The Internet has a way of making our world seem ever smaller. Vast physical distances seem only steps away, thanks to technology that allows us to be anywhere digitally in the blink of an eye. This is especially true when it comes to online shopping. The world is now practically at our doorstep, as cross-border trade through eCommerce has opened up new markets for retailers around the world. It’s easier than ever before for consumers to browse and purchase products from any country and have them shipped directly to their homes.
PayPal and Google released a study in June 2015 that found that in the UK, the U.S., China, and Germany – the world’s largest eCommerce markets – online retail sales will double by 2018. And another study from PayPal released in November 2015 showed that the U.S. and China are by far the most popular cross-border trade destinations, at 25 and 19 percent of all online shoppers surveyed.
Where are some of the biggest countries for cross-border commerce, and what’s behind their growth?
India – 500 percent growth
In a Forrester report commissioned by FedEx, India was projected to experience growth of 500 percent in online retail sales between 2014 and 2018. Although Internet penetration in India is still extremely low at 19 percent, compared with 46 percent in China and 87 percent in the U.S., the country is expected to become the second-largest Internet market in the world by 2018 with 297 million online users.
Another factor that is undoubtedly influencing higher levels of cross-border trade is a booming middle class. Currently pegged at 50 million, or 5 percent of the total population, the number of middle-class people in India will top 200 million in 2020 and reach 475 million by 2030. As overall purchasing power increases, so does the desire for higher-end consumer goods from western countries like the U.S.
China – 125 percent growth
With a middle class now larger than that of the U.S., China now boasts 109 million people in this income bracket. The nation’s eCommerce growth is expected to be 125 percent over the four years leading up to 2018.
Despite the global economic slowdown that has impacted China’s economy along with a weakened national currency, online retail sales will still increase. “Connected spenders” – those that have both the monetary means combined with Internet access – will increase their share of consumer spending in China from 44 percent in 2014 to 60 percent by 2025. The growth in spending share will be mainly the result of higher Internet penetration throughout the country.
Argentina – 106 percent growth
We turn now to South America, where Argentina recently experienced a highly anticipated change in government that is expected to result in an economic comeback for the country. After years of high inflation and an artificially inflated currency, the new Argentine president has taken aggressive action to restore international confidence in the country as a desirable place for global investment and trade.
Sales from eCommerce in Argentina are expected to rise from $3.3 billion in 2014 to $6.8 billion in 2018, further solidifying its place as the second-largest online retail market in Latin America. Given that the country now has renewed hope and even more promising future with a new national government, Argentina might even exceed this prediction as its economy strengthens and rebuilds.
Mexico – 96 percent growth
Even though Mexico is currently the third-largest eCommerce market in Latin America, it has huge potential for even higher rankings. The biggest limiting factors that discourage faster eCommerce growth in the country are a lack of trust in the Mexican postal system for deliveries and limited access to bank accounts for online payment.
In spite of these setbacks, there is a significant factor that bodes well for the future of Mexican eCommerce: high smartphone adoption levels. Mexico is far ahead of other Latin American countries in terms of smartphone penetration. While less than 25 percent of people in Brazil and Argentina use smartphones, around 33 percent of Mexicans own them, making it the largest mobile market in Latin America. At the end of 2015, there were 65 million Mexican Internet users. By 2018, this number will reach 80 million, with 21.1 million of those expected to be online shoppers.
Brazil – 84 percent growth
As one of the few countries in Latin America considered a middle-class nation, its economic strength is predicted to propel Brazil to the position of the world’s fifth-largest consumer market, putting it ahead of both France and the UK. Already having the region’s largest economy, 58 percent of Brazil’s population is now online, making it a highly attractive market for overseas online merchants.
Established American companies like Amazon have built a very strong online presence in Brazil. The company has been so successful in its endeavors that Brazil is now Amazon’s largest foreign market. With online sales reaching $10 billion in 2015, up 15 percent from 2014, Brazil’s eCommerce sector is still strong despite the fact that country is experiencing an economic recession.
What can we take away from all of this? For one thing, the top five countries for eCommerce growth are all either in Latin America or in Asia. Another notable trend is that three out of four of the BRIC countries – Brazil, India, and China – are featured. A key takeaway is that eCommerce is growing fast in emerging markets, and these five countries on our list are ones to watch.
Does your business have a global strategy? Have you looked into legal requirements that may impact your business operations?
In an upcoming blog post, we will look at regulatory changes and trends in cross-border commerce. Subscribe to our blog or newsletter and follow us on Twitter to get the latest updates.