There are eight rapidly growing countries that are not on the radar of larger retailers, which is creating more opportunities for small businesses to expand. According to The Next Billion Consumers: A Fast Growing Opportunity for Digital Commerce report from Accenture, these markets are: Bangladesh, Egypt, Ethiopia, India, Indonesia, Kenya, Nigeria and the Philippines.
These markets offer a level playing field where digital commerce is everything, so companies will need to develop new strategies to succeed,
Digital commerce revenues in these eight countries have quadrupled since 2017, reaching the equivalent of $211 billion in 2022, and this number will only grow as these markets mature. Additionally, 36% of the population consists of people aged six to 26 years old. However, the entire population (not just younger cohorts) is undergoing a “digital leapfrog” that is making them prefer pureplay ecommerce.
“It will affect not only the newest generation, but everyone — because no one ever had a [landline],” said Fabio Vacirca, Global Head of Commerce at Accenture in an interview with Retail TouchPoints. “No one ever visited a bank branch. No one ever went to a hypermarket. Of course, the new generation — the tech-savvy, digital-savvy generation — will be the ones teaching it to their parents, the Boomers and Gen X, but the leapfrog is something that will affect everyone. The traditional models that we all grew up with in Europe and North America simply did not exist in that part of the world. The new billion consumers do not have a generational stratification like we have in the Western world.”
Retailers will need to shape their strategies for these countries using these three principles:
- Learning to become a digital pure-play;
- Overcoming logistical challenges with creativity; and
- Preparing for a new kind of expansion.
Digital Pure-Play is the Only Way
Shoppers of these eight countries are already digital experts, and that definitely applies to how they like to shop: 80% of this group uses channels such as search engines, social networks and videos to research products and services before purchasing, while another 76% are influenced by posts with lots of “likes” or “good comments” on social media.
Traditionally, retailers use social media to generate buzz while reserving the actual purchase experience to stores or their own ecommerce sites. However, more than half of the shoppers in these countries prefer shopping on social media to other purchasing apps. This is something that brands need to be ready for.
Social media thrives on impressions from what Vacirca calls “the last moment of truth, when you utilize the product — you eat, you shave, you clean, etc.” In contrast, “retailers have only the secondary moment of truth, which is when you bought it. They’ve tried to make that moment a special one and a remarkable one where you remember it and post something about it, but now this place will not exist. So you need to think like [a] pure-play.”
Look to Locals to Help Overcome Logistical Challenges
Expanding internationally always has its challenges, especially in new and emerging cities. Issues can range from a lack of legal and financial stability to limited banking options and poor infrastructure that hampers supply chain development.
“The infrastructure is chaotic, but it exists in mega cities,” said Vacirca. “So you go to Johannesburg, you go to Lagos, you go to Cairo. They all have their problems, but the roads and the supply chain can work there, and you can capture a large part of the population if you focus on the urbanized consumers.”
Vacirca noted that Western retailers can partner with local retailers to bypass some of these challenges, too. Mom-and-pop stores are still the heart of commerce in these markets, with an estimated 25 million to 35 million small outlets in Asia and Africa. Many of these merchants have assortments of 1,000 or fewer SKUs and all familiar with their local customers.
The biggest benefit of partnering with local retailers is that they can handle the “last mile, nitty-gritty one package supply chain and fulfillment” that can be difficult to set up as a foreign retailer, according to Vacirca. Treating these businesses as a large network of buyers rather than as individual small stores could be a way for retailers to dip their toes into new markets — and partner strategies are a well-proven approach to reaching new markets.
Any Retailer Can Write the New International Playbook
The unknown variables in the eight up-and-coming countries can make international expansion intimidating, but they also make it possible for any prepared retailer to beat major players to win these next billion consumers. The digital focus in particular means that companies with the biggest wallets won’t necessarily be the most successful.
“One of the underlying takeaways, one of the biggest, is that there are barriers to entry, but the capital intensity is not super high,” said Vacirca. “You don’t have to build big box stores. You can just go in with your supply chain and fulfillment centers, so you can just have dark stores if you want. And because the big players are busy elsewhere, you may have the chance to leapfrog them.”
The place retailers may actually want to look for inspiration is the CPG industry, as these companies have a far more established presence in those eight countries than any retailer. Starting with a B2B approach and learning the ins and outs of a great D2C experience can enable any retailer to become a major part of this rapidly growing area.
“Retail is relatively less globalized than the manufacturers, with a few remarkable exceptions that we all know, but they already lost [the previous wave of globalization] and they are not even considered on the horizon in this one,” said Vacirca. “This may be a wakeup call. The last train is leaving.”
This article has been adapted from a piece initially published on Retail TouchPoints, written by Bryan Wassel.