Sales of $4 trillion in emerging markets to be influenced by digital

27 September 2018 5 min. read

According to a new study by The Boston Consulting Group, rapid digital growth in emerging markets is set to push the tally for digitally-influenced purchases toward the $4 trillion mark in these regions by just 2022, with consumers in China, Indonesia and the Philippines among the big contributors.

Through a survey of more than 15,000 internet users in nine emerging-market countries, including China, Indonesia, India and the Philippines (together with Brazil, Kenya, Morocco, Nigeria and South Africa), strategy and management firm The Boston Consulting Group has concluded a $4 trillion potential near future in emerging markets for online-inspired purchasing – a figure which will represent almost half of all retail spend in these regions.

As it stands, e-retail revenues in the biggest emerging markets have grown to $800 billion, accounting for around 15 percent of local retail spending. However, when the influence of online activity is factored in, such as through browsing catalogues, gathering price or product information or assessing reviews, the overall market for digitally-influenced purchasing in emerging markets balloons to a worth of $1.8 trillion last year.Digital influence on retail in emerging marketsAnd, with nearly a billion new internet users expected to join the current 2.1 billion in emerging markets by 2022, the attendant price-tag for digitally-guided purchases could swell to a staggering $3.9 trillion in that time. Already outnumbering their developed counterparts for the number of domestic internet users, much of the current and projected online retail spend in emerging markets is being driven by a rapidly evolving digital landscape.

Three specific factors in the rapid digital development in emerging markets have been a significant drop in the price of smartphones (by an average of 40 percent between 2011 and 2016), the arrival of high-speed internet, and a reduction in data costs – dramatically altering accessibility in just the past six or so years, a time during which emerging markets have grown to one quarter share of global household consumption expenditure, from 11 percent in 2011 to 24 percent by 2016.Consumer digital penetration in emerging marketsIn terms of the three cited factors, internet penetration levels across the countries measured have risen from a highest country-point of 56 percent of the population in 2010 to 82 percent for the highest country last year, with the country-wide average more than doubling from 23 percent to 50 percent in that time. Similar is the smart-phone uptake in these countries, from a highest point of 39 percent to 69 percent in just the past four years, with the average rising from 22 to 44 percent. Meanwhile, the high mark for data usage costs has halved over the same period.

Still, there is significant room for further growth, and not just by way of the 900 million new users projected to come online in the next four year. The BCG study further classifies the countries of the survey in terms of the progression of their digital development, into the categories of digitally aware – Philippines and the four African countries – digitally advancing – India, Indonesia and Brazil – and digitally evolved, as is the case with China, which already sees $750 billion in sales through online channels.Stages of digital development and ecommerce in countriesIn respect to these distinct levels of digital development, the BCG report notes that countries can rapidly progress through each stage of maturation, such has been the case with India, Indonesia and China over the past five years – with corresponding respective five-year average e-retail growth rates of 59%, 32% and 46%. As stated in the report; “Once e-commerce gets going in an emerging market, it generally develops, one might say, at light speed.”

Today, a staggering 98 percent of internet users in urban China use online resources to guide their purchases in at least one category, such as air travel – with Chinese intraregional travel in the Asia Pacific having risen in the past seven years at a compound annual growth rate of 25.8% – large appliances and automobiles, the latter which are even purchased wholly online, and, as the globe’s fastest growing market, luxury goods and fashion, with a recent survey finding that 88% of local millennials shopped online for clothes and accessories more than once a week.

Of course, this presents a huge opportunity for the retailers and manufacturers which can adapt to the changing landscape. The BCG report concludes; “In big cities in emerging markets nowadays, more people than not seem to have mobile phones in their hands as they walk down the street. That’s true of Shanghai, of Delhi, of Johannesburg, and of dozens of other places where, in effect, digital vanguards have emerged. Not every consumer who has a smartphone in these places uses it to buy things from e-commerce sites. But such consumers may use it to collect information for an offline buying excursion. And if they aren’t doing so today, they will be tomorrow.”