Online, in-person, or both? Regional differences in buying channels

In 2020, the COVID-19 pandemic created the conditions for an unprecedented surge in e-commerce—the equivalent of 10 years’ growth in just 3 months. The pandemic temporarily shut the doors of some establishments and, after stores reopened, they were only allowed to do so with reduced capacity. People felt, and many still feel, safer ordering what they need from their own homes. 

All of this meant that e-commerce share grew by 4.4 percent in 2020, accounting for 18 percent of global retail sales. By 2024, it’s expected to account for 21.8 percent.    

Although online shopping has grown globally, the rate and extent differ by region. Companies looking to expand into new markets need to understand how these markets prefer to shop. Do they like to walk into physical stores for that first-hand experience, or do they favor the convenience of ordering what they need online?

Related: Cash, credit, or digital? Regional differences in payment methods

Online and offline retail continue to grow in North America

The pandemic did not slow down North American retail in 2020. Total retail sales grew both online and offline. Offline sales increased by 2.1 percent. Following the global trend, online shopping in North America has been gaining steady momentum in recent years and jumped ahead significantly due to the coronavirus pandemic. In 2020, it accounted for 19.6 percent of total retail sales in the United States, nearly 4 percent higher than in 2019. 

According to Digital Commerce 360, online shoppers spent 32.4 percent more in 2020 than they did in 2019. This is the most growth the industry has seen in twenty years. Online spending accounted for 19.6 percent of all retail sales in the United States in 2020, an increase from 15.8 percent in 2019 and 14.3 percent in 2018. Interestingly, over a third of online retail sales happened through the e-commerce giant Amazon.

Preferred purchasing channels for small-ticket items by age (Source: Paybright)

Perhaps the biggest shift in online retail since the pandemic was in online grocery shopping. Pre-COVID, 80 percent of Americans had never bought their groceries online. A year later, 79 percent of all shoppers had done so, propelling online grocery sales in the U.S. from $1.2 billion to $7.2 billion in less than a year. According to research done by Food Navigator.com, Americans are likely to order more of their weekly shopping online even after the pandemic. 

Customers who were unwilling to pay for grocery delivery opted for curbside pickup options instead. This gave them the convenience of choosing their groceries online with the added convenience of driving to the store and having their goods placed directly into their cars.

The popularity of curbside pickup shot up by 15 percent in months (source: eMarketer)

Recommendations

• Focus on e-commerce and offer various delivery options— particularly curbside pickup.
• If you’re in the grocery or staple goods industry, consider adding an online store to your channels. 
• If you’re looking to attract customers into your physical store, find ways to offer richer experiences. Focus on deals and sales and prioritize well-stocked shelves.

More Latin Americans are buying online

Latin America is a region known for having a relatively low take-up of online shopping.  In 2020 the region saw a sudden boom in the e-commerce industry and has become one of the fastest-growing regions in the world. The COVID-19 pandemic pushed 13 million Latin Americans to make their first-ever digital purchase. 

In-store shopping has remained predominantly popular as up to 65 percent of the Latin American population is currently unbanked due, in part, to an apparent mistrust in financial institutions. This leaves most people without the means to make online payments and favors more in-store, cash-based purchases instead. 

There are currently nearly 300 million e-commerce users in Latin America, with an expected growth of nearly 20 percent in the next three years. The value of online retail sales is also expected to double by 2025 from $85 billion (in 2021) to $160 billion by 2025. Brazil and Mexico are the strongest players in the region, jointly making up nearly 60 percent of the LATAM e-commerce market, with countries like Argentina and Peru rapidly picking up the pace.

The rate of retail e-commerce sales growth increased five times more than originally forecasted in 2019 (Source: eMarketer)

The Argentine-based e-commerce platform Mercado Libre is a major player in the region. It generated $1.7 billion in the second quarter of 2021 and is credited for paving the way for the entire sector in Latin America. The company has even set up its own digital payments service, Mercado Pago, which processed $50 billion in 2020 alone.

