Michelle Grant Contributor Retail I write about retail trends from around the world.
E-commerce is expected to become the largest retail channel in the world by 2021, according to Euromonitor International, outpacing sales through retail outlets like supermarkets, independent grocers, apparel and footwear retailers, among others. E-commerce will account for 14% of total retail sales in that year.
However, future adoption is not evenly distributed across the globe. E-commerce is already leading the way in Asia-Pacific with a 13% penetration rate, but will not reach the top spot in Western Europe within the next five years. Retailers will need to tailor their digital strategies appropriately by region, country and category.
Asia-Pacific is home to digital powerhouses
In 2017, e-commerce became the leading retail channel in Asia-Pacific, driven by growth in two countries: South Korea and China.
South Korea was the first country in the region where e-commerce became the No. 1 channel back in 2013 with 11% penetration of total retail sales. The best digital infrastructure in the world combined with a high propensity to embrace the latest technology led the digital revolution.
Though e-commerce rose to the top in South Korea three years earlier than China, China is the digital powerhouse in Asia-Pacific and the world. E-commerce sales reached $354 billion USD in 2016 when it became the largest channel in the country, accounting for 17% of total retail sales. In that same year, China’s e-commerce market surpassed the U.S. to become the largest market in the world.
China’s leading retailers, Alibaba and JD.com, built retail ecosystems with the best selection and a range of prices while solving the challenges around logistics and payments. Both continue to improve upon the digital experience, speeding up delivery and expanding product categories.
North America is not too far behind
E-commerce in the U.S. and Canada, combined, will be the largest channel in 2020, accounting for 16% of retail sales—not too far behind Asia-Pacific. Retailers in both countries are eliminating friction in digital commerce. The focus for retailers in both countries is to offer multiple options for delivery, such as pick up in stores, lockers or hourly/same day delivery.
Western Europe is a mixed bag
E-commerce will be the largest channel in 2019 for the United Kingdom at 18% of total retail sales, with Denmark (17% e-commerce penetration) and Finland (14% e-commerce penetration) following in 2020 and 2021, respectively. The remaining countries will not see e-commerce take the top spot within the next five years.
Despite being the third-largest retailing market in Western Europe (behind Germany and France), the U.K. was the largest market for e-commerce sales in 2017—50% larger than second place Germany. This lead is thanks to the U.K.’s rapid adoption of online grocery compared to Germany and France. Germany is expected to narrow the gap though as more sales move online for apparel and footwear.
What does this mean for retailers?
The rise of e-commerce impacts retailers on a range of issues, from investments to organization to store planning. Retailers need to be prepared for how quickly this channel will become a significant portion of their sales. At the same time, retailers need to understand how digital commerce will evolve by country and category type. Western Europe is a great example of how countries and categories are moving online at different speeds: grocery is driving digital commerce in the third-largest retailing market, the U.K., while apparel and footwear will help the largest market, Germany, close the gap between the two countries.
Michelle Grant Contributor
I lead the global retailing research for market research provider Euromonitor International. I manage analysts worldwide to produce data and analysis on the retailing industry. I am a 2017 LinkedIn Top Voice for Retail and a Women2Watch award winner. My expertise on the global retailing industry is often quoted in business publications, including The Wall Street Journal, The New York Times and Bloomberg. I am a well-known public speaker, sharing my insights on-stage at industry conferences globally such as Shoptalk, World Retail Congress and Asia-Pacific Retailers Convention & Exhibition (APRCE), among others. Follow me on Twitter: @EMI_MichelleG.