Continuing with our e-commerce theme for the month we have a great post from Simon Glass, Vice President of Business Development at Clavis Technology. Simon looks at the growth of e-commerce in emerging markets. Interested in guest blogging? E-mail [email protected]
Simon Glass is a vastly experienced consumer goods expert, who has been at the forefront of the industry for more than 20 years. He has worked with industry giants such as Kellogg, Procter & Gamble (P&G) and Gillette in the US, Canada and the UK. At Clavis Technology he is focused on e-Commerce and helping global CPG companies to maximize sales opportunities through their retail partners’ online stores.
Leading US and European consumer goods (CPG) manufacturers, faced with a saturated domestic market, have made big plays in emerging markets in recent years. Global personal-care and home-care corporations, such as Unilever (NYSE: UL), Procter & Gamble (NYSE: PG) and Colgate-Palmolive (NYSE: CL), have been particularly bullish about newer markets.
Unilever for example posted 10.3 percent growth in emerging markets in the first half of 2013. P&G’s overall growth in developing markets was expected to be around six percent, while Colgate-Palmolive has had the highest growth of 11 percent in the emerging markets this year.
This growth has been achieved despite weak infrastructure and political instability in many developing regions. In fact according to a recent report from digital analyst firm eMarketer, regional instability means that CPGs have had to side-step traditional retail to channel much of their growth via eCommerce, online stores and mobile commerce.
The report titled “CPG in Developing Markets: Consumers’ Digital Habits in Emerging Economies” looks at the opportunities and threats for consumer packaged goods companies trying to succeed in emerging markets. These emerging markets are all completely different in most consumer behaviors; however, eMarketer cites one major unifier – mobile. eMarketer writes: “a young, mobile-connected middle class has emerged that is beginning to recognize and prefer name brands.”
The other unifier is of course change. Not only are consumers in these markets changing their buying habits, but they are also changing eating habits. Breakfast cereal, for example, is one product in particular that has become increasingly popular outside of America and Europe.
There is no end of data that confirms the digital channel will play a central role as global CPGs move to conquer new markets. By 2020 for example China’s eCommerce sales will overtake the US, UK, Japan, Germany and France combined, according to a report by the China Internet Information Center (reported in TechCrunch). China’s ecommerce sales grew 65 percent between 2011 and 2012 and its version of Amazon, Alibaba, is set to become the first online retail company in the world to process $1 trillion in transactions.
Internet penetration in the so-called BRIC countries may still be low compared with the US and Europe – Brazil, Russia and China have less than 50 percent penetration, while India’s is just 11 percent – but that is set to change dramatically as these countries’ middle classes grow. We are about to see an enormous increase in global online consumer packaged goods purchases. The Cisco Internet Business Solutions Group (IBSG) has aptly titled this trend a “Global eCommerce Gold Rush”. See the Clavis Infographic “Online Transforms Global CPG” for more details.
Global consumer packaged goods companies who want to succeed in emerging markets will have to make sure that they remain innovative by appealing to the tastes and needs of their potential customers as well as making sure they are advancing their eCommerce and digital channel capabilities.