Internet Connection Speeds Are Getting Faster:

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1 Internet Connection Speeds Are Getting Faster: How Does that Affect Retail? The global average Internet connection speed increased by 23% year over year in the first quarter of South Korea had the fastest Internet connection speed during the period. Faster Internet connections can facilitate online sales, as consumers tend to purchase elsewhere when retailers websites are slow to load. China and India have relatively slower average Internet connection speeds, while consumers in those countries also have a lower tolerance for slowperforming websites. Consumers globally would be interested in purchasing more from foreign retailers online if it were faster and easier to do so. DEBORAH WEINSWIG Managing Director, Fung Global Retail & Technology deborahweinswig@fung1937.com US: HK: CHN:

2 Speeds Are Getting Faster: How Does that Affect Retail? INTERNET CONNECTION SPEEDS INCREASED IN THE FIRST QUARTER The global average Internet connection speed rose by 23% year over year, to 6.3 Mbps, in the first quarter of 2016, according to a new report by technology company Akamai. South Korea had the fastest Internet during the period, with an average connection speed of 29 Mbps, an increase of 24% year over year. The US ranked 16th globally, with an average connection speed of 15.3 Mbps, an increase of 29% year over year. Figure 1. Internet Connection Speed in Selected Countries, 1Q16 Country/Region Average Connection Speed (YoY % Change) Average Peak Connection Speed (YoY % Change) South Korea 29.0 Mbps (+24%) Mbps (+32%) Norway 21.3 Mbps (+68%) 69.6 Mbps (+47%) Sweden 20.6 Mbps (+32%) 79.5 Mbps (+27%) Hong Kong 19.9 Mbps (+19%) Mbps (+19%) Switzerland 18.7 Mbps (+25%) 76.2 Mbps (+27%) Singapore 16.5 Mbps (+29%) Mbps (+49%) US 15.3 Mbps (+29%) 67.8 Mbps (+27%) UK 14.9 Mbps (+29%) 61.0 Mbps (+18%) China 4.3 Mbps (+15%) 31.0 Mbps (+60%) India 3.5 Mbps (+55%) 25.5 Mbps (+48%) Source: Akamai China had the largest number of Internet users in 2015, but its Internet speed, as measured in the first quarter of 2016, was relatively slow compared to that of the US, countries in Europe and some other Asian countries. Although China had the largest number of Internet users in 2015, its Internet speed, as measured in the first quarter of 2016, was relatively slow compared to that of the US, countries in Europe and some other Asian countries: China s average connection speed was 4.3 Mbps during the first quarter, ranking it 100th worldwide. Its average peak connection speed was 31.0 Mbps during the same period, lagging the average peak speed in the US, South Korea, Singapore and most of the European countries. Figure 2. Number of Internet Users in Selected Countries, 2015 (Mil.) China US India Japan Russia Brazil Germany UK France Turkey Source: comscore/statista 2

3 Akamai s report also shows that the world is adopting more broadband with higher speeds. The global 10-Mbps broadband adoption rate increased to 35% in the first quarter of 2016, while the adoption rate of broadband with speed faster than 25 Mbps increased to 8.5%. Figure 3. Global Broadband Adoption Rate Broadband Speed 1Q16 4Q15 10 Mbps 35% 32% 15 Mbps 21% 19% 25 Mbps 8.5% 7.1% Source: Akamai The report also shows that Internet protocol technology continues to evolve. Currently, the most widely used protocol is Internet protocol version 4 (IPv4), but that is being gradually replaced by the next-generation IPv6. In the first quarter, the number of unique IPv4 addresses connected to Akamai s platform declined by 0.5% year over year, to 808 million, representing more than 1 billion web users worldwide. Meanwhile, IPv6 adoption increased in countries including Germany, Switzerland and the US. MOBILE CONNECTIVITY Overall mobile connection speeds also increased during the first quarter. The UK had the fastest average mobile connection speed, at 27.9 Mpbs, an increase of 66.5% from the year-ago period. Overall mobile connection speeds also increased during the first quarter. The UK had the fastest average mobile connection speed, at 27.9 Mpbs, an increase of 66.5% from the year-ago period. Source: Shutterstock Mobile data traffic continued to grow during the first quarter as well. Cumulative mobile data traffic increased by nearly 16 times between 2011 and 2016, driven by increased smartphone subscriptions and increased viewing of video content. In terms of mobile browser usage, Android platforms (including Android Webkit and Chrome for Mobile) continued to outperform ios platforms in the first quarter of

4 Figure 4. Mobile Browser Usage, 1Q16 Percentage of Requests, by Network ios Android* All Networks 41% 51% Cellular Networks 33% 58% *Including Android Webkit and Chrome for Mobile Source: Akamai Nearly 65% of consumers surveyed were not willing to wait for more than three seconds for a website to load. Of those polled, 85% agreed that a website s speed and quality affect their trust in that company. Faster Internet Connections: The Impact for Retailers Site Optimization for Speed Key to Retaining Customers With Internet speeds increasing globally, retailers need to focus on optimizing their sites to deliver content in the fastest way possible in order to stay relevant. A 2015 survey by Internet performance management company Dyn found that the majority of global consumers expect websites to load in less than three seconds. The Dyn survey suggests that: Figure 5. Consumer Behavior When Facing Slow-Performing Websites Nearly 65% of consumers surveyed were not willing to wait for more than three seconds for a website to load. Of those polled, 85% agreed that a website s speed and quality affect their trust in that company. As many as 70% of consumers in China, India and Malaysia will find an alternative place to purchase when they face a slow-performing website. Source: Dyn 4

5 In China and India, more than 80% of those surveyed in the two countries said that they would be willing to buy more from overseas retailers online if it becomes faster and easier to do so. Positive Spillovers for Cross-Border E-Commerce Faster Internet connections will likely facilitate domestic online sales, and also boost cross-border e-commerce. The Dyn survey results suggest that consumers would be likely to buy more from foreign retailers online if it were faster and easier to do so. That feeling is particularly strong among consumers in China and India: more than 80% of those surveyed in the two countries said that they would be willing to buy more from overseas retailers online if it becomes faster and easier to do so. This indicates that foreign retailers could see positive spillover effects if connection speeds in China and India improve. Figure 6. If It Were Faster and Easier for Consumers to Buy Online from Retailers Located in Other Countries, Would They Do It More Often? Source: Dyn To succeed, online retailers will not only need to do more to optimize the digital experience for consumers, but also track the trends in how online shoppers consume content over a speedier Internet. More Video Marketing Faster Internet and mobile connection speeds are allowing users to stream more video content online. This will especially benefit fashion retailers, many of which are utilizing online videos for their digital marketing and brand-building campaigns. THE INTERNET WILL NOT WAIT Improvement in the global Internet infrastructure is bringing more users online, but at the same time, it is leveling the playing field for e-commerce companies, making the market more competitive. To succeed, online retailers will not only need to do more to optimize the digital experience for consumers, but also track the trends in how online shoppers consume content over a speedier Internet. 5

6 Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: Hong Kong: China: Kiril Popov Analyst Chim Sau Wai Research Associate HONG KONG: 10th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: LONDON: Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0) NEW YORK: 1359 Broadway, 9 th Floor New York, NY Tel: FBICGROUP.COM 6

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