Asia-Pacific – Selected Country Characteristics

Hereunder follows a brief per country overview of the five leading markets in the APAC region.

The five leading markets in the region are:

China, the future world  leader in retail and online retail

Total e-Commerce including B2B (small and large companies), B2C and C2C) are forecast to reach RMB12.7trn (USD2,065bn) in 2014. The share of B2C and C2C together was 22% and the share of B2C is estimated at around 41% of B2C and C2C e-sales together in 2014.

Total B2C e-sales sales are set to reach RMB 1,447 billion in 2014, an overall growth of 73%. Online retail sales will grow according to the latest estimates of iResearch to RMB 1.17 trillion (USD189.6bn), a share of 4.4% in Chinese retail (calculated in RMB), more than triple the share in 2010.  Alibaba’s Taobao Marketplace (C2C) and Tmall (formerly Taobao Mall, the B2C marketplace) dominate the market, accounting for more than half of consumers’ online purchases. Leading companies are investing heavily to improve deliveries and payment options, notorious weaknesses of e-commerce in China.

The total number of Internet users is set to reach had reached around 680 million (50% of the population). The number of e-shoppers will reach around 360 million at the end of 2014 and the number of mobile phone subscribers 1.27 million. With mobile Internet users becoming a majority of Internet users, mobile devices will become the primary tool to connect to the Internet.

There are an estimated 18 million online cross-border shoppers in China, of which three quarters mobile shoppers. These cross-border shoppers spent USD35bn in 2013 – with up to 36 million online cross-border shoppers expected to spend up to USD160bn a year by 2018; Chinese mobile shoppers spent $16.7 billion in 2013 the top five cross-border purchase categories in China over the past 12 months are:

1. Clothes, shoes and accessories
2. Health and beauty products
3. Computer hardware
4. Jewellery, gems and watches
5. Personal electronics

Cross-border online shoppers’ top shopping destinations:  US (84%), Hong Kong (58%), Japan (52%), UK (43%), Australia (39%). Geographic proximity plays a part in purchasing decisions; and, Mainland Chinese shoppers buy from Hong Kong and Japan

China represents a market of huge opportunities for (online) retailers. Continued economic growth will fuel retail sales for the foreseeable future and over time (maybe in just two or three years), China will overtake the USA as the largest retail market in the world. As the retail sector develops, food, as a proportion of total retail sales will decline as consumers shift their spending to non-essential categories such as leisure and communication. Chinese spending could account for one-quarter of the global retail market within five years.

When offering goods and services online, international brands need to take into account the challenges in making delivery and accepting payment, the huge scale of e-commerce and, especially, how fast online retailing is changing in China.

Dateline 14th October 2015 

China: Economy Is Slowing Down – e-Commerce Continues to Rapidly Progress … more 

Japan, a huge and still growing mature market

A much more mature market than China, Japan’s B2C sales are growing more at a slower but steady rate: from JPY9, 5bn in 2012 to JPY11.2bn in 2013. Total e-commerce sales are expected to reach JPY12.77bn in 2014, a growth of 14% against 2013.

Rakuten remained the leading online retailer in Japan in 2013 with a 28% market share. Following the double-digit value growth the company experienced during 2012 and 2013, Rakuten is now particularly focused on expanding its m-commerce sales.

The Japanese retailing industry performed well during 2013 as the country benefited from the policies set out by the Japanese government. This boosted consumer motivation for spending on various types of goods last year Japan’s retailers is increasingly offering various services and products in order to accommodate Japan’s ageing population. 2013 saw many Japanese retail companies provide concierge-aided shopping services for seniors as well as adding medical clinics. Understanding the need for this growing consumer base, retailers are looking to provide a variety of services, which can help and bolster the loyalty of this large and potentially lucrative customer base.

During 2013, Internet retailing recorded a dramatic shift away from e-commerce through computers towards m-commerce through smartphones. According to the Ministry of Internal Affairs and Communications, the penetration rate of smartphone increased from 29% to 50% in 2012, which is a remarkable increase from the previous year. Although the driving force behind Internet retailing sales was once media products such as books, CDs and DVDs, demand for other products is booming as Japan’s Internet users are becoming more diverse. One of the fastest growing categories is apparel and footwear, a trend that is closely linked with the rise of m-commerce as consumers are increasingly purchasing their apparel whilst on-the-go.

For any foreign companies or retailers looking to enter the e-commerce market in Japan, an awareness of the local players, led by Rakuten is required. When planning to target younger buyers, then a mobile-first strategy is essential. But to reach Japan’s aging population, it will be hard to keep them off Rakuten with an online only presence – so despite the additional investment the most effective strategy will be a multi- or omni-channel approach.

Australia, a natural for e-commerce and online retail

With its population of just over 23 million Australia is by far the smallest of the five countries. Australia has one of the highest internet and e-commerce uptakes in the world, with almost 89% of the population online. Australian online shoppers are spending more on average per order than anyone else in the world, at $129.4 in 2013, up 20% from 2011. Australians have really embraced e-commerce. Online B2C e-sales grew from USD31.8bn in 2012 to USD35.8bn in 2013 and are set to reach over USD40bn this year.

Non-travel related goods most commonly purchased online include: DVDs and CDs, digital music; computer software and hardware, books, electrical and electronic goods, clothes and shoes, sports and leisure goods, cosmetics and perfume and toys.

