How the Internet Makes the World Richer

In the Internet era, we all love the convenience of shopping online. Most anything you could imagine is available at the click of a mouse, without ever having to leave your home.

And as the number of people using the Internet around the world has increased almost 10 times faster than the world’s population growth, there are more and more people buying necessities and getting their shopping fixes online.

It’s not just about the convenience; often, online stores can offer lower prices due to their lower overhead costs. Unlike your traditional bricks-and-mortar retailers, there’s no need to maintain a storefront, so big online retailers often have much lower prices than the corner store that has to charge more to stay in business.

Now that everyone’s going online to find the cheapest goods from around the world instead of patronizing their local stores, how does that affect the economy?

Well, small local stores aren’t all going out of business just yet. While online stores can offer convenience and lower costs, there are advantages to shopping in person that online stores can’t compete with. Trying on clothes and getting face-to-face customer service are impossible online, and the experience of browsing and window shopping in person just can’t be replicated in the same way. The future of shopping isn’t necessarily all online, and when it comes to Mom-and-Pop versus Amazon, one isn’t always better than the other.

And while many claim that the rise of of online shopping may be destroying local retail, the opposite may be true when it comes to the bigger picture: the global economy.

E-commerce makes it easier than ever for retailers to upsell, and for customers to impulse buy. Online businesses are selling more than ever, and its effects are showing in the world economy. Global online sales are in the trillions, and growing at astounding rates each year. And with mobile commerce — or “m-commerce” — on the rise, the numbers are expected to grow exponentially in the following years.

Is e-commerce ushering in a new era of global wealth? The jury’s still out, but you can check out the facts for yourself below.

How-internet-making-world-richer

How the Internet Makes the World Richer

When a click is easier than a trip to the store, e-commerce continues to grow in options, accessibility, and convenience. What is its impact on the economy? Are we facing a transformation into a world of digital shopkeepers?

Global Internet Users

  • The world has over 2.9 billion internet users, about 40% of the global population, almost tripled since 2005.
  • The average growth rate of internet users is 10.8% annually in the last 5 years, while the population growth has only been an average of 1.17% in the same timeframe.
  • Asia accounts for 48.4% of users.
    • North and South America: 21.8%
    • Europe: 9%

The State of the GDP

  • The gross domestic product (GDP) gives the value of all final goods and services produced within a nation. The percentage measures the annual growth rate of economies by nation, region, or globally.
  • In the last 10 years, the global GDP has experienced some interesting growth activity.
    • 2003 – 2007: rate increased by 4%
    • 2008: rate increased by 1.4%
    • 2009: rate decreased by 2%
    • Since then, the GDP has risen back between a 3-4% annual growth.
  • The US had an estimated GDP of $16.72 trillion in 2013, with a growth of about 1.6%.
  • China’s GDP in 2013 was about $13.39 trillion with a 7.7% growth rate.

E-Commerce Hacks the GDP

  • Global Business-to-consumer sales are expected to reach $1.5 trillion in e-commerce in 2014.
  • With growing consumer bases in emerging markets, m-commerce (mobile commerce), payment options, and expanding international markets for major brands, e-commerce’s influence on the economy increases.
  • Mobile Commerce
    • By 2017, m-commerce is expected to account for about 25% of internet retail sales in the US, double the sales in 2012.
    • Mobile sales in 2013 were estimated at $38.84 billion, with more than $108 billion expected by 2017.
    • In 2013, about 51% of online buyers made purchases on a mobile device, approximately 60% of those purchases being made on tablets.

G20, Kings of E-Commerce?

