In recent years, e-commerce has been rapidly growing in emerging markets, driven in large part by the increased penetration of mobile phones and Internet access. As of 2023, e-commerce sales in emerging markets are projected to reach over US$3trillion, with Asia and Africa leading the way in terms of growth.
Mobile commerce, or m-commerce, has been particularly important in these markets as many consumers in emerging markets have leapfrogged traditional desktop computers and gone straight to using mobile phones for Internet access. In fact, in some emerging markets, mobile phones are the primary means of accessing the Internet for a majority of the population.
This shift toward mobile commerce has presented unique opportunities and challenges for e-commerce companies operating in emerging markets. On one hand, it has opened up a large, previously untapped market of consumers who are now able to shop online. On the other hand, it has required e-commerce companies to adapt their platforms to work seamlessly on mobile devices and to find ways to address challenges, such as limited bandwidth and inconsistent network coverage.
Despite these challenges, there have been many successful e-commerce companies in emerging markets, including Jumia in Africa, Konga in Nigeria, Takealot and Upventurez – both in South Africa, Shopee in Southeast Asia, and Daraz in South Asia. These companies have found success by offering a wide range of products at affordable prices, implementing innovative payment and delivery options, and leveraging social media and influencer marketing to reach new customers.
Challenges and opportunities for e-commerce in emerging markets
While there is significant growth potential for e-commerce in emerging markets, there are also several unique challenges that companies must navigate to succeed:
- Infrastructure and logistics
One of the biggest challenges facing e-commerce companies in emerging markets is the lack of developed infrastructure and logistics networks. Many countries in emerging markets have poor road and transportation networks, making it difficult and expensive to deliver products to customers in a timely and efficient manner. Additionally, there may be limited options for online payment and delivery, which can further complicate the logistics of running an e-commerce business.
Nonetheless, this challenge also presents an opportunity for e-commerce companies to innovate and develop new solutions for delivering products and processing payments. For instance, some companies have partnered with local delivery services or developed their own logistics networks to improve delivery times and reduce costs. Others have implemented cash-on-delivery payment options to cater for customers who prefer to pay in person rather than online.
- Trust and security
Another challenge facing e-commerce companies in emerging markets is building trust and ensuring security for customers. In many emerging markets, there may be a lack of trust in online shopping due to concerns about fraud, counterfeit products, and unreliable delivery. E-commerce companies must take steps to address these concerns and build trust with customers by implementing secure payment and delivery processes, offering warranties and guarantees on products, and providing clear and transparent communication throughout the buying process.
At the same time, this challenge also presents an opportunity for e-commerce companies to differentiate themselves from competitors by emphasising their commitment to security and trust. By implementing strong security measures and building a reputation for reliability and transparency, e-commerce companies can gain the trust and loyalty of customers in emerging markets
- Cultural and language differences
E-commerce companies operating in emerging markets must navigate cultural and language differences to effectively market and sell their products. What may be successful marketing strategies in one country may not work in another, and language barriers can further complicate communication with customers.
Even so, by taking the time to understand the cultural and linguistic nuances of each market, e-commerce companies can tailor their marketing and communication strategies to better resonate with local customers. This may involve partnering with local influencers or developing marketing materials in multiple languages to ensure that customers feel seen and heard.
Yet, while there are certainly challenges to operating an e-commerce business in emerging markets, there are also many opportunities for companies to innovate and grow. By understanding the unique challenges and opportunities of these markets and adapting their strategies accordingly, e-commerce companies can position themselves for long-term success and growth.
Logistics and payment solutions
In the early days of e-commerce, one of the main challenges was how to deliver products to consumers efficiently and cost-effectively. This challenge is even greater in emerging markets, where infrastructure may be less developed and consumer behaviour may be different.
To overcome these challenges, many e-commerce companies in emerging markets are exploring alternative delivery models, such as pick-up points and lockers. These models allow customers to pick up their orders at a convenient location, such as a local store or transportation hub, instead of waiting for home delivery. This can significantly reduce delivery times and costs, while also making it easier for customers to receive their orders.
Another key aspect of e-commerce in emerging markets is the role of mobile payment solutions. In many emerging markets, traditional payment methods, such as credit cards are not widely used, and cash on delivery is still common. However, mobile payment solutions – such as mobile wallets and payment apps – are becoming increasingly popular, allowing consumers to pay for their purchases quickly and easily using their mobile devices.
All the same, for consumers to feel comfortable using these payment methods, e-commerce companies need to build trust and offer secure payment options. This can be achieved through measures such as using secure payment gateways, implementing fraud detection systems, and offering buyer protection programmes.
Some successful e-commerce companies in emerging markets have already recognised the importance of logistics and payment solutions. E.g, China’s JD.com has invested heavily in its own logistics network and operates more than 650 warehouses and 5,370 delivery stations in China, enabling it to offer fast and reliable delivery to its customers. Similarly, India’s Paytm has built a comprehensive mobile payment ecosystem that includes its payment gateway, mobile wallet, and digital banking services.
As e-commerce go along to grow in emerging markets, logistics and payment solutions will continue to be key areas of focus for companies looking to succeed in these markets.
