Asian markets are now driving ecommerce growth on the international scale. By the end of 2017, ecommerce transactions in the Asia-Pacific region (including East Asia, Southeast Asia, India and Australia) expected to reach USD 2.352 trillion and more than double to USD 4.058 trillion by 2020. In addition, Asian countries are considered the pioneers in m-commerce (sales via mobile devices including smartphones and tablets) and s-commerce (sales via social networks).
East Asia represents more than 1.6 billion people in eight countries (China, Hong Kong, Macau, Taiwan, Japan, North Korea, South Korea and Mongolia), Southeast Asia represents nearly 620 million people in 11 countries (Indonesia, Malaysia, Singapore, Thailand, Vietnam, Brunei, Cambodia, Philippines, Laos, Burma and East Timor). In addition, China and India have another 2.6 billion plus people. All in all, this region offers a gigantic target for ecommerce sales.
However, Asia is far from being the ecommerce heaven (that it ought to be) due to several areas that present sharp contrasts. These areas include internet penetration, payment methods, sales volumes, differences in Internet regulations and the diversity of languages. Therefore, entering this market is not a piece of cake. In addition, the population is relatively young—most are under 30 years of age—and a middle class with a gradually increasing purchasing power.
Many Asian start-ups offer innovative products and services, which foster competition. Logistics infrastructure, including delivery services, remains a key component and is one area where major investments are very active. However, to really kick off the ecommerce revolution, Association of Southeast Asian Nations (ASEAN) should progressively reduce cross-border restrictions and allow the emergence of major players.
Why Invest in Asian Ecommerce Market(s)?
The growth of the consumption and distribution sector is significantly faster in Asia, as compared to the rest of the world. Driven by higher incomes and a rich middle class, this sector is expected to grow by an average of 6.2%, In contrast, the European and North American markets do not offer such favorable growth rates and other opportunities. Businesses, therefore, have many reasons for exporting to Asia, and more particularly to the Land of the Rising Sun.
Strong Growth in Online Shopping
The Asian ecommerce market is booming due to the strong and steady growth of the Internet users. For example, “APAC accounted for 40% of global e-commerce sales in Q1 2017” in Southeast Asia. Given this, it is important to understand that despite these numbers, ecommerce is still an emerging activity where the amount spent online per capita is more than spent by the Americans. With a huge potential and the increase in the global number of Internet users, China has surpassed the United States as the world’s largest market for ecommerce with 35% of annual growth rate.
Strategic Position and Competitiveness
To enter the Asian market, foreign investors must first decide their positioning on the Internet. The sale of products via existing platforms, such as Tmall (China), Lazada (South-East Asia), Snapdeal (India) or Rakuten (Japan) certainly facilitates the process. Furthermore, these platforms allow immediate access to the market through turnkey facilities and local payment methods.
This strategy is, less effective for luxury brands, who often prefer to launch their own shopping solution in order to differentiate and avoid assimilation by the mass distribution. This takes more time and requires a thorough knowledge of the market and local practices.
Impact of Mobile Commerce
Asian consumers are increasingly using their smart devices to search and buy products online. Therefore, ecommerce players must adopt m-commerce strategies to increase their sales. The growing use of mobile applications provides complementary services to consumers. Similarly, loyalty programs enable customized offers and discounts.
Use of Social Networks
In order to be a success in the Asian markets, a marketing strategy coupled with the intelligent use of social networks is essential. Use of social networks allows consumers to inform ecommerce stores about a purchase made or to share their experiences. Through social networks, brands can solicit opinions on new products or developing projects, while getting closer to consumers. In China, in particular, the growing influence of WeChat encourages brands to open an account. One of the main difficulties in using social networks is the management of the volume of information exchanged through the channel.
Online Payment Methods
The penetration rate of credit cards varies substantially in different Asian countries, and mobile payment methods are not available everywhere. In China, Alipay and Tenpay have become widespread, while in Australia, consumers prefer to use BPAY, POLi, PayPal, and PayMate. Moreover, many Asian consumers prefer to pay in cash (especially in India, Japan and in the emerging countries of Southeast Asia). Foreign investors should consider these payment issues as well as those relating to foreign exchange and exchange control before entering a particular market.
Logistics and Support Services
Asian consumers are used to relatively short delivery times and are not very tolerant in this respect. However, the poor quality of infrastructure in many Southeast Asian countries does not meet the expectations of consumers. This is less of a problem in China, where infrastructure investment has been a priority of the Chinese government for many years. Moreover, many delivery companies (originally set up for delivery to businesses) now cater to all customers. The management of returns, the organization of telephone calls prior to any delivery, the repeated attempts of deliveries, and the payment by cash upon receipt of an order are all problems specific to individuals. In order to overcome the difficulties encountered, some sellers decide to set up their own delivery service and invest in the purchase of trucks and motorcycles.
Availability of Local Data Centers
Almost every major hosting providers have data center located within the Asia-Pacific region. As a result, this reduces the latency factor and ensures great user-experience for the visitors. The page load speeds, in particular, increases significantly because of low latency factor. However, to side steps the hassles of application management, it is best to opt for managed hosting solution so that the ecommerce store managers/owners could focus on business processes rather than underlying technical issues.
From Opportunities to Challenges
Almost all businesses consider Asian ecommerce markets a tough nut to crack.
The first of these obstacles is the maze of local tax rules. Then comes the problems of local needs; the demand is not the same as in the West. The language barrier is also cited, in the third place as an obstacle.
However, many businesses opine that one of the keys to success in the Asian countries is the connection with the local purchasers. The obstacles are mostly cultural. And the sellers must adapt to a different language, needs, and market design.
Asia is a promising ecommerce market with prospects of a double-digit growth. It is important to understand that Asia is not Europe. It is an entirely different market with challenges such as language barrier, tax laws, and logistics. Therefore, ecommerce players in Asia must continually adapt their strategy to meet consumer expectations and to distinguish themselves within an increasingly competitive market.
As you know, Australia is an important country in the Asia-pacific region, read the Booming Australian Ecommerce Scene.
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Passionate about technology, entrepreneurship, and marketing, Mansoor Ahmed Khan is in computing since he knows how to type on a keyboard. His daily life is rocked by his family, projects, and his screen. Probably in this order, he likes to be convinced at least.