Cracking the world's largest eCommerce markets - 2015 PayPal Inc. All rights reserved. Confidential and proprietary.
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Cracking the world’s largest eCommerce markets © 2015 PayPal Inc. All rights reserved. Confidential and proprietary.
Introduction
The study examines today’s winners;
International Previous studies by OC&C and Google,
have shown the UK to be the largest the barriers that, once removed, would
ecommerce is net exporter, with international retail accelerate cross-border shopping; and
what it takes to win in three large
outpacing domestic retail by 4x and
here to stay, and expected to be worth £28bn by 2020. markets, each of which has some highly
unique characteristics.
several UK retailers, Much of this success to date has
both pureplay come from UK retailers ‘skimming’
a large number of markets
and multichannel through international shipping
and payment solutions.
are successfully
Success in the future will require them
winning outside to move from this ‘go broad’ strategy
to one that enables them to ‘go deep’
their home market. and be locally relevant in some
of the world’s largest and fastest
Bringing together for the first time
growing ecommerce markets. The
insight from OC&C with search data
USA, China and Germany, in particular,
from Google and transaction data
represent key opportunities for UK
from PayPal, this report looks at the
retailers to access via ecommerce.
opportunities for UK retailers to
International retail win in these three of the world’s
expected to be worth largest ecommerce economies.
£28bn by 2020
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 2Alongside the UK, the biggest growth markets
in ecommerce are USA, China and Germany
B2C ecommerce Market Size and Growth - Top 10 Countries £bn, % CAGR
Bubble = ecommerce Market Value (2018)
200
180
US
In total these 4 markets
are expected to
ecommerce Market Value (2014)
160
double in size by
140 2018, adding £320bn
120
China
100
80 UK
60
40
Japan
Germany
20 South Korea
France Brazil Russia India
0
0
Growth Rate 2014-18 (CAGR %)
Source: Analysts consensus, OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 3UK retailers are already punching above their weight in
these markets, ranking as #1 or #2 cross-border destination
Top 5 Countries for Cross-Border Shopping1 % of Online Shoppers
US Shoppers Chinese2 Shoppers German Shoppers
China
13% USA
14% UK
15%
UK
9% UK
6% USA
13%
Canada
9% Japan
6% China
11%
Japan 4% France
3% Austria 9%
France
2% Germany
3% NL 6%
1. Question: “Thinking about shopping online, from which of the following country or geographies’ websites in the past 12 months” US n=563; China n=639; Germany n=614
2. Hong Kong responses are assumed to be a subset of customers shopping from China
Source: Ipsos MORI PayPal study 2014, OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 4These markets merit greater focus - international consumers
are both valuable and loyal
Cross-Border Shoppers to UK Merchants1
Average Paypal Transaction Value Annual Repeat Paypal Transactions with Same UK Retailer
Multiple of UK Average Paypal Transaction Value Multiple of UK median
China
2.7x China
0.9x
Germany
1.7x Germany
0.6x
China may be skewed
by category mix as
1.4x 0.8x
well as customers
USA USA
purchasing on
behalf of others
UK 1x UK 1x
1. Excludes sales from online marketplaces e.g. eBay, tangible goods only
Source: PayPal, OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 56 essentials to win in the world’s largest ecommerce markets
Engage Convert
1. Know your Pull Factors 4. Break Barriers Beyond the Basics
Even in well-served markets like the US, there Many of the original barriers still exist but you
are reasons why UK retailers should do well need to be tackling the tier beyond the obvious
6
Harness the power of your proposition Go beyond the basics to tailoring
your proposition
2. Focus to Climb Fast 5. Price Smart for Currency Movements
When we look at the fastest rising retailers in Currency may not be a primary barrier