Alternative delivery models – such as pick-up points and lockers
In many emerging markets, traditional delivery infrastructure may not exist or may be unreliable, making it difficult to get products to consumers. This has led to the rise of alternative delivery models, such as pick-up points and lockers.
Pick-up points are designated locations where consumers can pick up their online purchases. These points can be located in retail stores, shopping malls, or other convenient locations. Pick-up points offer several advantages, including reduced shipping costs for retailers, greater convenience for consumers who may not be home during the day to receive deliveries, and increased foot traffic for retail partners.
Lockers are another alternative delivery model that is gaining popularity in emerging markets. Lockers are secure, self-service units located in public places, such as shopping malls or transit stations, where consumers can pick up their online purchases at their convenience. Lockers offer many of the same benefits as pick-up points, including reduced shipping costs, convenience, and increased foot traffic.
Both pick-up points and lockers require infrastructure investment, but they can be more cost-effective than traditional delivery methods, particularly in areas with limited or unreliable delivery infrastructure. As e-commerce continues to grow in emerging markets, the adoption of alternative delivery models, such as pick-up points and lockers, is likely to become more widespread, providing consumers with greater convenience and retailers with more cost-effective delivery options.
The role of mobile payment solutions in facilitating online transactions
Mobile payment solutions are playing an increasingly important role in facilitating online transactions in emerging markets. In many of these markets, traditional banking infrastructure is limited or inaccessible to large portions of the population. Mobile payment solutions offer a convenient and secure alternative for consumers to pay for online purchases.
One example of a successful mobile payment solution in emerging markets is M-Pesa, a mobile payment system launched in Kenya in 2007. M-Pesa allows users to deposit, withdraw, and transfer money using their mobile phones. The service has since expanded to several other countries in Africa and has over 40 million users. Similar to M-Pesa in Kenya, MTN Ghana also launched its mobile money service in 2009, and it has since grown to become one of the leading mobile money platforms in the country, alongside other providers such as AirtelTigo and Vodafone Cash. The success of mobile money in Ghana can be attributed to factors, such as a high level of mobile phone penetration, a large unbanked population, and the convenience of mobile money transactions. As of March 2022, the total value of mobile money transactions in Ghana reached GH¢264.1billion, representing a 72.6 percent growth year-on-year.
In addition to mobile payment solutions, other alternative payment options – such as cash on delivery (COD) – are also common in many emerging markets. COD allows consumers to pay for their purchases in cash when the product is delivered to them, providing a level of security and trust that may not be present with online payment options.
The importance of building trust and offering secure payment options
Building trust is crucial for the success of any e-commerce business, especially in emerging markets where online shopping is still a relatively new concept for many consumers. To build trust, online retailers need to ensure that their payment options are secure and reliable. One way to do this is by using encryption technology to protect customer information during transactions. Another way is to partner with trusted payment providers that have a proven track record of providing secure payment solutions.
In addition, to secure payment options, online retailers also need to be transparent about their business practices and policies. This includes providing clear information about shipping times, return policies, and customer service options. By prioritising trust and security, online retailers can attract and retain customers in emerging markets, where consumers may be more cautious about online shopping due to concerns about fraud and security.
Localisation strategies
As online retailers expand into emerging markets, they need to be mindful of the unique needs and preferences of local consumers. This requires a tailored approach that takes into account the local culture, language, and economic conditions.
- The importance of localising the shopping experience to meet the needs of consumers in emerging markets
Online retailers need to adapt their products, pricing, and marketing messages to local markets to appeal to consumers in these markets. For example, offering a wide range of payment options that are popular in the local market, such as mobile payments or cash on delivery, can help increase conversion rates.
- Strategies for adapting product offerings, pricing, and marketing messages to local markets
One effective strategy for localising the shopping experience is to partner with local suppliers and vendors to source products that are popular in the local market. Additionally, retailers can use local influencers and social media platforms to promote their products and build brand awareness.
Retailers should also consider pricing their products in local currencies to make them more accessible to consumers in emerging markets. By offering competitive prices, retailers can gain a foothold in new markets and build a loyal customer base.
- The role of local partnerships in establishing a foothold in new markets
Partnering with local suppliers and vendors can help online retailers establish a foothold in new markets by providing access to local expertise and resources. Local partners can help retailers navigate complex regulatory environments, manage supply chains, and establish local distribution networks.
- The impact of cultural differences on product design and marketing
Cultural differences can have a significant impact on product design and marketing strategies. Examples include certain colours, symbols, and imagery that may be popular in one market but could be offensive or misunderstood in another market. By conducting thorough market research and consulting with local experts, online retailers can ensure that their products and marketing messages are culturally appropriate and resonate with local consumers.
Lastly, online retailers looking to expand into emerging markets need to invest in localisation strategies to succeed in these markets. By adapting their products, pricing, and marketing messages to local markets, partnering with local suppliers and vendors, and being mindful of cultural differences, retailers can establish a strong presence in new markets and gain a competitive advantage.
Sustainability and ethical products
Over the years, there has been a growing global concern for the environment and social responsibility, with consumers becoming more conscious of the impact of their purchasing decisions. This trend is particularly evident in emerging markets, where consumers are increasingly interested in products that align with their values and support sustainable and ethical practices.
