The study was carried out by Translated to guide business clients in their selection of markets and languages for internationalization projects and to help them get the best possible return on investment (ROI).
T-Index was developed to help companies aiming to expand internationally to select their target markets and decide on the most suitable target languages when translating their website(s).
How to interpret the study
T-Index was developed to help companies aiming to expand internationally to select their target markets and decide on the most suitable target languages when translating their website(s).
Let's take an example.
A UK-based company specializing in the sale of winter sports merchandise has a website in English and wishes to translate it into another European language in order to reach new customers online. After conducting market research, the company’s marketing manager concludes that their products would be highly likely to succeed in Germany, Sweden and Norway. By accessing T-Index, it quickly becomes clear that Germany, with a 4.7% market share, is the market with the greatest potential for online sales, given its 73,825,582 Internet users, each with an average annual expenditure of US$24,003. T-Index has therefore acted as a decisive factor in the choice of German as a new language for the site.
Assumptions & Method
T-Index is a tool designed to support decision-making for companies faced with a choice of markets and languages when localizing their website(s). It gives an overview of each country’s online sales potential.
T-Index 2018 uses the latest statistical data provided by the World Bank database, i.e. data for 2016.
The T-Index value is calculated by multiplying the total number of Internet users by their estimated annual expenditure per capita.
In order to estimate the annual per capita expenditure of each Internet user, we used the HFCE (household final consumption expenditure) indicator from the World Bank expressed in current US dollars. The HFCE is the market value of all the goods and services purchased by households in each country. Please note that the calculation method used for previous versions of T-Index prior to 2016 was based on GDP instead of HFCE. We changed our calculation method in 2016 to give a more realistic overview of the real spending potential of Internet users in each country. You can find the details of our calculation method below.
Each country was classified according to the language most commonly used by the local population to browse and make purchases on the Web. For reasons of statistical significance, the coexistence of multiple languages within the same country was only taken into account where the T-Index value of the country exceeded 0.1%. In the latter case, only languages used online on a daily basis by more than 15% of the population were considered, except in cases where the minority languages in question (used online by less than 15% of the population) are also official national languages. For example, Switzerland, with a T-Index of 0.90%, was evaluated for three different language markets: German, French and Italian. All three of these languages are used on a daily basis by the Swiss people to browse and make purchases on the Web. While French and German are both used by more than 15% of the population, Italian is used by only 7% of the country’s Internet users. However, Italian is a nationally-recognized official language of Switzerland, hence its inclusion in the T-Index.
The T-Index study only includes languages used for browsing the Web. A number of languages are currently very scarcely represented online, with some not being used at all. In many countries, the language spoken on a daily basis by the majority of the population cannot be found online, such as Kinyarwanda in Rwanda. This is often due to a low Internet penetration rate, which prevents local people from accessing the Web to create content in their native language. In Rwanda, the 18% of the total population that has Internet access browses the Web in English, given that little or no content has been created by and for Rwandans in their national language. This is why T-Index includes Rwanda in the English-language market.
Languages with international variants have been grouped together. For example, UK and US English have both been classified as English.
Dependent territories (e.g. Puerto Rico) have been evaluated according to their respective governing state, provided they share the same language. If they do not share the same language, as is the case with Puerto Rico and the United States, they are included as separate entries based on the language market to which they belong.
The T-Index study does not cover all countries. The countries included in the study are those for which it was possible to find data on the number of Internet users. Without this data, the evaluation would have been impossible.
Calculation method
Firstly, we gathered information about each country’s total number of Internet users, HFCE and total population, from which we determined both the Internet penetration rate* and the HFCE per capita for each country. We then analyzed each country's Internet penetration rate and income distribution to determine the proportion of the HFCE theoretically spent by Internet users. Finally, in order to obtain the "HFCE per capita of Internet users", i.e. an estimation of their annual expenditure, we made the following calculation: (country's total population x country's HFCE per capita x percentage of HFCE theoretically spent by Internet users)/number of Internet users.
For countries where income distribution data was not available, we calculated the average income distribution for all countries and used this estimate.
In order to determine the proportion of HFCE theoretically spent by Internet users, we assumed that the Internet users in each country belong to the richest segment of the country’s population. We made this assumption bearing in mind that a certain income level is necessary in most countries to purchase an Internet subscription and take part in e-commerce activities.
*The Internet penetration rate is the percentage of Internet users in a given country.
Example
In Japan, the number of Internet users is 118,333,485 out of a total population of 126,994,551. The Internet penetration rate is therefore 93.18%. In 2016, Japan’s HFCE per capita was $21,703. Using the country’s income distribution by quintiles, we estimated that 93.18% of the richest people in Japan spend 96.7% of the total expenditure of Japanese households. To obtain the "HFCE per capita of Internet users", we then made a simple calculation:
(total population x HFCE per capita x % of expenditure spent by Internet users) / number of Internet users
Applied to Japan: (126,994,551 x 21,703 x 96.7%) / 118,333,485
The estimated HFCE per capita of Internet users in Japan is thus US$22.522.
To obtain the T-Index value, we multiplied the number of Internet users by the HFCE per capita of its Internet users. For Japan: 118,333,485 x US$22.522. Finally, to obtain a percentage value for each country, we divided each country's T-Index value by the sum of the T-Index values of all the countries. This explains how we obtained a T-Index of 7.08% for Japan.
Sources
The number of Internet users in each country is taken from the International Telecommunication Union (ITU) report "Percentage of individuals using the Internet". ITU is the United Nations specialized agency for information and communication technologies. The statistics were estimates for 2016. To change the percentage figures into whole figures, we combined the figures from this report with the ones from the total population report produced by the World Bank.
Data on HFCE (household final consumption expenditure) is taken from the World Bank. Data was up-to-date as of 2016 and is given in current US dollars. Please note that currency exchange rate fluctuations (national currencies versus US dollars) have an impact on the HFCE values expressed in current US dollars, and consequently on the current and estimated T-Index values. We chose to use HFCE values expressed in current US dollars instead of HFCE values expressed in current international dollars using purchasing power parity (PPP) rates because our study focuses on global e-commerce opportunities, and these are assessed in part on the basis of currency exchange rate fluctuations between countries. For countries or territories whose HFCE was not indicated in the aforementioned World Bank report, the data was estimated by our agency. The HFCE figures of the following 39 countries were estimated by our agency: Andorra, Bahrain, Bosnia-Herzegovina, Cape Verde, Comoros, Djibouti, Eritrea, Faroe Islands, Greenland, Iran, Iraq, Kazakhstan, Kiribati, Lesotho, Libya, Liechtenstein, Maldives, Marshall Islands, Mauritania, Micronesia, Monaco, Myanmar, New Zealand, Panama, Papua New Guinea, Puerto Rico, Rwanda, Samoa, San Marino, Sao Tome And Principe, Solomon Islands, Swaziland, Syria, Timor-Leste, Tonga, Turkmenistan, Tuvalu, Vanuatu and Venezuela.
To determine whether Internet access is restricted in a given country, we looked at the ranking provided by the international non-governmental organization Reporters Without Borders, available on its official website.
The distribution of income by quintiles is taken from the statistical data of the Development Research Group of the World Bank. The data refers to various years (the World Bank data ranges from 1992 to 2014).