  • G20 countries represent about 85% of global GDP and two-thirds of the global population.
  • As of 2012, the internet accounts for 4.1% of the GDP in G20 countries.
  • Estimates have the internet economy accounting for 5.3% of the GDP in G20 countries by 2016.
  • The internet economy is expected to double for the G20 between 2010 and 2016.
  • Western Europe
    • The UK is the biggest e-commerce spender with sales in 2013 at $3,878 per capita, more than Germany and France together.
    • By 2016 the UK’s online retail will account for 23% of its GDP.
  • Brazil
    • Although still emerging as online consumers, Brazil was marked as the 10th largest global market in early 2014.
    • About 37.7% of its 107.7 million internet users are expected to make online purchases this year.
    • Online sales are expected to grow from $11.97 billion in 2013 to $16.63 billion in 2017.
  • United States
    • In 2012, the US alone spent $226 billion in e-commerce, with an expected increase to $434.2 billion by 2017.
    • Mobile commerce is expected to rise from 11% of e-commerce sales in 2012 to 25% of sales in 2017, reaching more than $108 billion.
    • An estimated 74.4% of American web users will make purchases online in 2014.

Asia-Pacific, Taking Their Place Among Giants

  • The Asia-Pacific region, an emerging market, is expected to become the largest regional e-commerce market in 2014, spending $525.20 billion, compared to North America’s $482.60.
  • China will take $6 of every $10 spent on e-commerce in the Asia-Pacific this year.
  • South Korea’s e-commerce is a lesson in adaptability.
    • American giants like Groupon, Amazon, and Google are hardly a drop in the bucket in the Korean market.
      • Google accounts for only about 4% of searches, and Groupon recently closed its Korean subsidiary.
    • Local companies like TicketMonster and Coupang do better by integrating coupon sales like Groupon, but also physical goods like Amazon.
    • The mobile saturation, dense city populations, and super-fast internet connections all account for swift purchasing and delivery, making e-commerce with local companies very attractive.
    • E-commerce is still losing.
      • TicketMonster reported a loss of $41 million in the first three quarters of 2013, probably due to high marketing investments.

Emerging Markets, the Future of E-Commerce?

  • Latin America, Central/Eastern Europe, Africa, and the Middle East continue to be low performing e-commerce regions.
  • The Middle East
    • The Middle East has about 90 million e-commerce users, with about 15% of businesses having an online presence.
    • In 2015, e-commerce is expected to reach $15 billion in sales.
    • Mobile commerce is expected to reach $4.9 billion by 2015.
    • The current value of offline retail commerce is about $425 million.
    • The most popular multi-vendor sites include Etsy, Amazon, Souq, and Tradus.
    • About 33% of web users in the Gulf regularly use the internet for research and purchasing products.
    • About 68% of online shoppers are male, with only 32% female.
    • The United Arab Emirates has the highest percentage of e-commerce users.
    • About 50% of e-commerce in Saudi Arabia originates outside of major cities, suggesting a mobile commerce opportunity.
    • Saudi Arabia’s physical goods e-commerce sites use 70-80% cash on delivery.
    • In 2013, the Middle East’s top e-commerce niches were charted.
      • Kuwait: 52% of users did online banking, and 34% booked airline tickets.
      • Lebanon: 49% of users did online banking, while other niches were 18% or less, including purchasing goods and booking travel.
      • Egypt: 36% of users did online banking, and 35% used auctions, while travel hit 9% and lower.
      • UAE: 54% of users booked airline tickets, while 43% used online banking.
    • South Africa
      • An expected 29.8 million people will be internet users by 2016.
      • Online spending increased by about 25% in 2013, reaching about $400.6 million.
      • In 2014, smartphones are expected to reach an 80% saturation, although so far only about 12% of South African shoppers have purchased online via their mobile devices.
      • The most popular niches are airline tickets, movie tickets, and theatre tickets.