As a result, e-commerce retailers operating in emerging markets must consider incorporating sustainability and ethical sourcing into their product offerings and marketing messages. By doing so, they can tap into the growing consumer demand for such products and differentiate themselves from competitors.
Retailers can take several steps to incorporate sustainability into their business practices. For instance, they can consider sourcing products from sustainable and ethical suppliers, using environmentally friendly packaging, and reducing their carbon footprint through efficient logistics and operations. They can also develop marketing campaigns that promote the sustainability of their products and highlight their commitment to social responsibility.
Another important aspect of sustainability in e-commerce is the role of social media and influencers. In emerging markets, social media platforms such as Instagram, Facebook, and Twitter are highly popular; and consumers often turn to influencers for product recommendations and advice. Retailers can leverage these platforms and partner with influencers who align with their sustainability values to promote their brands and products.
Social commerce and influencer marketing
Social commerce and influencer marketing have become increasingly important in the world of online retail, particularly in emerging markets. Social commerce refers to the use of social media platforms to facilitate online transactions. In emerging markets where traditional e-commerce infrastructure may be lacking, social media platforms – such as Facebook and Instagram – are increasingly being used as a way for businesses to reach consumers and drive sales.
One of the key advantages of social commerce is the ability to leverage the social connections and networks of consumers to promote products and drive sales. By encouraging customers to share product information and purchase recommendations with their friends and followers, retailers can expand their reach and drive organic growth.
Besides social commerce, influencer marketing has also become a key strategy for reaching consumers in emerging markets. Influencers are individuals with large followings on social media platforms, who can influence the purchasing decisions of their followers through product recommendations and reviews.
To successfully leverage social media and influencer marketing, retailers must develop strategies that are tailored to the unique needs and preferences of consumers in each local market. This may involve adapting product offerings, pricing, and marketing messages to local cultures and customs.
Best practices for working with influencers include identifying individuals who are a good fit for the brand and its values, setting clear expectations and guidelines for influencer content, and measuring the impact of influencer marketing efforts through metrics such as engagement and conversion rates.
Overall, social commerce and influencer marketing are powerful tools for retailers looking to expand their reach and drive sales in emerging markets. By developing strategies that are tailored to local markets and leveraging the social connections and influence of consumers, retailers can build brand awareness and loyalty, and differentiate themselves from competitors.
Researching the industry
Let’s delve into the importance of conducting thorough research on the retail industry in emerging markets. As with any business venture, it is important to understand the market landscape, major players, and potential risks and challenges.
Market research is essential for making informed decisions and developing effective strategies. There are various tools and techniques available for conducting market research, such as surveys, focus groups, and data analysis. These methods can help businesses understand consumer behaviour, identify emerging trends, and gain insights into the competitive landscape.
Analysing market trends is an essential aspect of market research. This includes understanding growth projections and consumer behaviour, such as their preferences for products and channels of shopping. With the proliferation of e-commerce in emerging markets, understanding the behaviour of online shoppers and the factors that influence their purchasing decisions is critical.
Identifying major players in the industry and their strategies is another important aspect of market research. This includes analysing the strengths and weaknesses of competitors, assessing their market share, and understanding their pricing and marketing strategies.
What is more, understanding the regulatory environment is crucial to mitigate potential risks and challenges. This includes compliance with local laws and regulations governing e-commerce, logistics, and payment solutions.
Concisely, conducting thorough research on the retail industry in emerging markets is essential for developing effective strategies and making informed business decisions. This involves analysing market trends, identifying major players and their strategies, and understanding the regulatory environment and potential risks and challenges. By leveraging these insights, businesses can position themselves for success in the dynamic and rapidly evolving retail industry in emerging markets.
Ultimately, the e-commerce industry in emerging markets is growing rapidly, presenting unique opportunities and challenges for retailers. Mobile commerce, logistics, and payment solutions are crucial for success in these markets. Localisation strategies that adapt to cultural differences, as well as offer sustainable and ethical products, can help retailers build trust and differentiate themselves from competitors. Social commerce and influencer marketing are also important for reaching consumers in emerging markets. Thorough research on the industry – including market trends, major players, and the regulatory environment – is essential for retailers to succeed in these markets.
The e-commerce industry in emerging markets is poised for significant growth, with the potential to transform the retail landscape. To succeed in these markets, retailers must take a strategic approach that takes into account the unique challenges and opportunities presented by these markets.
By leveraging mobile commerce, logistics and payment solutions, and adapting to local markets through localisation strategies, retailers can establish a foothold in these markets and build trust with consumers. Offering sustainable and ethical products, as well as leveraging social commerce and influencer marketing, can also help retailers stand out from competitors. With thorough research and a willingness to adapt to changing market conditions, retailers can tap into the vast potential of e-commerce in emerging markets.
>>>the writer is a management and business consultant with 10 years of industry experience, CEO of Commec Group, and writer. A multiple award-winning consultant delivering exceptional results for clients, she specialises in strategy and planning, operations, project & change management, innovation, and performance improvement. Contact: [email protected] | 0507038639
