In several emerging markets, entrepreneurs are using the Amazon playbook to bring e-commerce to their own countries, but they're finding that demand for online shopping is expanding faster than the infrastructure needed to support it.
The big picture: Serving populations that tend to rely on cash and live in harder-to-reach areas, the online retailers of the developing world are searching for creative ways to grow — and keep the international giants at bay.
By the numbers: By 2020, the global e-commerce market is projected to hit $4.2 trillion, about double its size in 2016, according to eMarketer.
- The regions driving the boom are Asia, Latin America and Africa. Asia's e-commerce market, led by India, is expected to grow 25% this year; Latin America, 21%; Middle East and Africa, 21%.
- Yes, but: "All of these pockets have their own unique dynamics," says Andrew Lipsman, an analyst with eMarketer. And the players in these markets are investing millions — or even billions — to overcome infrastructure challenges.
In Africa, the dominant player is Jumia, a pan-African e-commerce platform which recently filed for an IPO as the continent's first tech unicorn. Since its founding, Jumia has added food delivery, flight and hotel bookings, and even a subscription service for free delivery called ... Prime.
- The company has accrued about 4 million shoppers across Africa. It has a long runway ahead of it on a continent that now has 400 million internet users.
- But one of the biggest hurdles Jumia faces in Africa is that many homes don't have traditional addresses. "[F]or example, if you say in a city in Africa, 'I live in the third street by the church with the blue door,' that’s the address," Jumia co-founder Sacha Poignonnec said in an interview with McKinsey.
- To get around the issue, Jumia works with local courier partners, dubbed "co-pilots," reports the Washington Post. These partners tag along with drivers and get on the phone with individual shoppers to figure out where to deliver their goods.
In Russia, another emerging hotbed for e-commerce, the biggest online retailer is apparel company Wildberries, which has gotten ahead because it has invested billions in trucks and warehouses, says Fedor Virin of Data Insight, a research firm. Russia's Amazon equivalent is Ozon, a platform which sells everything.
- Both firms have to work with cash. Around 40% of Russian e-commerce orders are still paid for in cash upon delivery, per Data Insight. Another 20% are paid for with cards upon delivery, while 40% are pre-paid.
- Much of the population is uncomfortable with having packages left on doorsteps, so 75% of orders are collected at lockers or pick-up points, Virin says. Maintaining these facilities adds another cost.
India's population also relies heavily on cash. Nonetheless, it's the second fastest-growing market for e-commerce, behind Mexico.
- Giants like Amazon, Walmart and Alibaba are making massive investments in homegrown firms like Flipkart and Reliance Retail — and betting the size of India's online shopping market will eventually rival that of China.
- That's "still a ways off," says Lipsman.
What to watch: The world's burgeoning e-commerce giants may hope to become the next Amazon. They certainly hope their home markets become the next China.
- Because China leapfrogged credit cards and went straight from cash to mobile payments, e-commerce has boomed there. It accounts for 30% of all retail, compared to the 10% in the U.S.
- The rest of the developing world lags behind. But it's catching up.