The State of the GDP

  • Argentina
    • A 2013 GDP of $771 billion puts it at number 23 among global GDPs.
    • Per capita, Argentina’s GDP is around $18,600, placing it at number 75 among the world’s nations.
    • The GDP growth rate took a hit between 2011 at 8.9% to 2012 at 1.9%.
      • In 2013, it rose to 3.5%, ranking at 95 in the world.
    • Industries include food processing, automobiles, textiles, chemicals, printing, and metal production.
    • Argentina has nearly 28 million internet users out of a 43 million population, nearly quadruple the internet users just 10 years ago.
    • Yet, in an attempt to protect the Argentine peso, import tax on goods brought in by post is now at 50%.
      • The tax discourages importing goods and the outflow of Argentine money to other countries.
      • There is even a heavy tax on overseas holidays.
      • Very few exemptions exist, and they can be used only up to $25 twice a year.
    • The result is an extremely limited domestic e-commerce marketplace and very expensive international e-commerce.
  • Mexico
    • Mexico’s biggest e-commerce market is the travel industry.
    • Outside of travel, online retail sales were around $3 billion in 2013, far behind the US’s $300 billion, China’s $249 billion, or Brazil’s $13 billion.
    • Factors for a limited e-commerce market are unsurprising.
      • An underbanked population makes digital cash difficult to get.
      • Retailers tend not to adopt a digital storefront as part of their business.
      • Weak distribution options make ordering and delivering difficult.
    • Retail e-commerce is expected to represent only about 33.8% of all business-to-consumer e-commerce sales in 2017, compared to current estimates in China at 78.8%, India at 33%, and the US at 67.4%.
  • Indonesia
    • Indonesia is the 4th most populous country in the world.
    • Among its millions of internet users, Indonesia lacks internet addicts.
      • The number of internet users hit 74.6 million in 2013, and the numbers are expected to nearly double to 125 million in 2017.
    • Asia’s top market, China, reached a business to commerce sales figure of $181.62, compared to India’s $16.32 billion, and lastly Indonesia’s comparatively small $1.79 billion in total sales.
    • Estimates suggest a rise to $10 billion in sales by 2015, still far below other Asian countries.
    • Home internet connections are slow and expensive, so peak shopping times are during regular work hours, right before and after lunchtime.
    • Poor infrastructure makes delivery difficult.
      • Bad roads, unclear addresses, lack of detailed maps for shippers, and couriers with unclear delivery times results in unsatisfactory consumer experiences.
    • Payment options are chaotic.
      • Many online retailers require consumers to make ATM transfers in cash before the products can be shipped, bringing the convenience level to negligible compared to going to a physical store..
    • Mobile commerce is becoming a little easier with smartphone prices dropping, but it has a long way to go.

The marketplace is changing from a storefront to a screen. Will the growth of e-commerce bring on a new age of global GDP growth?

Sources

  • Internet Users – internetlivestats.com
  • The World Factbook, Notes and Definitions – cia.gov
  • GDP Growth (Annual %) – data.worldbank.org
  • The World Factbook, United States – cia.gov
  • ComScore Reports $47.5 Billion in Q3 2013 Desktop-Based U.S. Retail E-Commerce Spending, Up 13 Percent vs. Year Ago – comscore.com
  • The Internet Economy in The G-20 – bcg.com
  • Global B2C Ecommerce Sales to Hit $1.5 Trillion This Year Driven by Growth in Emerging Markets – emarketer.com
  • Mobile to Account for 25% of U.S. Online Sales by 2017 – mashable.com
  • Global Ecommerce Tops $1trillion – UK Consumers Biggest Online Spenders – intelligentpositioning.com
  • Retail Ecommerce Sales in Brazil to See Double-Digit Growth This Year – emarketer.com
  • E-commerce in South Korea – economist.com
  • Ecommerce in Middle East Statistics and Trends – slideshare.net
  • Ecommerce stats: online shopping in the Middle East – econsultancy.com
  • The Future Of E-commerce in SA – businesstech.co.za
  • E-Commerce in South Africa – imoddigital.com
  • The World Factbook, Argentina – cia.gov
  • Argentina, Internet Usage Stats and Market Reports – internetworldstats.com
  • Argentinian Customs Duties To Shut Down E-Commerce – tax-news.com
  • Retail Ecommerce Sales Struggle in Mexico – emarketer.com
  • Four Reasons Why Indonesia Is the World’s Most Perplexing E-Commerce Frontier – qz.com
  • Indonesia’s Ecommerce Industry Awakens – ft.com

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