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Key findings from the Next Frontier [PayU’s global e-commerce report] 

The time to be in e-commerce has never been better. At a time of unprecedented global disruption by COVID-19, e-commerce has not only sustained sales for retailers but has also become a lifeline for many consumers, providing a way to access groceries and everyday essentials. As a result, e-commerce adoption has reached the much-anticipated tipping point. Consumers who had previously resisted online shopping have been won over by its simplicity and convenience, with respondents to a UN survey saying their shopping habits have now permanently changed. 

The report examines four of the fastest-growing consumer sectors – fashion and gallantry, beauty and cosmetics, digital goods, and education – where we see the most growth potential for the coming years. So stay with us to learn about the most promising markets for emerging e-commerce leaders in 2021 and beyond, or check out the full report from Payu!

Europe, the Middle East and Africa

Poland

According to the Polish E-commerce Chamber, 27% of internet users started shopping online more often due to COVID-192. Furthermore, 50% more businesses began trading online as a result of the pandemic. PayU’s payments platform data demonstrated a voracious consumer appetite for buying beauty products and fashion online. Fashion and gallantry is Poland’s most established e-commerce sector, with consumer spending exceeding $5.7bn in 2020. Poland’s growth in e-commerce spending on digital goods between 2019 and 2021 is 39% versus Romania’s 54%. Furthermore, due to the rise in remote learning, e-commerce spending in the education sector grew by 39% in Poland in 2020.

The Czech Republic

PayU’s data highlights that the Czech Republic remains a significant contributor to e-commerce growth in Europe. For example, E-commerce spending on the beauty and cosmetics category grew by 3% in the Czech Republic, reaching a value of $175m by the end of 2021. On the other hand, e-commerce spending on clothing and accessories reached $1.1bn. There were also 33% growth spendings on digital goods on 2019 levels. Additionally, most learning subscriptions and online courses can be purchased online, and it was expected that regular school fee payments would move online soon.

Romania

Romania is an excellent market for online and omnichannel fashion and gallantry and beauty and cosmetics retailers. The country’s projected growth in e-commerce spending by the end of 2021 reached 47%. Only Hungary was higher (49%). Of the five European countries investigated, external data suggests Romania is where e-commerce spending on fashion and gallantry is growing the quickest. Before 2022, e-commerce spending in the sector is expected to be up by 75%, passing $1bn for the first time. Between 2019 and 2022, spending on digital goods was expected to increase by 54% – well ahead of Poland and Russia. Also, in 2020 the total amount of consumer spending on education was estimated at $1.8bn, with a projected spend of $2.2bn a year by the end of 2025.

Turkey

Technology in Turkey has become a vibrant sector in almost all aspects of society. Average yearly e-commerce spending was projected to grow by 80% between 2019 and 2022. Total e-commerce spending on digital goods grew by 52%, reaching $879m. In addition, as people spent more time at home in Turkey, there was an increase in e-commerce spending on education.

South Africa

There are plentiful opportunities across every sector in South Africa, notably for specialist merchants in both beauty and cosmetics and fashion and gallantry. The beauty and cosmetics sector was expected to be worth more than $169m2 by the end of 2021. Throughout 2020, South Africans have remained willing to part with money to revamp their wardrobes. According to external data, e-commerce spending on clothing and accessories was supposed to grow by 54% between 2019 and 2021, falling just short of $1.5bn. This is because people consume more digital media while spending time at home. PayU data shows a year-on-year increase in spending of 67% in 2020. The majority of the growth was in Q3 2020 when spending rose by 134%.

India and South East Asia

India

2020 accelerated the adoption of digital services in India in a way that no other year could have done. COVID-19 pushed contactless and digital payments to new age groups and locations in India, reaching more rural areas and older age groups. As of May 2020, over a third of India’s population were active internet users. India crossed half a billion smartphone users in 2020, which in turn led to more consumers turning to their devices for various needs – from financial to retail to educational. 

India is predominantly a cash-based economy. The low uptake of credit and debit cards and alternative payment methods is partly due to a cultural reliance on cash and is compounded by an underdeveloped digital payment infrastructure. While cash on delivery has traditionally been the most popular e-commerce payment method, this is gradually changing. Affordable and intuitive innovations that provide cash alternatives allow merchants to offer digital payment options to consumers. The shift from traditional cash to e-payments will occur along a continuum, including middle-of-the-road phygital (integration between the physical world and the digital world) solutions.

South East Asia

SEA saw massive growth across several areas, particularly in online food delivery and e-marketplaces, as people shopped online in their millions. In addition, demographics across the region meant many countries were well placed to meet this acceleration of online behavior.

There are some standout challenges common across all countries. First, many payment methods can cause complications for any e-commerce business looking to trade across multiple countries. In markets like Indonesia and Thailand, many shoppers are still using cash, and even those who do have cards can be wary about sharing details due to fears around security. Secondly, regulations differ hugely from market to market. In Indonesia, for example, the government requires a payments business to be 51% controlled (voting shares) by local Indonesian players. While regulation can cause challenges, it also presents opportunities. New rules that keep up with evolving technology and the requirements of forward-looking merchants can be favorable for the market as a whole, ensuring strong standards are kept and the best players can succeed.

Latin America

Colombia

Across the board, Colombia is one of the most consistent performers regarding e-commerce spending. Although external data showed a dip in total expenditure on beauty and cosmetics in 2020, the amount spent via e-commerce channels increased by 19%. External analysis shows that fashion and gallantry display the fastest projected growth in e-commerce spending between 2019 and the end of 2021, rising by 58%. Year-on-year growth in spending proved significantly higher for digital goods merchants using PayU’s payments platform (62%). What’s more, education generated a turnover of more than 350 million USD in all of 2020.

Brazil

Over the past few years, Brazil has proved to be one of the world’s most profitable high-growth markets for merchants. This country is distinguished for its high spending on fashion and gallantry. It’s predicting further growth in the sector, with online consumer spending on beauty and cosmetics expected to total a vast $2.85bn. It was also substantial year-on-year growth in online consumer spending of 508% between 2019 and 2020. A decrease in digital goods can be explained by analysts anticipating people spending more time outside of their homes as COVID-19 vaccinations are distributed and restrictions are lifted. Additionally, e-commerce spending in the education sector grew by 14% between 2019 and 2020. 

Last words

The e-commerce sector has a solid foundation to build on, thanks to smartphones’ ubiquity and the internet’s expansion in high-growth countries. While every market has different regulations and digitalization strategies, they are all united in their desire to improve e-commerce security for consumers, who are increasingly embracing new payment methods. As consumers feel more comfortable shopping online, this will only increase the total year-over-year e-commerce spending in the years to come. Trade deals, such as the African Free Trade Area agreement, will also create opportunities for cross-border e-commerce in high-growth markets. This is an exciting time for online and omnichannel retailers.

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