Asia set for e-commerce boom
Asia set for e-commerce boom
A new report by market research firm TNS identifies five triggers that acted together as catalysts for the dramatic changes in consumer behaviour that led to China’s “explosive” e-commerce growth, and suggests other Asian economies could be on the same trajectory.
The report, titled The Asian eCommerce Explosion, says China’s unexpectedly rapid e-commerce growth has reshaped the understanding of the conditions needed for online shopping to thrive. It notes that prior to 2010, none of the presumed indispensable ingredients of a successful e-commerce industry – such as ready access to banking services, well-established logistical infrastructure and giant warehousing operations – existed in China. Yet the country’s experience demonstrates that online shopping can take off without them, provided five triggers are in place.
The report identifies the first trigger as innovative e-commerce and payments solutions. It notes that “any ecommerce model that combines low barriers to entry for brands and retailers, with competitive pricing and transparency through user reviews has the potential to take off in Asia”.
However, even the most promising e-commerce platform requires payment models that are suited to the market’s financial infrastructure and consumers’ attitudes toward online spending. Accordingly, Asian e-commerce sites have devised various solutions to overcome the region’s lack of access to credit cards and banking solutions, such as a mobile wallet service that enables customers to pay for goods using their mobile phone bills.
Moreover, even in Asian markets where banking services exist, cash is king and customers are reluctant to pay in advance. This has fuelled the growth of online platforms with post-pay options.
“The option to pay on delivery was a key component of Alibaba’s explosive growth in China – and it is likely to be equally important elsewhere,” the report noted.
The second trigger identified in the report is cheap labour for low-cost distribution to overcome the limitations of poor logistics infrastructure. Again looking at China’s Alibaba, it notes the value in having a fleet of low-paid freelance motorcycle couriers to deliver orders to its customers.
Aside from expanding the company’s logistics reach, the moto fleet obviated the need for extensive warehousing capabilities, as independent retailers could arrange delivery of their Alibaba orders with couriers themselves.
For its third trigger, the report highlighted the region’s increasing smartphone penetration and mobile data infrastructure. It noted that the “nature of mobile lends itself to a form of ecommerce that is particularly suited to Asian markets: more spontaneous [and] more focused on single-item purchases”.
Time and convenience are also factors in the report’s fourth trigger, increasing population density. It notes that as urban populations swell, young couples are seeking practical shopping solutions as they spend more time in the office.
“With less time available to shop, ordering goods online and having them delivered to the office during working hours has obvious benefits,” it says.
The fifth trigger, the lack of entrenched modern trade shopping habits, sees potential in the Asian proclivity to visit local markets daily to pick up a few items rather than weekly or monthly bulk-buy shopping.
The TNS report stresses that the presence of the five triggers alone does not guarantee China-style explosive growth of e-commerce. Consumers must also have trust in the model and the brands on offer.
“Multinational brands have often struggled for share on China’s ecommerce platforms because the equity that they have built up elsewhere doesn’t apply for consumers encountering them for the first time online,” it notes.
The report offers inspiration for Cambodian e-commerce platforms, which have struggled to overcome the obstacles of a largely unbanked market, poor logistics infrastructure and low internet penetration.
Marta Grenda, account manager for MyPhsar.com, a homegrown online marketplace to link local buyers and sellers, said the Kingdom’s e-commerce industry appears poised for meteoric growth.
“E-commerce in Cambodia is going to become big,” she said. “In the next five years, we think it is going to be become like other ASEAN countries.”
For Sam Phallar, founder of three Cambodian online shopping platforms – ElegantBrandKH.com, MyEyesCCTV.com and My-Store – the five triggers are already in place. He said sales at his online shopping sites have grown exponentially over the past year, largely in part to deepening smartphone penetration and more confidence of Cambodians in online purchasing.
He said e-commerce platforms can grow successfully in Cambodia if they are flexible to local operating conditions.
“For buyers in Phnom Penh, I have staff to deliver the goods to them by motorcycle,” he said. “But for customers in the provinces, I send the products by bus or taxi.”
He added that payment is almost always received in the form of cash on delivery.