the ranks, they all appear to pick their battles
Take lessons from the leaders
winning but it’s clear that it is still an influencing
factor for cross-border shoppers
essentials Evolve your approach to pricing
3. Adapt for Online Ecosystems 6. Lead the Growth of Mobile
Some markets are fundamentally different where UK retailers are uniquely well-positioned to
you will need to change the way you operate exploit the international growth of retail
Consider a specifically Chinese approach Invest in the mobile journey
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 6International consumers purchase from the UK
due to the unique products, price and quality
1. Know your pull factors Pull Factors for Consumers to Buy From UK Retailer vs Local Retailer1
% Respondents
Products that I cannot find in my own country
40%
Cheaper overall
30%
Trust the quality
29%
Better product styles
22%
More authentic products
20%
Like British brands
19%
Better service
14%
Quicker to receive
11%
1. Question: “Why did you decide to buy from a retailer based in the UK rather than a local retailer? Select all that apply” (n=2,290)
Source: OC&C Consumer Survey (powered by Toluna), OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 7Key drivers differ across countries
1. Know your pull factors Top 3 Pull Factors by Country for Consumers
to Buy From UK Retailer vs Local Retailer1 Bubble size indicates % respondents citing
as an important or very important factor
#1 Products that I cannot find
in my own country
Products that I cannot find
in my own country
Trust the quality
#2 Trust the quality Cheaper overall More authentic products
#3 Cheaper overall Better product styles Cheaper overall
Consumers US German Chinese
1. Question: “Why did you decide to buy from a retailer based in the UK rather than a local retailer? Select all that apply”; US n=724; Germany n=974; China n=592 Source: OC&C Consumer Survey (powered by Toluna), OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 8UK retailers who have achieved international ecommerce
success do so through clear strengths in their offer
2. Focus to climb fast
Important Factors when Choosing to Top 3 Factors where Fast
Buy from UK Retailer1 % Respondents Answering “Very Important” Climbers are Outperforming2
Safe & preferred
payment method 46%
Unique product
offering 34%
1 Free & easy returns 1 Trust in product authenticity
Affordable shipping 33%
Safe & preferred
Website & support 2 Affordable shipping 2 payment method
in local language 32%
Safe & preferred
3 payment method 3 Pricing & promotions
Free & easy returns 31%
Trust in product
authenticity 31%
Delivery speed 28%
Website & support
1 1 Free & easy returns
Pricing & promotions 27% in local language
Delivery tracking 26% 2 Delivery Tracking 2 Affordable shipping
Mobile-friendly 14% 3 Mobile-Friendly 3 Unique product offering
1. Question: “When making the decision to purchase from , how important was it to you that they offered the following?”
2. Outperforming average of the 36 UK retailers included in the consumer survey: ASOS n=86; Graze n=48; MyProtein n=43; Boden n=31
Source: OC&C Consumer Survey (powered by Toluna), OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 9Fast-climbers in the international field have been focused
2. Focus to climb fast Top 10 Fastest Risers 2012-15
Added Search Volume
Introduced zonal pricing to compensate for
USA Germany Tailor product offering to tastes
currency movements, including in US and Germany In each market – not a ‘one size fits all’
1 ASOS 1 ASOS
Partner with local couriers abroad, allowing Given lack of on-the-ground presence,
hassle-free returns Build trust in quality via digital advertising,
2 Topshop 2 My Protein
social media and influencers
Accessible everywhere: mobile site, apps,
Facebook shop, Pinterest in multiple languages 3 Wiggle 3 Superdry
4 Graze 4 Sports Direct
5 Lush 5 The Body Shop
Understand the consumer – e.g. 40% 6 Burberry 6 Wiggle Emphasise unique proposition by focusing on
of snacks unique to the US market to suit their British heritage internationally...
