The popularity of online shopping for consumer appliances continues. With new research findings released in November 2016, internet retailing for consumer appliances posted global growth of 7% in 2016, the highest amongst all distribution channels. While physical stores continued to rake in the highest sales, there continues to be sharp transition to online shopping. In addition, the development of mobile shopping applications and digital payment options are contributing to the growth of internet retailing.
Following on from an earlier opinion, we will explore the top five markets that are leading growth in sales of internet retailing. Based on the understanding that middle-income households are behind this growth trend, the drivers of growth for these top markets are showing contrasting patterns, with China taking on a unique positioning when it comes to internet retailing.
China makes rapid strides with internet retailing
Over the past five years, China’s consumer appliances sales through internet retailing posted robust growth at a 37% CAGR. Chinese consumers’ lifestyles and purchasing habits are changing positively towards digital and are coming mainly from big cities (or tier one cities) such as Beijing, Shanghai and Guangzhou. Lower prices offered via online along with the increased adoption and usage of mobile payments such as WeChat pay and Alipay are key driving factors. Notable online retailers include JD.com and Alibaba, followed by Suning and Gome. In particular, JD.com stands out for consumer appliance consumers with its offer of established appliance brands and a reliable delivery system. Orders are typically fulfilled within one day in tier one cities, along with a 2-hour delivery offer within limited areas. Suning and Gome, originally store-based retailers, are also extending their online presence, with Suning establishing a partnership with Alibaba and Gome one with Amazon China.
Price sensitivity supports online shopping but logistic problems are apparent in Russia and Brazil
Pricing dictates online consumer appliance purchases in Russia and Brazil, given both countries’ current struggles with economic downturn due to high inflation, taxation, and political issues. Other than the fact that prices are usually cheaper online, the offer of installment payments or discounts also encourage online purchases. In Brazil, for instance, bank slip is a popular payment method as this can be done without a bank account. This payment method does not offer the option of installments but one enjoys a discount as payment is made all at once.
Despite the growing popularity and adoption of shopping online, delivery and logistics remain a challenge. Mvideo, Russia’s main consumer appliance online and offline retailer, delivers products within one day or on the same day, but this service is limited to Moscow and other big cities. Elsewhere, consumers feel that delivery takes longer than anticipated and is considered the biggest hindrance for more heightened online shopping adoption. In Brazil, delivery takes an estimated one week to even one month, depending on how much delivery fee is charged. This is due to the poor logistic infrastructure that Brazil has, which retailers and manufacturers find frustrating. Given that both store-based and internet retailers suffer from a delivery time lag, consumers then look to benefit from the lower prices offered online.
Convenience a key factor in the US and UK
In the US and UK, price matters less compared to the convenience offered by internet retailing. Consumers in the US visit different websites for major and small appliances as they are hesitant about buying major appliances online and prefer to check products in physical stores. Consumers prefer to visit electrical and appliance retailers’ websites, such as Home Depot and Sears, or those of regional stores for major appliance purchases, while they tend to order small appliances online via the likes of Amazon and Bed Bath & Beyond. Delivery plays a big part in supporting internet retailing, especially for those who live far away from physical shops or shopping centres.
In Western Europe, the largest region for internet retailing, UK consumers widely embrace internet retailing for consumer appliances, encouraged further by the establishment of omni-channel shopping. Most internet retailers offer free delivery services and next-day delivery, including the offer of choice of day and time of delivery to cater to consumers’ convenience. For example, Currys provides same day delivery in parts of London at a charge of £3.95 for small appliances. The retailer also offers free next-day delivery for small appliances and next-day delivery of £3.95 for major appliances. Ao.com has its own repair service as part of the AO After Care plan and offers free delivery, with a choice of delivery day.
Mobile shopping: Not taking off just yet, except in China
Although internet retailing is growing in these markets, mobile shopping appears to be lagging behind, bar in China. While the infrastructure for mobile shopping is available, it is not commonly used for actual purchasing; instead, it seems to be used for checking product information and comparing prices. The notion of shopping via smartphone or tablets remains nascent for many. In contrast, Chinese consumers are increasingly using their devices for convenience and on-the-go consumption, supported by high penetration rates of smartphones. The Chinese government launched the “Internet Plus” action plan in 2015, which focuses on the construction and development of 4G networks and Wi-Fi coverage countrywide. With this infrastructure development and support, mobile shopping is set for stronger growth in China over the next five years.