Why Iberia ranks so low in the eCommerce index
Recently, the United Nations Conference on Trade and Development (UNCTAD) released a study which analyses a country’s economic preparedness to support online shopping. This study covers 151 of the world economies and we got to say, the results were very interesting.
Eight of the top 10 countries in the index are in Europe. The Netherlands is the highest ranked country, followed by Singapore, Switzerland and the United Kingdom.
According to this index, the Northern European countries are amongst the best prepared countries for online shopping, since Iceland, Norway, Sweden and Denmark are also represented in the Top 10.
Although slightly below on the rank, some of the other European countries, like Germany, Austria, France and Belgium are doing well, being, respectively, in 16th, 22nd, 23rdand 28th position.
But what about Southern countries?
Well, compared to the rest of Europe, they aren’t doing so well. Spain, Greece, Italy and Portugal occupy the 38th, 40th, 44thand the 56thposition, with Portugal actually being one of the lowest European ranking countries on the list (only being ‘out ranked’ by Georgia, Albania and Armenia).
So this got us wondering: why are Southern European countries ranked so low compared to other European countries? What are the reasons behind Portugal and Spain’s positions?
So we took a look at the four main indicators responsible for this ranking: share of individuals using the internet, share of individuals with an account at a financial institution or with a mobile-money-service provider (over the age of 15), secure internet servers (per 1 million people) and Postal Reliability Index. And after a brief analysis, we could see that both countries scored very low on the Postal Reliability Index, the logistics part, while scoring well on the other indicators. So we delved into the meaning of this index.
Postal Reliability Index
This Postal Reliability Index was created by the Universal Postal Union (UPU), and it combines four major components:
- Reach Score, which captures the level of internationalization of operations by the number of partner networks and the volume of international exchanges;
- Relevance Score, that has the goal of evaluating the competitiveness of postal services in all key segments, and that measures the intensity of the demand of full portfolio postal services;
- Resilience Score, which assesses the ability of postal services to withstand external shocks through adaptable business models and that indicates the level of diversification of revenue streams, the capacity to innovate, to adapt, and to integrate sustainable development into postal operations.
- And Reliability Score, that reflects the performance of the postal services in terms of speed and predictability of delivery across all the key segments of physical postal services.
And, although the reliability score is exactly what we’re looking for, in this study, they only provide the global average score, which combines these four aspects and measures a country’s overall performance.
So, overall, among 173 countries, Spain is ranked in the 53rdposition and Portugal at 71st, which shows a big disparity within regions. While the global average score for industrialized countries is of 67.9, Spain’s score is of 49.3, and Portugal of 40.9.
And what is the reason behind this discrepancy? Well, according to UPU, the regional asymmetries in Postal performance, in terms of reliability, reach, relevance and resilience, are most likely attributed to a lack of investment in upgrading and transforming the postal infrastructure.
What does all this mean?
In summary, Portugal and Spain’s economies are overall prepared to support online shopping. Their population is connected and is using the internet, whilst also owning an account at a financial institution or at a mobile-money-service provider that allows them to pay for their potential online shopping. But one of the most important parts of eCommerce, the logistics, needs some improvement to get postal infrastructure up to part compared to leading European countries. And from our experience working in the Dutch, Portuguese and Spanish eCommerce market, we can see a significant higher number of delivery issues in Spain and Portugal (delays, damages and losses) than in the Netherlands.
According to Statistica, in 2018, 79% of Dutch consumers order goods and services online, whilst the European average is 67%. In Spain, 61% of the population buys online, and in Portugal this number increases, reaching approximately 64% of the population.
This means that the Netherlands has between 15% and 18% more online shoppers than Portugal and Spain. And from the UNCTAD index, which shows that these three countries score similarly in the four major indicators of the index except one – Postal Reliability – it is safe to assume that there is a direct impact of the quality of the logistics infrastructure to the development of the eCommerce market.
So, if Portugal and Spain want to level the eCommerce playing field, then their governments, regulators and market players would gain from investing and from creating policies and regulations to boost this critical element of national infrastructure. And luckily, we can already see this happening.
But you know what the best part is? Even though we already see efforts to improve the logistics on the long term, there are solutions that online stores can implement today.
Where larger companies can either have their own distribution infrastructure or local warehouses in their main markets, for small and medium size businesses those solutions are out of reach. What they can, is use services, like Shiptimize (yes, we plugged ourselves here. We usually don’t do this, but we really believe that it’s in place here) that allows them to route their shipments to different carriers with specific strengths. This way, they can use the best option possible for each delivery, making their logistics process as best as can be.