Article

Sirisha Bhavaraju
Sirisha Bhavaraju 24 September 2018

The e-commerce glitter of Asia: The story behind the success

In a few years from now, e-commerce is expected to touch a staggering $4.5 trillion. To put this in perspective, this is 6 percent of the global economy of 74 trillion. Considering that global economies comprise multiple facets, 6 percent is technically mind boggling.

The Asia Pacific region is the fastest growing and the single biggest contributor to global e-commerce value. Emerging nations have caught up with advanced nations that were the early adopters of technology, embracing digital transformation, and driving statistics through the roof while taking pole position.

An interesting development is a simple fact that has been rightly acknowledged by experts. The success of e-commerce in any region is intrinsically linked to the digital technologies of everyday life. There is more to this than a simple interpretation. Internet has penetrated to almost all locations in the globe. This means that it is pretty simple for any shopper to place an online order for a product. Therefore, the ability to place an order is more or less the same everywhere. So what exactly drives the success story of e-commerce in SE Asia?

One of the latest videos that have been widely shared on the internet is that of a people showing QR Codes to the shopkeepers and taking delivery of products that were ordered online. And this answers the question. China has adopted technology in a manner and at a pace that is not seen elsewhere. A report by McKinsey states that ‘digital technology is powering China’s economy’. This explains the success of China in becoming one of the biggest players with 42% market share in the global eCommerce market. This is mind-numbing considering that a decade ago, it was not even one percent of the global market. An advantage that China had over other economies that had well-entrenched technologies in place in the ecosystem is that fact that any new entity will find it easier to adopt a new technology. A company that needs to migrate from legacy systems to a new technology will face challenges – discarding old systems and processes and cost considerations. However, for a company that is freshly adopting new technologies, it would be easier. Chinese companies found it easier to adopt new technologies, and the public who were exposed to the conveniences of these technologies, lapped up the options.

Does the growth of eCommerce in SE Asia mean that eCommerce has pushed the demand for products, or is the demand the same (normal growth), with only the channel of purchase changing from retail to online? In a report in the New York Times, an investor throws light on this, the main advantage of Alibaba was the lack of adequate offline options in a large nation as China for shopping, and this helped push online sales. Effectively, online shopping has made it more convenient to shop, and while being an additional channel for retail sales, it has also pushed sales higher in locations where other options (channels) were fewer. This is more or less the same in SE Asia and other nations that are taking eCommerce to the next level.

The disruptors in eCommerce are manifold. Payment options have changed, making it more convenient for shoppers to pay. Flipkart was the first in 2010 to offer COD options, and this made it popular among shoppers. Similarly, last mile delivery has changed with specialist last mile delivery solutions playing a major role in the manner in which eCommerce players deliver products and receive returns from customers. With smart boxes finding their presence in major cities, it is now easy for customers to place an order online and pick up the products at their convenience from smart boxes. This gives the online shopper the advantage of browsing through many products online, availing coupon codes, discounts and offers while placing the order. One of the biggest challenges faced by eCommerce players was dealing with returns due to the non-availability of addressee at the time of delivery. This has all changed with last mile delivery solutions adding a layer of convenience to online shopping.

Customers now have multiple flexible options, and this has come at no additional costs to the eCommerce players, rather it has helped slash the financial burden associated with missed deliveries and returns. The myriad solutions have blurred a few boundaries. Consequently, shoppers now shop online, and pick up the products at retail stores. Similarly, shoppers check out products physically at retail stores and then shop online. These changes have transformed the online shopping experience and the discerning Asian buyer has adapted to these changes easily, pushing eCommerce statistics higher.

The future will witness a battle between Alibaba and Tencents as these two giants consolidate in Asia with acquisitions. Smaller players are likely to be smothered in the battle for eCommerce supremacy as both the entities have begun treading into each other’s domain. The smaller players who will continue with a strong showing despite the dominance of global eCommerce giants, will be those entities that deal with specialist products.

In India, Jabong for instance, post its merger with Myntra has recorded profits. Online sales that cater to an exclusive need, or an exclusive category of buyers can weather the storm of large players, provided value addition and differentiators are communicated to users. Bigger players have the power of greater visibility and scale of operations. However, smaller players will continue to have the advantage of focusing their operations on a niche, delivering special value to clients. A case in point is the success story of Tasty Worms that caters to an exclusive niche.

Asia and especially SE Asia will witness the clash of the two tech titans – Alibaba and Tencents. By definition, eCommerce is technology driven. However, the difference has been the level of adoption and the integration of various options, a powerful platform, convenient and multiple paying options, last mile delivery, and messaging platforms that connect. The success of eCommerce in Asia and by extension, of Alibaba, has been the use of emerging technology as a facilitator. Asia and SE Asia will witness an interesting phase in eCommerce and the unprepared players will find themselves left out of the trillion dollar market.

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