International E-commerce and the Leapfrog Effect

By Alex Karabasevic | May 12, 2015

Global e-commerce sales reached $1.3T in 2014, a record high, and most of that growth has been lead by developing countries. In China, e-commerce sales grew at a rate of 35% in 2014, more than double the growth rate of US-based e-commerce. Other developing nations, such as Brazil, follow closely behind with a 22% sales growth in 2014.

Citizens of developing countries are proving that they too are enthusiastic online consumers, even in the face of overwhelming infrastructure issues. Much of what is driving this growth is where the shopping experience starts. Consumers in developing countries often begin their online shopping experiences in a different way: on their mobile phones.

The Leapfrog Effect

The Leapfrog Effect is frequently used to describe the catch-up process many developing countries exhibit. Instead of proceeding through all previous versions of a technology, they are able to jump to the most recent and efficient version, thus saving themselves considerable time and money. We see evidence of the Leapfrog Effect when looking at mobile phones: instead of first experiencing the fixed-line technology of the 1990s, many developing countries have skipped over directly to mobile technology of the 21st century. For many of these online consumers, they have never experienced dial-up or floppy disks, and many do not own computers. However, they do own mobile phones and the rate of ownership is rapidly increasing. From 2007 to 2011, the number of mobile subscriptions doubled, from 40 to 80 per 100 inhabitants in developing countries.

The use of mobile devices is becoming an important part of commerce in developing countries. For example, the Kenyan Agricultural Commodity Exchange rolled out an online platform to communicate up-to-date market prices for commodities, which were readily accessible on a mobile-responsive website. Merchants can easily see updated prices, as well as make purchases through this platform, connecting them with sellers who they wouldn’t have previously had access to.

The Asia-Pacific region is poised to become the largest consumer of mobile devices, led by China and India, where mobile usage has grown to more than 2 billion subscriptions. This rapid growth has turned mobile devices from a luxury product into a staple for many. More affordable devices and low-cost SIM cards have fueled this growth. For these citizens, e-commerce has opened up a new world, which they have been eager to take advantage of: the Asia-Pacific market has shown e-commerce sales growth of 25% every year since 2007 and shows no sign of slowing down.

In order to tap into these rapidly growing markets, retailers will need to realize there is more than just a language barrier separating them from new customers. Moreover, there isn’t a one-size-fits-all approach when expanding into new markets. Successful global expansion involves significant localization, in which cultural differences are accounted for. Localization can involve making adjustments for the following:

  • Local currencies
  • Local time zones
  • Culturally-appropriate images and product names
  • Names and titles
  • Regulatory rules, including shipping & logistics
  • Local customs & conventions

Often, the product names used in a company’s home market are optimized for the culture of their domestic consumers. When moving abroad, much of the original e-commerce strategy will need to be adapted, so that it seems familiar and comfortable to a new group of consumers. For example, Nike Air has not been translated to Chinese characters, even when it was launched in the Chinese market, as there is no comparable terminology. Retailers will need to work on a market-by-market basis to best understand the needs of their future consumers, as what works in one market may not work in the next.

By better understanding the needs and expectations of international customers, retailers can better position themselves for success.





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