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With e-commerce already mature and mainstream across advanced economies, emerging countries offer some of the most attractive growth rates in the segment. Euromonitor has identified the top 5 e-commerce markets among emerging economies based on retail growth, Internet connectivity and consumer demand. They are Nigeria, Algeria, Pakistan, the UAE and India. Rising household Internet penetration on the back of lower broadband tariffs and cheaper digital devices, demand for online offerings due to improved marketing strategies by Internet retailers, and more options for consumers in terms of payment and delivery are some of the primary factors driving surging e-commerce uptake in developing countries.
The combination of enhanced domestic broadband offerings and a vibrant domestic retail environment have led to Nigeria becoming the global leader in e-commerce growth for 2015, with annual real growth of 177%, almost triple the rate of the next closest developing country. With mobile Internet to be accessed by a fifth of mobile subscribers in 2015, venture capitalists are taking notice of the e-commerce success and are actively seeking to invest in this market. The two most prominent examples of online retailers already receiving substantial investments are Jumia and Konga, the largest online retailers in the African country.
Following the discontent of the Arab Spring, the Algerian market has stabilised and become an exciting epicentre of North African e-commerce. Improvements in Internet access and a love affair with social media have provided the platform for the country’s young populace to shop online. A more diverse payment landscape, including stand-alone street terminals and via mobile, are driving expansion, with e-commerce set to expand by 66.7% in real annual terms in 2015. However, the primary driver is the smartphone, with the country set to see the world’s fastest rise in mobile Internet retailing in 2015 by some distance, with a rise of 733% in real annual terms.
Although Pakistan’s economy remains unstable, providing an unpredictable environment for business, e-commerce operators have caught on to growing demand for online purchases among the country’s urban households. With Internet penetration set to reach only 12.6% of the population in 2015, rural consumers are still a long way from gaining access to e-commerce services. Considered as a frontier market, international businesses are investing into Pakistan, with Germany’s Rocket Internet leading the pack. However, despite rapid growth, the local e-commerce market remains tiny by value compared to the huge size of the country’s population, forecast to reach only US$42.9 million in 2015.
Recovery following the devastating impact of the global economic downturn of 2008-2009 has been swift in the Arab economy, with real estate, finance and e-commerce all booming. The UAE has a strong domestic e-commerce segment that can compare to developed countries in terms of maturity, so its growth is not based on an early stage of development. Instead, rapid population expansion (5.2% growth over 2009-2014) is driving sales, as foreign workers continue to stream into the country, with many doing much of their settling-in purchases online. However, there is also a contrast to the market –many come to the UAE to shop in many of the country’s huge, tax-free shopping malls and souks, meaning online purchases represent a fraction of retail sales. Still, there is no reason why both offline and online are unable to grow in tandem.
The world’s second most populous country has all the characteristics of an e-commerce growth spot: low Internet penetration on the rise, giant urban centres and localized IT clusters. As the population becomes more tech-savvy, online purchases are rising, with e-commerce value increasing by 36.4% in real annual terms in 2015. What could really propel market growth though is India’s growing status as an alternative to China. International e-commerce players have long looked to crack the lucrative Chinese market, but state protectionist measures and the monopolies of domestic players such as Alibaba and Tencent mean that international entrants would have to play second fiddle to local giants. As a result, majors such as Amazon are pouring funds into India (the US firm announced investments of around US$2.0 billion in 2015), which has a similarly sized population, an increasingly friendlier business environment and a less competitive e-commerce landscape.