In order to assist companies with identifying which geographic markets are the most digitally attractive and offer the best prospects for future deployment of digital initiatives, Euromonitor International developed the Digital Consumer Index. Leveraging more than 2,500 data points from Passport, Euromonitor International’s syndicated research platform, the Digital Consumer Index assists companies with market prioritization exercises for all digital initiatives, including digital commerce.
The 2016 Digital Consumer Index consists of two central components: the Digital Connectivity Index and Connected Commerce Index. Each component, which is broken down into further subcomponents, is given equal weight in the overall Digital Consumer Index. Each index also contains a current and forecasted score. In total, the Digital Consumer Index utilizes 18 different metrics, all weighted according to Euromonitor’s industry expertise, to provide an overall market attractiveness score for each component of the index.
Below are five key insights from the 2016 Digital Consumer Index:
#1 - Degree and type of connection varies greatly across market types
The degree and type of digital connectivity varies greatly between developed and emerging markets. Broadly speaking, developed market consumers tend to have greater access to digital hardware and services than emerging market consumers. Of the top 10 markets with the highest current scores on the Digital Connectivity Index, all are developed markets. Of the 26 emerging markets contained in this index, the emerging markets score higher on mobile connectivity than home connectivity with the exception of Hungary, Poland, Slovakia and the United Arab Emirates (UAE).
#2 - South Korea sits atop the current digital connectivity rankings
South Korea is a leader in technological development and implementation with some of the fastest and most extensive networks in the world. The strength of these digital connections propelled it to the top spot in the Digital Connectivity Index current rankings, placing it just ahead of tech-savvy neighbors like Singapore and Japan. Although strong in fixed and mobile broadband connectivity, the nation’s connectivity score was buoyed by its near-ubiquitous household broadband. With an extensive infrastructure and top connection speeds, it has a highly developed broadband environment, which will mute expansion rates going forward. South Korea will fall four spots in forecasted ranks as Hong Kong, Singapore, Switzerland and the US make greater gains. These markets will see an increase in their expansion of wireless broadband penetration rates and share of mobile internet subscriptions to total subscriptions.
#3 - UK sits atop Digital Consumer Index thanks to digital-first mindset
The UK, which sits atop the current Digital Consumer Index, is a digital frontrunner. As of 2015, 17% of all consumer payments were executed through a device, equating to US$260.3 billion in digital purchases. That ratio is expected to reach 22% by 2020. The UK is among the most digitally advanced commerce markets. Digital commerce has taken off there more so than other markets thanks to a propensity toward card payments and a strong digital infrastructure backbone. The proliferation of smartphones led urbanites to embrace the convenience of on-the-go purchases. In addition, consumers can conduct commerce via websites, mobile apps, carrier billing or text message. In fact, most products and services can be bought digitally. Even traditional cash businesses, such as cabs, hairdressers and cleaning services, accept online bookings and payments.
#4- China and UAE currently outpacing emerging market counterparts
China and the UAE are outpacing their emerging market counterparts based on current scores on both the Connected Commerce Index and Digital Connectivity Index, which together equally feed the topline Digital Consumer Index. Owing to the economic downturn and the increasingly rapid pace of life, digitally savvy Chinese consumers have been seeking more efficient, convenient and cheaper ways of purchasing. Thanks to the enhanced user experience and quicker internet access, mobile overtook PCs in 2015 for most digital commerce spend, which was buoyed by higher-priced items like consumer electronics and appliances. Like other emerging markets, the United Arab Emirates has a strong cash culture, which has hindered digital commerce growth with the exception of travel-related purchases. Although offline travel sales still account for a higher proportion of overall travel sales, the popularity of booking travel services, flights and/or accommodations made online propels the digital commerce story in the United Arab Emirates.
#5- US will take top position in the forecasted Digital Consumer Index
The US is forecasted to move ahead of the UK in the forecasted Digital Consumer Index on the back of an expanding digital connectivity environment and a well-developed digital commerce ecosystem. The willingness to make digital purchases continues to grow as US consumers become more familiar with browsing and buying online across a range of devices. By 2020, Euromonitor predicts consumers will make more purchases for both goods and services via mobile phones than computers. An estimated 46% of digital commerce is expected to be executed via mobile in 2020, up from 20% in 2015. The large range of products available online means consumers have a wider choice in terms of prices, brands and delivery options. More internet retailers are also offering free delivery, free in-store delivery and rewards for purchases. While some consumers visit stores to test products, many turn to websites to buy such products in order to take advantage of online offers. These online platforms also appeal to consumers due to the 24/7 nature of these commerce environments and the convenience they provide for time-starved consumers.