consumer tastes, and new products like the Clarks
7 7 Boohoo ...and then tackle key barriers to purchase:
‘8 snack box’ introduced
Localised logistics - ‘The Brain’ adapts delivery • Shipping cost & speed first
8 Dabs 8 Next
according to quickest route (Including adding a US warehouse)
• Tailoring payment methods
Make friends and share knowledge understand 9 The Body Shop 9 Photobox to each country, and
solutions from similar companies and share insights • Localising languages
10 Naked Wines 10 Boden
Source: Google and OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 10China has a unique internet ecosystem, which
requires a markedly different approach to succeed
3. Adapt for online ecosystems E-Commerce Leading Players by Type
Relative Size (Traffic, Penetration1)
Marketplaces & Generalists Social Media
walmart.com LinkedIn
Google+ Tumblr Multiple functionalities in one app:
etsy.com ebay.com Instagram FB-Messenger • Messaging and video chat
amazon.com
bestbuys.com
Facebook Pinterest
Skype
• Ecommerce: WeChat brand stores and
direct access to online marketplaces
Twitter Snapchat
• Customer Support & Marketing
• Other services: mobile banking, taxi
bookings, restaurant reviews
ebay.de
Shazam
Whatsapp Instagram
Skype
Facebook
otto.de
amazon.de
bestbuys.com
Twitter
Tumblr
FB-Messenger LinkedIn Google+
Tmall JD Facebook Sina-Weibo Google+
Taobao amazon.com
Wechat
Qzone
Tudou
Tencent-Weibo
Youku
Renren Kaixin
amazon.cn
#1 Player
1. Traffic: Marketplaces & Generalists, Penetration: Social Networks Source: iResearch, Similarweb rankings, OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 11Marketplaces are the dominant online retail platform in
China and supplant search engines as the starting point
3. Adapt for online ecosystems Marketplaces as an Online Platform Marketplaces
supplant
search englines
in China
Ways International Consumers Reach UK Retailers Online1
% respondents2
China ecommerce Market Composition
% total sales 32%
Link from online
18%
marketplace
Non marketplace 10% 19%
21%
Search engine 27%
Tmall = c.60%
B2C marketplace 30% 34%
JD = c.20% 19%
Type in website
directly into browser 33%
27%
19%
Search in shopping
navigation sites 10%
12%
C2C marketplace 60% TaoBao = c.90% 9%
Link on social
China
media site 10%
5% US
Germany
Other 3%
3%
1. Question: “How did you access online?” 2. Sample sizes: China n=398; US n=559; Germany n=584 Source: iResearch, OC&C Consumer Survey (powered by Toluna), OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 12Existing cross-border shoppers identify different
key barriers to non-cross-border shoppers
4. Break Barriers Beyond the Basics “To what extent do the following discourage you
from purchasing more from overseas retailers?”
Top 5 Barriers Indicated as “Very Strongly Discouraging”
Current Cross-Border Shoppers1 Non Cross-Border Shoppers2
Concern about the security of my Website and/or customer support
1 personal or financial details 1 not available in own language
Lack of trust in the retailer and/or Payment in foreign currency and/or
2 product authenticity 2 higher overall cost to buy internationally
3 Returns difficult and/or costly 3 Returns difficult and/or costly
Payment in foreign currency and/or Concern about the security of my
4 higher overall cost to buy internationally 4 personal or financial details
Concern about customs duties/ Concern about customs duties/
5 fees and/or taxes 5 fees and/or taxes
1. Consumers who have bought something online knowing that it was shipped from outside of their country (n=2,241)
2. Consumers who have never knowingly bought something online that was shipped from outside of their country (n=759)
Source: Google, eConsultancy , OC&C Consumer Survey (powered by Toluna), OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 13To ‘go deep’ you need to tackle barriers beyond the basics
4. Break Barriers Beyond the Basics Cumulative Impact of Addressing Barriers
% of Total Online Shoppers Accessible
A third of ‘Skimming’ has Tailoring the proposition
Full potential
people don’t been done fairly further by tackling these
unlocked
identify any well to date – only further barriers could allow you
major barriers another 10% to be to access the final 60% of
to shopping gained from potential customers
cross-border improving on
these barriers
‘Going Deeper’+ a further 60%
100%
10%
30% + + + + + +
No Changes Basic Logistics Language6 Pricing7 Trust8 Preferred Payments9 Speed10 All Barriers Addressed
Shipping1, Returns2, Data Security3,
Customs/Duties4, Tracking5
1. Delivery shipping costs; 2. Difficult to return goods and/or return shipping costs; 3. Concern about security of personal or financial details; 4. Concern about customs duties / fees and/or taxes;
