The US just overtook China as the world’s best place for e-commerce

Online retailers, the US is your oyster.
Online retailers, the US is your oyster.
Image: Reuters/Chip East
We may earn a commission from links on this page.

China, you have probably heard, has become the world’s largest economy by some measures. It’s also home to Alibaba, an e-commerce monster with annual transactions greater than those of eBay and Amazon combined. It’s certainly an attractive and growing e-commerce market—but it’s no longer the most attractive market.

The US now holds that distinction, according to the global management consulting firm A.T. Kearney’s biennial global e-commerce index. The US has jumped ahead of China, which led the rankings in 2013, because it offers an irresistible mix of market size, growth potential, developed infrastructure, and its residents’ eagerness to purchase online—the categories A.T. Kearney measures to compile its index.

China’s fall to number two is due primarily to the broader slowdown hitting its economy, but there are other factors holding it back as well. The report noted that the lack of local infrastructure at times makes e-commerce challenging in the country: Conditions in less developed areas can make it difficult for retailers to distribute and deliver packages. Retailers have also been slow to allow refunds and returns of online orders.

A nation of shopaholics

The researchers attributed the US moving up the ranks to “continued growth and an improving economy.” As consumer confidence returns following the recession, Americans are getting back to shopping, and some of that spending is happening online. Even though online sales comprise less than 10% of all purchases by Americans, the US e-commerce market is still the largest in the world at $238 billion, and it grew 15% in 2014, showing it’s not nearly close to being saturated.

So what are Americans buying online? A.T. Kearney included part of a separate study it did on consumer behavior online, which found that more US consumers had bought “fashion and apparel” than any other category in the previous three months. (Chanel, which is finally launching e-commerce, should take note.) Clothes were one of the top three categories of goods purchased online globally, along with electronics and books.

India’s not at the party

One notable name missing from the list was India, which despite its massive population and rapidly growing economy has not yet broken into A.T. Kearney’s top 30. That’s perhaps not so surprising in a nation where extreme poverty and hunger are still prevalent, and internet penetration, while increasing, remains relatively low: The report points out that only about 3% of Indians shop online.

In its last report, the firm raised the same issues in India, pointing out that a lack of transportation infrastructure and low rates of credit card use, as well as onerous tax laws, have impeded the sector’s growth. Indian e-commerce is undoubtedly growing, but it needs much better infrastructure if it wants to rival North America, Europe, and Asia Pacific in the growing global e-commerce market.

Global e-commerce sales