E-commerce overview

In this article, we want to make a statistical overview of the development of e-commerce in the world, its place in world trade, and also to compare rates of development of e-commerce in different countries. We hope the data presented in this article will inspire those who only thinks about the integration of electronic commerce and starting their own online stores and give confidence to those who is an active participant in the market of electronic commerce.

But first let us define - what e-commerce is and if it is limited to the current  concept of already familiar to us online stores?

E-commerce - the area of the digital economy, including all financial and commercial transactions made through the Internet, and business processes related to the processing of data and transactions (wiki). This is a fairly broad term, affecting a lot of business processes and business areas - from direct purchases and sales to the processing of banking transactions, transfers through payment systems, logistics transportation and delivery of goods. Marketing component plays a huge role in this areat though. This happens because the advertising budgets of many e-commerce projects are truly huge sums.

The dynamics of e-commerce extension and the grade of its integration into the economy leads to the fact that more and more countries seek to regulate at the legislative level the processes in e-commerce. This is largely promotes e-commerce in many countries. When the algorithm of doing internet business becomes transparent, then all becomes profitable:

  • the government gets the money in the budget
  • the owners are serious about their business, respectively the quality of product and services is improving
  • customers have more confidence in the product, so there is a constant increase in sales, that leads to an increase in profits, and, accordingly,  increase payments to the state budget

Unfortunately, there is no clear rules for e-commerce In Ukraine. Moreover, there is still no legislation governing the business use of internationally recognized online payment systems (for example, Paypal, Stripe, Payoneer, etc.). Despite the fact the ice broke up on this issue, and National Bank of Ukraine adopted two regulations that facilitate access to international payment systems, and a bill number 2306a "On e-commerce" is in Verkhovna Rada,  it is too early to talk about any foreseeable future legalization of payment systems and regulation of all the subjects of e-commerce in our country. In any case, these processes are started now and are likely to be brought to some result, as it is the part of the economy, which will continue its intensive development, gradually increasing its percentage in trade sector of Ukraine. However, we will review of statistics and dynamics later.

It should be noted that in this article will be given the statistics for only one form of e-commerce, the most familiar to the Ukrainian customer - B2C. Let's see what it means, and what else are the types of e-commerce.

B2C (business to customer) - a traditional form of e-commerce, when there is trade between companies and consumers. Standard online stores - this is a classic example of B2C. It is the most popular form of e-commerce, since it allows to quickly bring products to the end user and has a fairly low threshold of market entry - the cost of creating an online store, and its promotion is much less than the cost of opening an offline store.

B2B (Business to Business) - a form of e-commerce, consisting of trade between companies and business entities via the Internet. At first glance, B2B is not remarkable, but it relates to the 80% of the total e-commerce market in the world. Because in fact selling services on company’s website to other companies - this is B2B. Imagine that in this market represented almost all companies that use the Internet to sell their products and services (from

C2C (customer to customer) - is another form of e-commerce that is rapidly gaining popularity. Online auctions (the biggest example - Ebay), exchanges, portals, ads, etc can be included to C2C. The owner of this business is not acting as the subject of trade, but only provides a platform for transactions by third parties. In terms of risk, this is the safest and least expensive form of e-commerce, because there is no need to work with suppliers and maintain a huge a call-center for handling orders. The most important thing in C2C - this is the correct lauch of site, effective advertising campaign and a whole qualitative implementation of a good idea.

Back to B2C Model Overview. In Ukraine during the last 5 years there is maintained stable development trend of e-commerce - the market increases every year, regardless of economic fluctuations of recent years. Referring to the data on site ekosglobal.com with  B2C statistics in Ukraine for 2014:

  • Internet users - 15,1 million.
  • Internet penetration (percentage of active use of the Internet among the population) - 33,7%
  • The market volume of B2C e-commerce - $ 1,6 billions.
  • Market growth of B2C e-commerce compared to the year 2013 - 45%.

Next, we appeal to the site statista.com, which provides interesting statistics on e-commerce in the context of countries from different regions. Unfortunately,there is no comprehensive statistics on Ukraine, but looking at the infographic we can draw conclusions about how the B2C is developed in different countries. Statistics presented below applies to B2C markets, and is based on sales figures in the following market segments:

  • Fashion
  • Electronics
  • Food, cosmetics and pharmaceuticals
  • Accessories, furniture and home decor items

Figure 1 presents statistics of involvement of Internet users in e-commerce (percentage shows how many Internet users make purchases on the Internet).

 

The leaders are:

  • United Kingdom - 77,2%
  • Japan - 71,8%
  • Germany - 70,9%
  • Norway - 70,3%
  • Denmark - 70,3%
  • Switzerland - 70,2%

Figure 2 shows the average revenue per user (ARPU) in the "eCommerce" market amounts.

 

The leaders are:

  • South Korea - $ 39 266,82
  • Norway - $ 2282,33
  • Israel - $ 2134,46
  • United States - $ 1654,22
  • Denmark - $ 1607,72
  • United Kingdom - $ 1534,54

It is worth noting the huge gap between South Korea on these indicators and  the rest of the world. Such a huge average annual bill makes this country a world leader in terms of B2C e-commerce market.

The following diagram depicts the volume of the market for 2014.

 

The leaders of these indicators:

  • South Korea - 119 913,7 million $
  • United States - 287 392,2 million $
  • China - 247 036,4 million $
  • Japan - 76 106 million $
  • United Kingdom - 66 697,9 million $
  • Germany - 57 330,2 million $

The formation of the market size is affected by a number of factors unrelated directly to e-commerce:

  • the population of the state (top three - China)
  • the degree of penetration of the Internet to the masses
  • GDP

For comparison, the population of South Korea is about 51 million, which is not much more than the population of Ukraine, but the difference in the statistics of the e-commerce is enormous.

From all the above mentioned it can be summed up with the philosophical conclusion that Ukraine has room for improvement in terms of the development of e-commerce.  There is the most important thing for this - enterprising entrepreneurs who have the desire and the idea to do e-business at the European level of quality and developers can realize these plans into reality.

In the next article on e-commerce we will tell you about the best practices and approaches in the work of online stores, which are used in countries that are leaders in the industry.

Thank you and see you soon.

Mind Team.

Published at:01.10.2015