Retail Spotlight: smartphone penetration fuels online sales in world markets

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Euromonitor International: smart phone penetration is changing how and where people shop

Euromonitor International: smart phone penetration is changing how and where people shop

In the seventh Retail Times and Euromonitor International Retail Spotlight, Daniel Latev, head of retailing research, Euromonitor International, explores how the smartphone evolution is driving online sales in markets around the world

Internet retailing is bucking the overall retailing trend and growing unabated in both emerging and developed markets. In many cases its growth has been supported by the uncertain economic environment, although new technologies, particularly the rapid penetration of smart phones, are fuelling e-commerce growth even further.

Internet retailing is consistently the best performing channel in terms of growth globally, and in the majority of the 80 markets in which Euromonitor International tracks the retailing channel. The channel generated sales worth almost US$400bn in 2011, growing by 18% in fixed currency terms. North America and Western Europe are the two largest and most mature markets but still generated healthy growth rates of 14% and 17%, respectively, albeit at the lower end of the growth spectrum. 

The UK, for example, which enjoys the highest internet per capita spend globally at US$723, maintained an enviable 19% growth rate in 2011, while store-based retail sales rose by just 2.6%. As in other developed online markets where the economy has performed poorly and disposable incomes have fallen, consumers have increasingly shifted their attention to the internet, driven by the promise of cheaper prices. 

At the same time, the rapid penetration of smartphones, with their continuous internet access, cameras and geo-location capabilities, is impacting consumer shopping habits in more ways than one. On the one hand, they are allowing consumers to shop online, opening up locations which otherwise might be inaccessible for shopping, for example the commute to and from work on public transport or when out and about. The growth of m-commerce has been closely linked to the penetration of smartphones and tablets, with some sites reporting up to 10% of sales generated through such devices. Japan has been at the forefront of m-commerce, which is estimated to generate about 25% of internet retail in the country. 

Smartphones are undoubtedly boosting online sales but they are also affecting sales in stores. New technologies such as QR codes, near field communication (NFC), apps and augmented reality are moving from the trial phase into the mainstream. Some of these features are used to provide additional information for consumers or to facilitate the sales process. For example, by scanning a QR code a shopper can obtain additional product details or watch a short demo of the product’s features on their phone. NFC is used to speed up payments and cut queuing times as the customer phone is used as a wallet. Similarly, mobile apps and augmented reality are used to provide additional features.

Note: Data for 2012 is partially estimated and 2013 is forecasted

Source: Euromonitor International

Smartphone penetration reached over 58% globally and over 70% in developed markets in 2011, having increased rapidly in just a few years. In most countries smart phones will account for half of all new phones sold by next year. While online penetration is growing strongly mobile usage is higher, particularly in developing markets. The Middle East and Africa has the highest ratio of mobile subscribers versus online users, and as a result mobiles have become increasingly important for accessing information and services. In developing markets, the first time a consumer accesses the internet could be via a mobile phone rather than a computer. 

Due to the ubiquity of mobile phones and the very rapid adoption of smart phones, online and store- based retailers need to adapt. To be successful, retailers need to take into account the specific features which smartphones offer to facilitate usage both on their websites but also in stores to improve the shopping experience.

Note: Internet retailing includes sales of products from businesses to consumers, excluding auction sales, travel and event tickets. Smartphones refer to mobile devices which have an identifiable operating system, allow installation of software applications (apps) and have a screen size of less than six inches.