Digital Disruption in 2016-2020:

Where Is Growth Coming From – and Is That Where You Want to Be?

Dr. Kati SuominenFounder & CEO, NextradeGroup & TradeUpCapital Fund

Adjunct Fellow, Center for Strategic and International Studies (CSIS) 11 August 2016

eCommerce Day, Buenos Aireskati@nextradegroupllc.com

Ecommerce is still driven by only a handful of humanity…

7.4bn people

5.2bn mobile phones

3.2bn online

1.1bn high-speed

Internet

• Wealthy• Urban• Young• Male• Developed

countries

?

Megatrend 1: Huge Growth in Internet Users

270m in LatAm

More & More of LatAm Netizens =Digital Buyers

Megatrend 2: Incomes Are Growing

Per capita income, 2016 and 2020

• 75% of consumption growth is from income growth

Income Growth Internet Use, Consumption

LatAm 2016

LatAm 2020

Strong Income Growth in LatAm 2016-2020

Megatrend 3: More Low Income Online Shoppers – do you buy online?

Before

Megatrend 3: More Low Income Online Shoppers

Now

Ecommerce as % of LatAm Retail Growing

• UK: 14%• US: 8%• China: 13%• Brazil: 4%

By 2020

• 270m new Internet users in LatAm, 3bn globally Most lower income

• LatAm shopper is wealthier by 10-15%

• More low-income Latin Americans shop online

How do you get at this massive market?

Global Income “Pyramid”

1bn people<$1 / day

3bn people$1-$8 / day

2bn people$10-$60 / day

1bn people>$60 / day

Global Income “Pyramid”

1bn people<$1 / day

3bn people$1-$8 / day

2bn people$10-$60 / day

1bn people>$60 / day

Mobile Use Is on Fire

Smartphone Usage Rates 30-50%

Low-Income People Connect Online on Mobile

Go “Mobile First”

Buy online to save time

Buy online to find best fit, save money

Know Your Customer & what drives them

And Do Customer Analytics

Source: McKinsey.

Know Where Your Customer IsSource: Esri data.

2016

And where she is tomorrowSource: Esri data.

2020

Cross-Border Ecommerce Grows Much Faster

Cross-border ecommerce growth = 5x domestic ecommerce growth in 2016-2020

Digital Disruption in 2016-2020:

Where Is Growth Coming From – and Is That Where You Want to Be?

Dr. Kati SuominenFounder & CEO, NextradeGroup & TradeUpCapital Fund

Adjunct Fellow, Center for Strategic and International Studies (CSIS) 11 August 2016

eCommerce Day, Buenos Aireskati@nextradegroupllc.com

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Legal and regulatory frameworks

Ecommerce strategies Ecommerce logistics

Online payments

ICT infrastructure and services

Ecommerce skills

Much has to go right in the “enabling environment”

Ecommerce is still driven by only a handful of humanity…

Demographics

Geography Psychographics

Ecommerce is still driven by only a handful of humanity…

Demographics

Geography Psychographics

Demographics

Know Your Customer

Internet is used more by some demographic groups

32Source: UNCTAD

% of individuals purchasing products online, 2013

Most emerging market shoppers have not bought online

…and only some companies sell online

% of companies with online sales

Typically these are: Larger, fast-growing, skill-intensive, export-oriented, urban

Source: Author based on Eurostat.

Even most EU companies are offline

The Next 5 Years

Cross-Border Trade Is Growing

Who’s Driving This? B2C Ecommerce Markets in 2015

Source: eMarketer.

Emerging Markets Catching Up

% of people using the Internet

Megatrend 2: Incomes Are Growing

Per capita income, 2016 and 2020

• 75% of consumption growth is from income growth

China’s $24,000 Club

• Higher incomes: more discretionary income, purchases of luxury products

• 100 million by 2020

• Highly connected

• Buying ~$6.5T

• 53% of the millennials – who buy 40% more than older people of same incomes

Womenomics

• Women drive 65-80% of all B2C purchasing

• Women have money to spend: incomes at $18T by 2018

• U.S. women make 61% more online purchases than men and make up 58% of online spending

Asian women emerging as spenders –and breadwinners

Source: EIU.

Huge Mass of Urban Consumers

• Want to reach 80% of consumers by 2020?

Be in 430 world markets = cities

• 410m people & 61% of world GDP by 2030 in 750 mega-cities

• 91% of growth in consumption comes from cities

• Large young & urban populations in Nigeria, China, India, Brazil, U.S.

• Most urban consumption still in China + North America: 315 cities make up 40% of consumption growth

Biggest spenders: today’s millennials

Source: McKinsey Global Institute.

Source: McKinsey Global Institute.

Surprise! Rural ecommerce growing fast

• Rural consumers: 80m new online buyers in 2015 alone

• Rural buying growing with rise of smartphones: physical retail not near, while phones are

• India: more and more demand from 3,313 tier II & III cities & 1,233 rural hubs

Cities

What Is Your Strategy?

New Spending Power

New connectivity

China $24K Club

B2C & B2B

Emerging markets of Africa, LACB2C, B2B

Emerging market women

B2C

Advanced economy

women and men B2C

Advanced economy

businessesB2B

Rural, BOPB2C, B2C

LatAm Companies: Already in Crossborder

LatAm Companies: Already in Crossborder

LatAm Companies: Already in Crossborder

LatAm Challenges

LatAm Challenges

LatAm Challenges

Most consumption still in advanced economies

% of world GDP per capita, 2016 and 2020

• B2B ecommerce at $6.7T by 2020: manufacturers and wholesalers getting online

• Smartphones accelerate this: already, 42% of B2B purchase researchers use a mobile device during the purchasing process

• >50% of B2B decision-makers in 2020: Millennials

B2B Is Exploding

Source: Google.

2012 2015

3x growth in B2B searches from mobiles

In B2B too, Think of Millennials & Mobile: Shift in B2B Researcher Demographic

Source: Google.

How Do People Buy (or Browse)

Source: Nielsen.

What Sectors – and Where?

Source: Nielsen.