As e-commerce and digital payments continue to grow in Latin America, mobile commerce is quickly becoming the preferred option for consumers. Pre-pandemic, mobile already accounted for over 40 percent of retail e-commerce. It’s expected that m-commerce market share will make up nearly half of all purchases by the end of 2021. 

Related: Mobile and social commerce are set to explode this year

Recommendations

• In-store shopping is still important in Latin America. Having a physical presence where your customers are will still likely reap benefits. 
• Cash is still an important method of payment in the region. Look into offering multiple payment options available in the region that will allow people to pay for goods this way. 
• Prepare for significant e-commerce and mobile commerce growth in the very near future. Understand and tap into the various payment providers in your area.  

Europeans are looking for multiple shopping options

Europe has become the center for multi-channel shopping—a shopping experience that involves interaction between multiple channels, including in-store, website and app. Physical stores still play a large part in European shopping habits, and they will likely continue to do so even as e-commerce continues to grow in the region. 

The ratio of online and in-store shopping can differ quite significantly from one country to another. In May 2021, 40 percent of German shoppers shopped in-store weekly, while 72 percent did so online. In Finland, only 18 percent claimed to have shopped at a physical store on a weekly basis.

Offline shopping is still dominant across some countries in Europe (Source: Klarna)

In a report by Klarna, many European countries exhibited a preference toward more offline purchases as opposed to online. The United Kingdom and Sweden show a slight preference for online shopping, but there have been notable shifts toward online purchases in many countries.

Many countries in Europe are still offline-leaning, but there has been a noted shift since the pandemic (Source: Klarna)

Retail shopping at physical locations has remained quite popular amongst Europeans for a number of reasons. Europeans tend to value the experience of being able to see and touch the product in person. There is also a higher concern for the security of digital payments mixed with a lack of digital know-how, particularly amongst older persons. There are also parts of Europe that have a higher population of people without access to standard financial services. Thirty-three percent of Eastern Europeans are currently unbanked. 

In countries like Montenegro, Hungary and Spain, there are lower reported levels of trust in e-commerce platforms, and people are worried about whether or not they’ll actually receive their goods or if they’ll be able to return them if need be. In countries like Macedonia, Turkey and Hungary, there is also a concern that goods will take too long to deliver. 

Similar to North America, the pandemic gave rise to online grocery shopping throughout the region. A survey by supermarket chain Waitrose in the UK found that one-fourth of consumers now buy food and essentials online at least once a week.

More Britons are turning to online grocery shopping (Source: The Guardian)

Recommendations

• There are big differences from country to country and region to region around Europe. Understand the market in the region you’re operating and adjust accordingly. If you’re a grocery retailer in the UK, for example, you should start selling online. 
• Variety is key for Europeans. To succeed, you’ll need to offer your clients multiple ways to buy from you.

Convenience is king for Asia Pacific consumers

Asia is the globe’s powerhouse of consumption, making it a tantalizing prospect for any company thinking of expanding into new regions. According to McKinsey, half of the globe’s consumption growth in the next decade will come from Asian consumers—the equivalent of $10 trillion. Half of all upper-middle-income and above households will be in Asia, and every other consumer transaction will likely happen in the region. 

This is a big leap from 2000, when only 15 percent of Asia’s population were considered to be part of the “consuming class.” In-store trade is booming, and the region's rapid digitalization is also propelling e-commerce and m-commerce forward rapidly, particularly in bigger cities where convenience and efficiency are highly prized. 

In China, online transactions are expected to reach 30 percent of retail sales by 2025. That said, there are still large swaths of the Chinese population who don’t have an internet connection. During the pandemic, three Chinese e-commerce companies, Alibaba, JD.com and Pinduoduo, delivered 29 percent of the global retail industry’s market-cap growth.

In Japan, online shopping accounted for 77 percent of transactions in 2020. In Southeast Asia, 20 million people became new online shoppers during the first half of 2021. In South Korea, nearly a third of all retail sales are happening online. Google’s survey found that nearly half of APAC consumers see no point in going into a store if they can shop online. 