5. Lack of delivery/tracking notifications; 6. Website and/or customer support not available in local language; 7. Payment in foreign currency and/or higher overall costs to buy from
another country; 8. Concern on counterfeiting and/or lack of trust in the retailer; 9. Preferred payment method not always offered; 10. Delivery time not fast enough
Source: OC&C Consumer Survey (powered by Toluna), n=3,000, OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 14Currency is clearly an influencing factor for some
cross-border shoppers, particularly with the Asian customer
5. Price Smart for Currency Movements UK Share of eCommerce vs Exchange Rate
2013-15YTD
Australia China
High correlation: R2 = 76% UK Share of eCommerce GBP/AUD High correlation: R2 = 58% UK Share of eCommerce GBP/CNY (£)
(Indexed) (Indexed)
110 0.74 220 0.112
105 0.72 210 0.110
200 0.108
100 0.70
190 0.106
95 0.68
180 0.104
90 0.66
170 0.102
85 0.64 160 0.100
80 0.62 150 0.098
75 0.60 140 0.096
130 0.094
70 0.58
120 0.092
65 0.56
110 0.090
60 0.54
100 0.088
55 0.52 90 0.086
50 0.50 80 0.084
Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016
Source: Paypal, Oanda, OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 15Determining the right pricing model is a
key challenge to counter these effects
5. Price Smart for Currency Movements Pricing Options, Example Retailers & Products
One Price, One Currency One Price, Multiple Fixed Currencies
£1,250 + £15 delivery
$949 £599 €699
e.g. Selfridges - Alexander McQueen Jacket e.g. babyshop.com - Stroller
One Price, Floating Currencies Totally Local
100
$ (USD)
$(NZD) $109/ $105/
99
€(EUR) $68 £69 €77
98 £(GBP)
Home Price USA Local Price UK Local Price Germany
e.g. iHerb.com - Avalon Organics Thickening Shampoo 414ml e.g. Abercrombie & Fitch - Jeggings
Source: Retailer Interviews, Internet research, OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 16UK shoppers are more mobile
6. Lead the Growth of Mobile Fashion case study: Mobile & Tablet Share of Searches
Google Searches & Paypal Transactions1 (%) Transactions
2013 2015
43% 60%
38% 59%
44% 61%
29% With high growth in 45%
mobile in all markets,
US and Germany
will soon follow
26% the same path as UK
48% Mobile has an even bigger share
in China. Our consumer survey
showed 75% of Chinese
consumers said they
16% 24% shopped on mobile vs
25% in US and Germany
1. Share of mobile & tablet vs all devices for fashion only, March 2013 and March 2015
Source: Google, Paypal and OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 17As the US and Germany get more comfortable with mobile,
UK retailers are well positioned to succeed
6. Lead the Growth of Mobile
DE Fashion Search and Transactions by Time of Day1,2 UK Fashion Search and Transactions by Time of Day1,2
Indexed 100=Max Indexed 100=Max
Desktop - search Desktop - transactions Desktop - search Desktop - transactions
Mobile - search Mobile - transactions Mobile - search Mobile - transactions
100 100
90
Desktop searching 90
Shopping on mobile
high throughout the is 1.7x that on
80 day, converted to 80 desktop in the
transactions in evening in the UK
70 the evening 70
60 60
50 50
40 40
30 30
20 20
10 10
0 0
12am 4am 8am 12pm 4pm 8pm 12am 4am 8am 12pm 4pm 8pm
1. Search: Google searches only, Transactions: Paypal transactions only 2. Mobile includes both Smartphone and Tablet activity
Source: Google, Paypal and OC&C analysis
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 18The CEO’s Playbook for Success in the World’s Largest
ecommerce Markets
USA Germany China
Emphasise proposition – Sharpen your Build trust and focus
particularly high quality, British value credentials on authenticity
Social is king,
Master visual social media Search trumps social
especially WeChat
Find a way to buy and Lernen Sie Deutsch Work out the role of
price locally zu sprechen marketplaces in your strategy
Focus on mobile conversion Adapt your payment mix Price smart for currency
Proactively manage the Cultivate a network of trusted
Adapt your last mile for speed
returns experience local partners, e.g. for last mile
© 2015 PayPal Inc. All rights reserved. Confidential and proprietary. 19For further information contact: Anita Balchandani Partner, OC&C Strategy Consultants anita.balchandani@occstrategy.com Ritesh Arora PayPal UK – Cross Border Trade ritarora@paypalcorp.com Martijn Bertisen Google UKI, Industry Director, Retail mbertisen@google.com Acknowledgements OC&C worked with Toluna to run a survey of 3,000 respondents in 3 markets © 2015 PayPal Inc. All rights reserved. Confidential and proprietary.
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