Propensity for e-tailing in Asia is high due to exorbitant cost of physical brick and mortar retail space, high cost of transport and convenience in ordering goods online compared to shopping in highly congested , polluted city landscapes. Increased reliability of secure electronic payment options and enhanced fulfilment efficiency of logistic had also boosted customer confidence in e-tailing
Asia is a thriving growth market for e-Tailing.China holds the top-notch position in start-ups and unicorns for e-tailing in Asia and challenges the best in the world. South East Asia is the emerging hub for e Commerce in Asia. According to a study done by McKinsey, Chinese companies like Alibaba and its associate companies record the highest sales in terms of Gross Merchandise Volume (GMV). Alibaba had penetrated successfully in global markets by establishing strategic partnerships in Asia, USA, Europe, Latin America and Australia by leveraging its core platforms for trading, electronic payment and logistics. The transformation that is taking place in China towards a consumption led economy from an export and investment led economy will boost e-Tailing in China further. Budding entrepreneurs in Asia can learn a lot from Chinese e-Commerce giants and unicorns like Alibaba, JD.com, Meituan Dianping and elle.com.
The emergence of Technologies such as AI, Big Data, IoT, AR/VR, Blockchain and 4G/5G create an enabling environment for e-Tailing to register a multi fold growth in Asia (as shown in Figure 1). AI, Big Data, Cloud and Blockchain technologies, improve the agility and reliability of payment, supply chain and logistic. These technologies also facilitate personalization of transactions while empowering customers. (Examples: for real time tracking, traceability, customer validation, prevent counterfeit, secure payment, increase productivity of logistic operation). As illustrated in Figure 2, a multiplier or network effect is created in e-Tailing platforms in Asia by adding more customers and more merchants in a virtuous cycle. Enormous growth in valuation of e-Tailing companies like Alibaba (US$ 500 Billion), JD.com (US$ 200 Billion) can mainly be attributed to this spiralling growth due to network effect.
A compelling customer experience through personalization, lower cost and high fulfilment efficiency (in terms of on time delivery and quality of goods at the final destination) can attract more customers. Trust building measures such as ESCROW payment methods, unblocked chat line with the merchant, good authentication and verification processes to certify merchants, flexible return policies and efficient dispute resolution can increase customer confidence and create more demand. CAINIAO, the logistic platform of Alibaba assures on time delivery and only less than 2% of goods are damaged or dispatched late. This is a classic example for fulfilment efficiency.Having an Asset Light Strategy of outsourcing logistic network backed by an AI driven logistic platform can reduce cost substantially as it eliminate the need of investing in warehousing and maintaining a work force. Example: Alibaba has completely outsourced its logistic operation to 3rd parties (but connected to a single intelligent logistic platform, CAINIO developed by Alibaba) and its profit margin is as high as 45% compared to Amazon’s 3% and eBay’s 20%. (Source: Danker Capital 2016)
As illustrated in Figure 3, Internet Plus Asia will focus on four different types of e-tailing start-ups, unicorns and established companies in order to highlight the strategies that underpin their success.
Internet Plus Asia will showcase companies under four different categories as follows
Cross Border e-Tailing Platforms
There are many players in Asia conducting cross border e-Tailing (mainly B2C), offering lot of advantages to SMEs in the region. Currently ASEAN community is working towards harmonizing cross border sales with the blessing of UNCTAD. ASEAN single window program helps to clear cargo expeditiously.
- As Table 1, Global share of B2C e-Tailing cross border sales for Asia Pacific is closer to 50%.
- According to Mordor Intelligence, share of cross border transactions in Singapore is nearly 55% compared to domestic online sales of 45 %.( Source: Frost and Sullivan 2016). Fashion and Accessories dominate in terms of $ sales. Exporters use different channels such as social media (We Chat, Line) and multiple portals such as Koala, Rakuten, JD.com and T Mall to reach the targeted segments. Blockchain technology is adopted to reduce counterfeit and package losses, authenticate vendors, provide a digital identity`, facilitate cross border payment and to provide more transparency. (Example: Alibaba’s T-Mall and its logistic arm CAINIAO had adopted Blockchain technology in cross border selling).
O2O and Omni Channel or "New Retail"
This type of operators integrate online and offline retail elements such as products, services, logistics, marketing, analytics etc. in a seamless fashion across a single value chain. According to recently concluded study conducted by Boston Group Consulting in China, more customers demand Omni-Channel shopping experience for luxury goods purchases. It is the experience of buying anything from anywhere at any time. In O2O, experience is coherent, immersed in an experience where the information flow is conducted in a channel independent manner. Albaba had entered into partnerships with offline retail giants Bailian Group, Suning Commerce Group, Intime Retail Group and Sanjiang Shopping Club while pursuing its own strategy of having Hema stores (盒马鲜生) where people shop in physical/tangible world, check details offline/online, study customer reviews online and order online.
It is important to harness the power of social platforms to reach mobile savvy Asian customers who prefer to do shopping using mobile apps. Discount offers, group buying and viral marketing are enabled through Social Media and Video Streaming Apps. In simple terms, i+ Asia definition of Social Shopping is the seamless integration of social engagement via Social Media, entertainment via Video Streaming, the convenience of online shopping with the mobile payment at your finger tips. These bunch of platforms create an ecosystem that make shopping fun, convenient and thrifty. Social Shopping is immensely popular in China as it allows people to buy as a group, enjoying attractive group discounts. It also provide lot of entertainment by facilitating greater community engagement. Pinduoduo, the 3 year old company who pioneered Social Shopping or Social Commerce, promote "Team Buying" by Interacting over social media platforms like We Chat and QQ.(Current Valuation of Pinduoduo is US$15Billioin).It offers attractive discounts for team buying by creating an impulsive or gamified buying environment. Most of the instances, the group members buy directly from the producer bypassing 3rd parties. Though Pinduoduo does not depend excessively on "Live Streaming" where internet celebrities act as Key Opinion Leaders (KOL) for luxury goods, other established players like Taobao, T-Mall and JD.com heavily focus on live streaming to create an entertaining social engagement at the Discovery phase of the buying process. (Example: If someone get interested in a fashion item during a KOL live streaming on makeup, she can quickly clicks on the embedded link in the video that get directed to T-Mall site where she can buy it using Alipay payment seamlessly.)
Niche Market Players
As two rival tech ecosystems, Alibaba, Tencent's JD.com and their associate companies such as Lazada/Alibaba (South East Asia), Tokopedia/Alibaba (Indonesia), Daraz /Alibaba(South Asia), Snapdeal /Alibaba (India), Shopee /Tencent (Singapore)overwhelmingly dominate the Asian e-Commerce market, there isn't much space for others in the horizontal e-Tailing market in Asia. Therefore it may be wiser for new players to strategize to capture a slice in a specific, vertical market or carve out a niche market to play.
Figure 9: Examples for Specialized Niche Players in Asia for e-Tailing