With more than 10 million consumers having already bought online, and with Internet use surging, the Asia-Pacific online retail market is reaching critical mass, according to a report by The Boston Consulting Group (BCG).
The report “E-Tail of the Tiger: Retail E-Commerce in Asia-Pacific” surveys the online retail markets of Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Singapore, Philippines, Taiwan, and Thailand.
“The major global online players are starting to turn their eyes to this part of the world,” said BCG VP David Michael. “Asia-Pacific online retailers need to act fast to leverage their local knowledge if they want to win the competition that is coming with these global players.”
Despite the tremendous diversity in the Asia-Pacific region, the online retail market in still highly concentrated, with the leading 25 players in most countries accounting for more than 60 percent of overall revenue. While some markets and categories, such as computer hardware and software, financial services, and travel are already starting to get crowded, the report also points to the many areas that are virtually unexplored.
According to the report, the fastest growing e-commerce market in Asia-Pacific is the online brokerage segment, which has been driven primarily by phenomenal growth in South Korea, where the category’s revenue reached $520 million in 1999.
Financial services is the center of e-commerce growth in the region,” Michael said. “E-commerce delivers an immediate convenience and price benefit for consumers and there are few of the fulfillment problems that often plague online retailers selling physical products.”
Online trading is also a natural point for converting Internet users into online shoppers, according to the report. Customers gain confidence from trading online, and use it to make other purchases.
A clicks-and-mortar approach will be even more important in Asia-Pacific than it is in the US, the report found. The e-commerce landscape in the region is already dominated by multichannel players rather than Internet start-ups. Established players have the security of well-known brand names, plus consumer demand for physical as well as online outlets working to their advantage. Given multichannel advantages, including existing assets and relationships, as well as the success of those who have already come online, BCG expects many more traditional retailers will establish online operations this year.
More than 1,500 retailers outside Japan are now actively engaged in e-commerce. More than half of the total sites are pure-plays, indicating that multichannels have been slow to adopt the Internet despite their dominance of overall online revenue.
Other findings of the report include:
- Total online retail revenue in Asia-Pacific was $2.8 billion in 1999, compared with $3.5 billion in Europe, and $36.6 billion in the US
- Growth potential is high, with online retail penetration of the total retail sector only 0.1 percent compared with 1.2 percent in the US
- Online retail revenue in 1999 grew almost 200 percent to $2.8 billion, and is expected to rise more than $7 billion in 2000
- Three countries account for 94 percent of the total Asia-Pacific market: Japan at $1.5 billion, Korea at $720 million and Australia at $380 million. Most other countries in the region have revenue of less than $30 million.
- Computer hardware and software, and financial brokerage lead the categories, with revenue of $770 million and $700 million, respectively
- Emerging categories include travel, consumer electronics and books, with revenues between $120 million and $320 million per category. However, category breakdowns vary widely by country, with best-performing categories usually dominated by a few key players in any given market
- Multichannel retailers, with both online and offline operations, have been able to leverage existing assets and brand equity to capture 74 percent of online retail revenue in the region