The Internet Economy in the G-20

The Internet Economy in the G-20

          
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The Internet Economy in the G-20

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  • The Internet's Further Economic Impact


    As significant as the GDP figures are, they capture only part of the story. In retail alone, G-20 consumers researched online and then purchased offline (ROPO) more than $1.3 trillion in goods in 2010—the equivalent of about 7.8 percent of consumer spending, or more than $900 per connected consumer.

    ROPO is a bigger factor in developed economies, as one would expect, but consumers everywhere research a wide variety of products online before purchasing them elsewhere. In China, groceries are a popular ROPO purchase; in the United States, cars; India, technology products; Brazil, electronics, appliances, and travel packages. Multiple factors affect e-commerce and ROPO. In addition to regulatory barriers like those cited above, the state of infrastructure for online and bricks-and-mortar retail plays a big role, as do Internet penetration, credit-card use, and consumer confidence in online payment systems, delivery, and fulfillment.

    ROPO spending is higher than online retail in virtually all the nations we studied. (See Exhibit 7.) In the U.S., online retail sales totaled $252 billion in 2010, and ROPO added another $482 billion. ROPO dwarfs online retail in Turkey—$37 billion compared with $2 billion—owing in large part to poor delivery infrastructure and consumer concern over fulfillment. In Mexico, although low credit-card penetration and security concerns over online payments hold back online commerce, Mexican consumers without credit cards can pay for their online purchases at 7-Eleven stores. Like the U.S., Japan has a busy online retail market, which totaled $89 billion in 2010. ROPO added $139 billion because Japanese consumers still prefer the experience of shopping in stores. Across the G-20, ROPO would add an additional 2.7 percent if it were counted as part of Internet GDP.

    exhibit

    Mobile shopping—using a smartphone to identify deals, compare products and prices, and “seal the deal” while on the go—is growing in popularity worldwide. As device prices fall, especially in developing markets, increased smartphone penetration will have a dramatic impact on both retail commerce and e-commerce—further blurring the lines between online and offline buying. Mobile apps such as RedLaser, Google Shopper, and Amazon Remembers make it ever easier for consumers to research products, compare deals, and make purchases as they see fit at any given moment. Retailers of all stripes face an especially fast-changing and increasingly competitive environment in the years ahead. With the rapid growth of e-commerce and its potential to disrupt both the top and bottom lines, retail may be ripe for a transformation similar to the one seen in media. A multichannel offering that captures sales wherever they occur will become a “must have” for most businesses.

    Online advertising, a $65 billion business in the G-20 in 2010, is forecast to grow 12 percent a year to almost $125 billion in 2016. In countries with more developed Internet economies, 15 to 30 percent of advertising spending has migrated online. Online advertising spending in the U.K. overtook spending on television advertising in 2011—and it now exceeds spending on all other media categories.

    Consumer-to-consumer Internet commerce is a big factor in China, facilitated by websites such as Taobao, a marketplace for goods of all sorts. More products were purchased on Taobao in 2010 than at China’s top-five brick-and-mortar retailers combined.

    The Internet is having a big impact on how enterprises do business and interact with one another, too. Cloud-based data storage, integrated procurement systems, and “enterprise social networks” that facilitate communication within and among organizations in real time are helping companies address a host of procurement, coordination, communication, and fragmentation issues. With spending in the $3 trillion range, both the U.S. and Japan lead the world in business-to-business e-commerce, but penetration is picking up in other countries. South Korea’s percentage of business-to-business e-commerce is approaching 50 percent, as is Japan’s.