What you need to know about ecommerce in Asia

A photograph of Mike Millar giving his presentation on digital business in Asia, to a room of attendees at Shift London.

At ClickZ’s Shift London conference, visiting lecturer from Hong Kong Polytechnic University and author of Global Supply Chain Ecosystems, Mark Millar, talked about the challenges and opportunities presented by Asia’s massive ecommerce market, and how businesses can equip themselves to tackle them.

Ecommerce in Asia is thriving. That was the central message of Mark Millar’s presentation to Shift London on Tuesday morning, and he had the figures to back it up.

China currently ranks top in the world for number of internet users, and boasts an online retail market of approximately $2 trillion. On a blended average, Asia has a GDP growth rate of between 4 and 7% – far higher than anything the developed world could dream of achieving.

By the year 2020, two-thirds of the world’s middle class are predicted to be living in Asia, which will represent a phenomenal amount of collective spending power. Social media, video and mobile internet are all developing at break-neck speed. China’s largest mobile provider, China Mobile, will reach 500 million 4G subscribers this year, and is due to start rolling out its 5G network in just four years’ time.

A slide from Mark Millar's presentation entitled "The Asian Century". Across the top, the text reads, "Global Middle Income Class to 2030. 66% world's middle class in Asia (2009 was 28%)". There is a map below it with green circles denoting the size of the middle income market in each continent in 2009 versus 2030. The Asia Pacific region has a medium-size circle depicting 2009, with a much larger circle around it denoting the middle class population in 2030.

There is also a vast potential market in Asia that is not yet online: more than 500 million people in China have never been on the internet, with another 500 to 700 million, Millar estimated, elsewhere in Asia. This represents more than a billion new internet users who could become connected to the internet over the coming years.

So with all this in mind, what do marketers and businesses need to know in order to tap into this huge, up-and-coming consumer base, and the opportunities it presents?

It’s not just about China

China has a tendency to dominate any conversation about ecommerce and retail in Asia, and with good reason. It is currently home to 668 million internet users and has more social media users than the US and the EU combined; it has 413 million online shoppers, predicted to hit 750 million by 2020. It currently turns over 672 billion US dollars in online retail, which is projected to soar to 1.5 trillion in just two years.

But Asia is not just about China, and assuming that it is means missing out on a huge part of what is currently happening on the continent. The Association of South East Asian Nations, or ASEAN, has a collective population of over 600 million, and a combined GDP of more than $1.5 trillion. It generates $1.7 trillion in trade per year, and has an average economic growth rate of 5-6% annually.

An infographic depicting various countries in ASEAN with their flags. At the bottom it lists various statistics about the Association's population, GDP, trade revenue and economic growth (given in the article).

Indonesia, the largest of the South-East Asian nations, is already on its way to 100 million online users. Millar cited a “blooming” Indonesia as one of the four key trends driving the digital world in Asia, alongside female influence, social booming and mobile dominance.

Myanmar is another Asian nation where rapid change has been taking place, due in large part to economic liberalisation. Millar recalled two visits he made to Myanmar a few years apart, where he witnessed the price of a pre-paid SIM card drop from several thousand dollars to around a dollar in value. Smartphones have gone from being almost unheard of to being commonplace.

And in India, 459 million people – 35% of the population – are predicted to be connected to the internet by 2019, with ecommerce in India set to reach $47.5 billion in sales in the same year, according to figures from eMarketer.

Mobile first, always

Millar described how digital development in Asia has “leapfrogged” over several stages that we saw technology progress through in the west.

Rather than transitioning from computer to laptop to mobile, much of Asia has gone straight to a mobile internet; and in Millar’s words, “If you’re not mobile-ready, you’re not going to be in the game whatsoever.”

A picture of lots of Asian women holding up flip phones and digital cameras, as if to record something.

Google’s Consumer Barometer report in 2014 revealed that Asia is home to two of the top five smartphone-engaged nations, with Singapore topping the list at 85% smartphone penetration, followed by South Korea with 80%.

Malaysia, Taiwan and Hong Kong had all tipped the 50% penetration mark, while in China, the percentage of internet users accessing the web via mobile surpassed that of desktop in late 2012.

So any ecommerce or marketing strategy in Asia has to be a mobile-first strategy. Christian Arno laid out four tips for tapping into the mobile market in Asia in a piece for ClickZ last year, with some great practical advice on how to optimise your site for mobile.

A different infrastructure for ecommerce

Millar explained that there are different drivers and dynamics across the developing Asian market compared to the developed world.

The developing market is a “greenfield” scenario, without an established infrastructure in place, and ecommerce is a new channel for new consumers, as opposed to in the developed world where it is simply an alternative channel for existing consumers, with an emphasis on convenience.

A slide from Mark Millar's presentation listing different drivers and dynamics across developing versus developed markets. On the left side is a list of traits for developed markets (UK, EU, USA): modern retail, established B2C, sophisticated logistics, legacy infrastructure, PC/laptop/smart phone. On the right side is a list of traits for developing markets (Asia, China): traditional retail, new B2C/C2C, unrefined logistics, greenfield scenario, entry *is* smartphone.

The “mobile ecommerce frenzy”, as Millar termed what is currently taking place in Asia, allows many people in rural areas to shop as if they were living in big cities, with access to the same brands and consumer goods.

The key difference with these rural consumers, however, is that many don’t have the same financial resources, like online banking and credit cards, that normally make ecommerce possible. One of the big obstacles to online retail in China was that very few people had credit cards, and many of them still don’t.

Mobile and online payment platforms are extremely important for opening up these rural markets. Indonesia has a large online population with a lot of online shopping, but Indonesia’s payment system is not suited to online transfers, with an electronic transfer taking about 4 to 6 days to process. As a result, much of online shopping in Indonesia is paid for in cash on delivery.

Tips for tapping into the market in Asia

For businesses who want to tap into the Asian market, but might not know where to start, what is Mark Millar’s advice? “The key things are be selective and to be focused,” said Millar.

A cartoon style image of a finger "tapping" the top of a building, which has a picture of a shopping cart on top. Two trucks are driving out of the doors to the building.Image by Tech in Asia, made available via CC BY 2.0

Choose which particular area you want to focus on, both in terms of region and in terms of sector. Even China needs to be subdivided into regional opportunities; it’s a huge country with a varied demographic, so you need to target your approach.

You should also narrow down which section of the market you want to tackle, such as electronics or luxury goods.

One of the beauties of doing business in Asia, said Millar, is that there are many businesses who have been there for decades, and have learned the hard lessons already. So once you’ve chosen your location and segment, you should network into the existing ecosystem to find out who the major players are, and what they’ve learnt.

Of course, you should also carry out your own research into your new target market and learn about its unique features. As we’ve seen, there is a huge variation across the continent in terms of infrastructure, technology and behaviour, so always tailor your approach.

This was our inaugural Shift event. Our next one will be in San Francisco in August – see you there!

Related reading

Mobile Payment
tencent_emily-ma_featured-image
nurcin-erdogan-loeffler_wikipedia-definition-the-future_featured-image
pwc_experience-centre_hong-kong_featured-image
<