As market analysts fear the developed world may be in danger of recession, international retailers are looking toward emerging markets to make up for lost profits, and they’re looking at the internet as a means to connect to them.
This can be applied to both high end specialists like Louis Vuitton Moët Hennessy and Neiman Marcus, as well as, well, suppliers of everything, like Wal-Mart, according to a CNBC report.
And you could be forgiven if your first thought when you heard the words “emerging market” was China. The Asian giant does have the largest online population in the world, and the value of its online market is the largest in the developing world and the second largest on earth, totaling US$23 billion, according to the global management consulting firm, A.T. Kearney’s Ecommerce Index.
But a much smaller country, hidden away behind the Andes mountains in South America, could have much more promising online investment potential, the U.S. based consultancy says.
“While the absolute number of consumers is higher in China, from a behavioral perspective, online shopping is much more wide-spread among online users in Chile,” Hana Ben-Shabat, a partner at A.T. Kearney, a consulting firm that advises retailers on overseas expansion, told CNBC.
That means that while Chile’s online market stands at US$749 million, you’ve got to look at the percentage of online activity among the population. A.T. Kearney says, for every 10 people online in Chile, seven will buy something online. That’s compared to three of every 10 Chinese internet users.
And compare the average Chilean household, which has four credit cards and spends US$158 online every year with China’s average household, which spends US$17 per year online.
“There’s a big discrepancy in terms of the size of the online retail market,” said study co-author of the consultancy’s research paper, Parvaneh Nilforoushan, “but when we look at online penetration and percentage of people who are actually active online, the percentage of people who shop online is highest in Chile.”
The divergence between online take-up can be explained by China’s large rural population, who do not have access to the internet, and its infrastructural shortcomings outside of the huge urban conurbations.
In contrast, the long, narrow country of Chile is well served by a modern highway network, high-quality internet and communications infrastructure, as well as heavy online society.
“You can have high broadband penetration, adequate regulation and safe online payment mechanisms,”says Ben-Shabat, “but if the country’s infrastructure is not as developed, you can’t actually deliver the goods.”
In fact, A.T. Kearney is so glowing in its Chilean report card that it has declared the Andean nation the “hidden gem” of Latin America.
For more on investment opportunities in Chile, click here.