Three Emerging Markets Perfect for Luxury E-Commerce - Global Trade Magazine
  December 28th, 2015 | Written by

Three Emerging Markets Perfect for Luxury E-Commerce

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  • In three years, global e-commerce will hit $2.3 trillion; most of the growth will come from overseas.
  • Cheap oil prices have positively impacted India’s economy and growth.
  • Thailand is Southeast Asia’s largest luxury goods market.
  • Next year, Poland’s luxury spending will hit $3.4 billion.

As a recent business feature in The New York Times put it, luxury retailers “believe in the primacy of the customer experience … in touch, and talk.” Indeed, luxury retailers excel at the exclusive, intimate, in-person consultative sale.

Historically, that might be one of the key reasons why the luxury sector hasn’t invested much in the web. Even with global online retail sales increasing nearly 20 percent annually, at least 40 percent of high-end brands haven’t embraced e-commerce, Bloomberg recently reported.

But the times, they are a-changin’. As the New York Times piece said, luxury retailers “have come to believe that the future of their business and a route to global expansion lie online.”

Why? The next generation of luxury customers is here. They’re younger, digitally savvy, practically minded, and impatient.

They’re also big spenders. Luxury ecommerce sales are expected to reach $21 billion in the next five years, says a recent McKinsey report. In fact, the sector is one of the fastest-growing in e-retail: “E-commerce has been described as the ‘next China’ for luxury in terms of opportunity,” an analyst recently said.

As with every retail sector, luxury retailers will soon feel the pinch as they saturate their core markets. The solution for sustained growth? Launching ecommerce sites in international markets.

It’s a smart play. In just three years, global e-commerce will hit $2.3 trillion. Most of that growth is hailing from overseas consumers.

Luxury retailers, here are three promising online markets to target with your e-commerce efforts. For now, they’re largely untapped by competitors, and are demonstrating appetite for online shopping.

India

Unlike the disruptions they’ve created in other BRIC nations, cheap oil prices have positively impacted India’s economy and growth. This translates into confident consumer spending, especially in luxury e-commerce.

India’s population of 300 million Internet users is mobile-savvy. About 70 percent of the country’s Internet-connected devices are smartphone and tablets. The luxury e-commerce market here will grow to $25 billion by 2016, according to one report, with a compounded growth of 25 percent annually. Expect most sales to center on high-end apparel, accessories, watches and electronics.

Despite the economic uptick, India is largely untapped by luxury retailers. This is great news for first movers. Of the 500 leading international luxury brands, only 30 percent have a presence in India. (In contrast, 70 percent of these top brands are present in China). With its blossoming economy, growing middle class, and favorable regulatory environment, India is an ideal market for exploration.

Thailand

Thailand loves luxury. It’s already Southeast Asia’s largest luxury goods market: last year, its residents spent $2.5 billion on luxury goods.

There’s a lot going for this market. Housing costs are low, and disposable income is high. The largest share of Thailand’s population (20.5 percent) is between 30 to 34 years old, and earns over $150,000 annually. Residents 35 to 39 years old account for 18.6 percent of the population. They’re also increasingly affluent.

Internet penetration in Thailand is robust (54 percent), but mobile is where the action is. With a mobile adoption rate of 150 percent, Thailand is poised to become a player in the Southeast Asia’s biggest m-commerce space. In fact, some analysts believe m-commerce is the “last explosive sales channel” for luxury retailers.

With currently little competition online, luxury retailers may stand to win big in Thailand—especially retailers that persuade local smartphone users to hop onto the m-commerce bandwagon.

Poland

Economic recessions seemed to abound at the beginning of 2015. But Poland entered the year walking tall. According to Brookings, its “GDP per capita based on purchasing power exceeded $24,000 and reached 65 percent of the Western European (eurozone) level of income.”

This is supercharging customer spending, particularly in luxury. Next year, Poland’s luxury spending will hit about $3.4 billion. This spending won’t be focused solely in brick-and-mortar stores; Poland’s e-commerce spending will grow to $12 billion during the same time frame.

This is an ideal frontier for companies keen on expanding into an economically stable Central European market. At 67 percent, Poland’s internet adoption rate is very good, too.

With global Internet and smartphone adoption hitting stratospheric heights—and international B2C e-commerce sales growing year after year—luxury brands can ill-afford to sit on the sidelines. Now is the time expand internationally, online.

Engaging these emerging markets, especially in their languages of choice, can ensure a steady stream of new customers and sustained sales growth.

Charles Whiteman is senior vice president of client services at MotionPoint Corporation, the world’s #1 enterprise localization platform. He may be reached at cwhiteman@motionpoint.com.