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Cities Hotbed for Internet Retailing Growth

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Over 2014-2019, internet retailing is expected to grow by 76% to reach US$1.5 trillion in turnover (in constant value terms), while traditional store-based retailing will grow considerably more slowly at 11% to almost US$14.6 trillion. However, internet retailing seems set to take off only in markets where conditions are right. Specifically, the share of internet retailing in total retailing sales rises above 5% only in countries with high rates of household access to the internet – namely, in countries where household ownership of internet-enabled PCs exceeds 70%.

Chart 1. Access to Internet and Role of Internet Retailing in 80 Major Countries of the World, 2014


Source: Euromonitor International

Locations of the future

The 70-75% threshold of internet availability is important as it shows that the online experience of friends, acquaintances and colleagues may matter more than advertising or even delivery and payment options. Once a large enough share of the population has access to the internet, they increasingly surf the web, share their experiences and help overcome any concerns about online shopping among their peers.

In most markets where internet retailing is underdeveloped, online sales are actually quite strong in major cities thanks to widespread access to internet in those cities. Consider Russia, where St Petersburg and Moscow account for 75% of online sales. In many such markets, selling outside major cities usually means overcoming consumer distrust of online shopping. The previously described 70% share of households with internet-enabled PCs suggests a threshold that can help to identify locations where consumers will have enough peers to help them shake off security concerns.

Worldwide, there are 136 where share of internet-enabled PCs was below the 70% threshold in 2014, but they will see the share rise above 70% in 10 years’ time from 2014. Most of these cities are located in countries where internet retailing is still in its infancy, yet these cities are likely to lead the countries’ online sales growth over the next decade. Some of the 136 have over one million households, constituting large consumer markets on their own.

Without doubt, advertising, pricing, delivery and payment options are important success factors for internet retailing too. Some of these challenges can be tackled by innovative business decisions and investments. However, prioritising locations where more than 70% of households have internet-enabled PCs is likely to provide the highest returns on such investments.

Chart 2. World Cities with the Best Prospects for Internet Retailing to 2025



Source: Euromonitor International

Note:  Each dot represents one of 136 world where the household possession rate of internet-enabled PCs will exceed 70% by 2025




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