Emerging markets have been a topic of discussion for quite some time now. E-commerce has enabled the idea of a global market for sellers and buyers a like. As retail in developed markets becomes saturated, furthermore, more favorable government regulations, these new frontiers prove to be lucrative opportunities for e-commerce growth.
According to a report by Business Insider, the current market leader is China as it is the world's largest e-commerce market, nearly half of the population is actively making online purchases, leaving little room for growth. India, Southeast Asia, and Latin America are experiencing significant growth. E-commerce penetration rates in these areas hover between 2-6%, presenting a huge opportunity for future growth as online sales gain traction. Moreover, the graph below highlights markets that are expected to grow at compound annual growth rates (CAGRs) of 31%, 32%, and 16% through 2021.
Things to Consider
Emerging markets offer immense growth and opportunity for firms, however, there are many obstacles firm must consider before making the leap abroad. One major concern is government regulations. US based retailers must understand the regulatory climate they are looking to venture into. Often times, firms will be forced to work with local companies or partner with the governing body as a joint venture. Although not a bad route and often times beneficial when entering foreign markets, it remains important to keep in mind in how strategies and operations will need to adapt. Second is logistics and supply chain management. When doing business in developing regions it can be challenging to implement operational practices done in the US as infrastructure is underdeveloped. Delivery and efficiently will likely be slower and costlier when building out supply chain in these markets Lastly, is retailers must successfully adapt brand, product offerings, and operation to meet cultural norms and practices. Retailers' home markets will differ drastically than emerging markets. The landscape, what consumers want, and what is acceptable will shape a global e-commerce for firms.
- Developing nations are trending towards less restrictions on foreign investments.
- Eastern markets consist of large populations, growing middle classes, increased spending power, affinity for western brands, and access to internet create massive opportunities for domestic firms to expand internationally.
- Logistically, doing business in developing regions can be challenging. In most of these emerging markets, infrastructure is underdeveloped and the population remain less educated.
- Retailers must successfully adapt brand and operation to meet cultural norms and practices, while not damaging current competitive advantages derived from domestic markets.