With over 50% of cross border e-sales, Australia is one of the top choices for cross-border e-commerce[1]. Australians e-shoppers are encouraged both by a (still) relatively small number of domestic players and the fact that the first AUD1, 000 in purchases made from a foreign retailer enter the country duty-free as an exemption of the so-called Goods and Services Tax (GST). Consumers also have high levels of disposable income, and goods sold at retail are expensive due to high labour costs

The share of 6,4% of online shopping (between 3 and 3.5% excluding foreign online purchases) still accounts for only a fraction of the USD255bn total retail market in Australia. Shopping done through mobile devices like smartphones and tablets is just a slice of that, but at AU$5.6 billion and a share of 15%, it’s a considerable slice and growing.

South Korea, a highly developed market

From the early 1960s to the late 1990s, South Korea was one of the world’s fastest-growing economies. Today, South Korea ranks as Asia’s fourth-largest economy and it boasts GDP per capita of well over USD 32,000. The country’s wealthy, urbanised population has made the country a highly attractive market for domestic and international retailers alike. In 2013, GDP rose three per cent compared to just 2.3% in 2012.  IMF’s forecast for 2014 is 3.7%. Experts are expecting the economy to better than before and the WON is gathering strength again. The South Korean economy’s long-term challenges include a rapidly aging population, inflexible labour market, and heavy reliance on exports – which comprise half of GDP.

South Korean consumers are typically well educated and well informed.  The national literacy rate is 98%. The country also has the world’s best IT infrastructure, with exceptionally wide use of high-speed Internet and smartphones. Consumers tend to be tech-savvy, and this has strongly influenced the way they shop. Many use social media to search for information about potential purchases and to share their own product reviews. These technology-minded consumers are well positioned to judge the value of products, and also to find the best prices for the best products.
The richest consumers are spending more than ever. The luxury market has grown rapidly in recent years, driven by these heavy-spending VIPs. South Korea’s fashion- conscious elite has attracted an array of high-end companies. However, even in the luxury market, there are plenty of bargain seekers. This has led to a boom in online sales of used luxury goods.

Online sales increased from KRW19.6trn in 2012 to KRW22.2trn in 2013 (plus 13% in local currency). For 2014 we forecast e-sales will reach KRW24.6trn (USD23.6bn). Broadband speeds are among the highest in the world, contributing to the high percentage of online consumers who shop via the web (67%). Many global brands are absent from South Korea, although the country boasts the largest overseas operation of UK retail chain Tesco, which includes a profitable online division.

Mobile commerce in particular is booming, with a CAGR of 154.7% since 2011. Tech savvy consumers have discovered that products are significantly cheaper overseas, therefore cross-border e-commerce is exploding; imports through e-commerce grew 47% in 2013.

India, a force to reckon with in the future

With a population of 1.27 billion India has the second-largest population in the world and the fastest growing. It is expected that India’s population will surpass China in about 15 years.

At the moment by far the least developed in e-commerce among the major markets, India is growing rapidly. The number of Internet users is set to reach around 260 million by the end of 2014 up from 213 million in n2013/ The number of e-shoppers is still rather low (around 10 to 12% of the number of users), but set to grow rapidly in the next years.

B2C e-sales grew from US$3,9bn back in 2009 to reach US$15.9bn in 2014, an increase of 300 per cent.  Travel related services, including transport tickets, hotel accommodations and tour packages, cover over 80% of total B2C e-sales. At the time, just 16% of total e-sales are retail goods: electronics, apparel, footwear, jewellery, home & kitchen appliances, consumer durables and furnishing. However, the growth of online retail goods is higher than any other sector: 127% in 2012, 55% in 2013 and forecast to increase 60% in 2014

Mobile Internet is certainly a key-driving factor for the growth of Internet in India. With over 110 million mobile Internet users in India, the sector is poised for steady growth.

The increasing mobile, young middle-class population drives the growth in cross-border purchases. India requirement that both online and offline retailers based outside the country source 30% of their products and services locally poses a potential barrier for inbound cross-border e-commerce.

This restriction for instance has kept major retailers like Amazon.com Inc. and Wal-Mart Stores Inc. from entering the market “with their standard online business models.” International computer and consumer electronics brands have been among the first to sell online in India, while “most apparel and beauty brands selling directly online have not yet prioritised India.”

With a growing middle class of close to 300 million people, online shopping shows unlimited potential in India. Today e-commerce has become an integral part of daily life in the country.

With respect to the other (smaller) emerging markets in the region:  In its 2013 Southeast Asia e-Commerce Readiness Index Vela Asia ranks Indonesia the most attractive e-commerce market in SE Asia, and Malaysia and Vietnam as the least e-commerce ready. The e-Commerce Readiness Index (eRI) is a comprehensive report into regional e-tail behaviour and trends.

The eRI analyses online shopping behaviour across Southeast Asia based on publicly available data and primary research involving over 500 Internet users in Indonesia, Thailand, Vietnam, Malaysia, Singapore and the Philippines. The primary insight from the eRI is its index of e-tail readiness, which ranks countries across the region based on market potential and infrastructure availability, evaluating factors such as internet penetration, transaction value, mobile usage, ease of online payment and delivery. Indonesia’s strong result was largely driven by its 240 million population, with an estimated 55 million Internet users already online despite low internet penetration rates. Singapore was ranked second, its relatively small population offset by high basket sizes and advanced logistics, technology and payment solutions. Malaysia’s lower score is driven by its small population size and less developed infrastructure.  Malay eCommerce shoppers reported some of the lowest rates of online payment or free delivery in the region.