The overseas Internet markets to watch
The World Wide Web is rapidly living up to its name. Of the 158.5 million people now online worldwide, more than half live outside the U.S., according to research firm Nua Internet Surveys. And as more overseas governments urge Internet service providers (ISPs) and telecommunications companies to drop prices – and in some cases, offer free access – U.S. catalogers should wake up to the potential for online revenue from foreign customers.
Of course, overseas markets still make up only a fraction of the total online universe. According to a December report from research firm MMXI Europe BV, there are four times as many homes, or 61 million, connected to the Internet in the U.S. as in the three major European markets: Britain (7.8 million homes wired), Germany (a total of 5.3 million homes), and France (2.4 million homes). And while London-based catalog consultancy Sterling Marketing Ltd. estimates ‘Net penetration in the U.S. at 45%, it cites overall European penetration at just 13%.
Sterling also estimates that this year U.K. users will spend $955.6 million online, Germans will spend $792.9 million, and French users will spend $334.1 million online, compared to $15 billion from U.S. users.
But KPMG Consulting predicts that by 2002, European ‘Net sales will hit $2 trillion. Scandinavian countries Denmark, Finland, Sweden, and Norway will be big contributors to this growth. Even this year, Sterling Marketing estimates, online shoppers in Sweden, which has a whopping 50% penetration, will spend $357 million, while Denmark users (34% penetration) will spend $145 million online, Finnish shoppers (32% penetration) will spend $133 million, and Norwegians (36% penetration) will spend $129 million.
If you don’t want to sell internationally, well, you may not have much choice. “Like it or not, once you have a Website, you’re selling internationally,” says Clive Mayhew-Begg, vice president of international for online music cataloger CDnow. CDnow claims 21% of its revenue comes from its more than 500,000 overseas buyers in more than 120 countries. And in three years, the company expects its international revenue to make up 50% of its sales.
Europe isn’t the only overseas market with e-commerce potential. London-based research firm Philips Group estimates that there are already 43.6 million Asians online and predicts that number will soar to 370 million by 2006.
Chipshot.com, a Sunnyvale, CA-based manufacturer/online cataloger of custom-built golf clubs, has already benefited from growth in the Asian market. By the middle of last year, roughly 12% of its orders were from international buyers – mostly from Japan. So in fall ’99, it launched a separate Japanese-language Website and hired bilingual customer service staff. Since then, orders from Japanese buyers have increased tenfold.
When most catalogers think of Asia, they zero in on Japan. But by 2005, Philips Group estimates, 85 million Chinese, or nearly 38% of the population, will be online. That’s far more online users than from any other country in the region.
Then again, the Internet population in Latin America is expected to meet that of Asia, Europe, and the U.S. in the next few years, according to online research company Jupiter Communications. A November study found that while just 9 million Latin Americans will use the Web this year, that figure will grow 50% annually until 2003, when there will be 38 million Internet users in this region. The majority of users will be in Brazil, Argentina, and Mexico.
And International Data Corp. Research predicts that e-commerce spending in Latin America will reach $8 billion by 2003, up from $167 million in 1998. But the same report found that factors such as weak credit card processing infrastructure, high costs of access, tariff barriers, and shipping costs need to be addressed before the Latin American market’s potential can fully be realized.