index. "India is on the radar screen of many online retailers as it is the second most populous country in the world with over 1 billion inhabitants," Nilforoushan said: "It falls short of the Top 30 rankings because of internet connectivity challenges and significant infrastructure constraints that hinder order placement and fulfillment. U.S. retailers that enter India must be in it for the long haul–the market offers tremendous potential but poses significant challenges that make ROI horizons longer."

The online grocery category has a 60 percent penetration in the United Kingdom, compared to 26 percent in the U.S. "The U.K.'s online grocery market is well ahead of most other markets in the world, as retailers like Tesco and Asda heavily invested in their online businesses in the late 1990s, recognizing the favorable consumer and demographic trends. Most U.S. grocers have not prioritized or invested in the online channel until the recent past. As a result, consumer behavior is playing catch-up and notable discrepancies exist between U.S. and U.K. "penetration," she said.

For retailers seeking to increase sales by tapping international markets, entering via online sales offers the ability to quickly learn about local consumers at a lower cost than a traditional brick-and-mortar expansion. "Valuable information about product preferences and price sensitivities can immediately guide in-store merchandising decisions. More targeted site selection can also take place once local market conditions are deeply understood," Nilforoushan said.

For more:
-See this A.T. Kearney press release

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