Mobile commerce is very popular in parts of Asia. According to the Digital 2021 report, Indonesia (79.1 percent) has the highest share of the online population in the world who bought something on a mobile device in 2020. This was followed by Thailand (74.2 percent), the Philippines (69.6 percent) and Malaysia (68.4 percent). The worldwide share is 55.4 percent. 

There has also been a significant shift in buying behavior in Australia since the start of the pandemic. This has happened in both online and offline shopping experiences. Similar to Europeans, Australians prefer a multi-channel approach to retail. Customers now expect more spacious layouts inside stores with more attention to hygiene and prioritization of health. 

Overall spending has declined since the pandemic, but Australian Gen Z and Gen Y consumers have increased the number of purchases they make online. Currently, 26 percent of retail purchases are online. Forty percent of customers feel more comfortable ordering items online without viewing them in-person first, and 80 percent of these people now feel more confident to keep doing so going forward. This trend is also being observed with online grocery shopping.

Post-2021, Australians will be more likely to purchase groceries online (Source: Statista)

Interestingly, Australians have also become more likely to buy goods from local retailers over foreign ones. This is true of both online and in-store purchases. Forty-nine percent of consumers said they shifted towards Australian online retailers, and 52 percent of these said they’ll continue to do so moving forward.

Looking ahead, more Australians want to buy local (Source: CommBank)

Recommendations

• Similar to Europe, there are major differences in shopping preferences across the region. Whether you’re operating in China, Southeast Asia or Australia, understand what your target audience looks for. 
• Any company looking into expanding into big cities in Asia should develop an e-commerce platform with mobile commerce integration. 
• Omnichannel strategies are likely to work very well in Australia.

The Middle East and Africa region is going through an e-commerce boom

The Middle East and Africa region had relatively low e-commerce market penetration prior to the pandemic. Since 2020, the industry has grown significantly, particularly in Egypt, Saudi Arabia, the UAE and Nigeria. People’s shopping habits are increasingly including a mixture of online and offline shopping.

The number of online shoppers in Africa is set to increase by over 380 million people between 2017 and 2025 (Source: Statista)

The slow but steady rise of e-commerce throughout the continent can be partially attributed to increasing internet penetration and, particularly, the growing popularity of mobile commerce.  Homegrown e-commerce platforms such as Jumia and Konga in Nigeria and Kilimall, in Kenya, have also been responsible for more people shopping online. 

The Middle East and North Africa region have seen a somewhat quicker growth in online shopping. Egypt, Saudi Arabia and the United Arab Emirates alone account for 80 percent of e-commerce in the MENA region. Here, Amazon and Noon make up more than half of the e-commerce market share as half of the younger populations have been shopping online more since the pandemic.

Nigeria boasts a healthy e-commerce market on the African continent (Source: Statista)

A Think With Google survey of shoppers in the United Arab Emirates found that 80 percent of people in 2020 preferred shopping both online and offline. This was a seven percent increase from 2019.

Share of respondent shopping preference in the United Arab Emirates in 2019 and 2020, by channel (Source: Statista)

Recommendations

• With the e-commerce sector booming in most of the region, now would be a good time to offer online retail, especially if you’re in the electronics and media or fashion industry. 
• Physical stores are still sought after, even in booming economies such as those of the UAE. Having a physical presence along with an online one will likely attract more customers. 

Understand your audience’s buying preferences, post-2020

Online shopping was already on the rise around the world prior to the coronavirus pandemic. Since then, its popularity has shot up and is unlikely to decrease any time soon. Different regions, countries and cities have different preferences for the purchasing channels they’re likely to use depending on the good or service they’re seeking. 

The pandemic has changed customer expectations when it comes to both online and offline retail. Regional differences in buying preferences have either been flipped on their head or accelerated. Anything you knew about your customers’ preferences pre-2020 is likely to be dated, so it’s probably a good time to carry out some new research.