Companies will need to lead on online retail sales in Asia

04 Sep 2020

Tags

  • Divya Skene
  • International Trade

The COVID‑2019 pandemic has accelerated digital disruption in the global retail sector. Customers across the world responded to the pandemic by avoiding crowded shopping precincts and observing lockdown creating a captive market for online retail growth.

E-commerce now accounts for 13% of total global retail sales:

  • e‑Marketer estimates an additional 145 million new participants will join 2.2 billion existing digital buyers this year.
  • Global e-commerce sales are estimated to rise by 16.5% to US$4 trillion in 2020.

Whilst emerging e-commerce markets in South East Asia and India are showing double digit sales growth, Australian companies should consider their e-commerce strategies for the region carefully. They should seek to understand how markets within Asia differ from each other, and how best they can embrace the shift towards online purchasing in the region.

Asian e-commerce offers an opportunity for long-term sales growth

The world of online retail is leading the way as the new centre of gravity for global middle class spending, where Asians have collectively become the world’s largest consumer bloc.

  • eMarketer has estimated that this year, 62% of all global retail e‑commerce sales will take place in Asia while the US and Western Europe will account for just 19% and 13% respectively.

Digital retail trends are a harbinger of change for total global middle class sales (online and offline).

  • Estimates of total global middle class consumption expenditure show that Asia Pacific (excluding the Americas) currently accounts for less than 50% share of global middle class consumption expenditure, but by 2030 is estimated to grow to a majority share of 57% of global middle class spend.

Companies looking to market themselves prominently to middle class consumers of the future should position themselves now in Asian e-commerce markets.

The fastest e-commerce growth occurs on social networks and mobile devices

Mobile phones are the e-commerce device of choice in our region, with mobile commerce (m-commerce) accounting for around 80% of retail transactions in Asia. Latin America is also experiencing strong m-commerce growth, with an estimated growth of 30% in retail sales through this channel in 2020.

In Europe and the United States, m-commerce orders account for just over 40% of all e-commerce transactions, reflecting the fact that consumers in advanced markets exhibit a higher share of e-commerce activity on desktops and laptops.

Social commerce (s-commerce), where orders are taken via social media networks on the recommendation of social networks, friends and relatives, is the fastest growing category of e‑commerce.

  • S-commerce is forecast to grow by 34% in the US next year and an average of 28% in China over the next 3 years.

In s-commerce, retail orders are placed by clicking links on a social network that leads to the retailer’s product. Social media platforms such as WeChat Mini Programs, Facebook Marketplace, Facebook Shops and Instagram Checkout are familiar export platforms for Australian SMEs seeking to establish their brands internationally, and are being used throughout the region.

Regional platforms Lazada and Shopee are used in major markets across South East Asia while local platforms include Tokopedia in Indonesia, and Qoo10 in Singapore.

Australia’s companies are veterans in Asian s-commerce

Many Australian companies are veterans in s-commerce.

Chinese social media apps Wechat and Alibaba were among the first to integrate payment functionality, and were pioneers for today’s growing s-commerce trend. This new technology capability encouraged the involvement of large local multicultural communities in trade.

Over the last 5 years, Australian companies’ efforts at international market development have been supported by multicultural communities adept at using Chinese social media apps. Consumer goods companies as diverse as Ego Pharmaceuticals, Blackmores and A2 were supported in their China market expansion by multicultural businesses and communities.

These communities have helped boost both the Australian brand presence, and export sales, on Chinese social platforms. During this period Australian brands have survived a range of challenges to their e-commerce operating models, including the introduction of Chinese government regulations for cross border e-commerce, the entry of Australian retailers such as Woolworths and Chemist Warehouse into China e-commerce trade, the introduction of ‘social’ Chinese payment technologies in Australia, the introduction of entertainment-based marketing trends such as livestreaming, and this year, COVID‑induced demand and supply chain disruption. (The latter is not to be underestimated as the A$ value of airfreighted exports of milk powder from Australia to China grew 500-fold between 2014 and 2019, while airfreighted vitamin supplements grew more than 300-fold.)

Australian companies are therefore veterans in riding the s-commerce trade wave. This is not an insignificant trend. Australia’s International Business Survey (AIBS) 2019 found one quarter of 349 goods exporters surveyed in May 2019 agreed “goods sold to multicultural communities in the domestic market helps to fulfil export demand.

New growth opportunities across ASEAN and India

The e-Marketer report reports that signs of relative market maturation are evident in China, the leading ecommerce market, where e‑commerce sales already account for one third of all retail sales. In 2020, total e-commerce sales are estimated to grow at a lower rate in China (16%), than sales in key markets across ASEAN and India.

Philippines and Malaysia for example are projected to grow at 25% and 23% respectively, while India – where e-commerce sales are projected to hit US$50bn this year - is projected to grow at 21%.

Recent large investments in regional platforms signify the growing online opportunity in these emerging regions. Southeast Asian online retailer Lazada has attracted investment by China’s Alibaba, and while India has attracted investment from American firms Amazon and Walmart.

The Asian region is diverse and mobile apps, social media platforms and payment technologies will differ across markets and regulations governing social media and retail apps in India and South East Asia will be different to those in China.

In contrast to the strong participation of multicultural communities in promoting Australian brands into China on Chinese apps, Australian companies may find they need to more actively target growing middle class consumption in India and South East Asia by taking greater direct ownership of digital engagement with consumers.

Company-led commitment to online retail sales

Digital technologies will transform marketing and sales across ASEAN and India, as businesses and consumers test out online purchasing and COVID continues to disrupt traditional retail operations.

In addition to reconsidering marketing platforms, companies engaged in e-commerce should also consider logistics, warehousing, last mile delivery of goods and market regulations. Further information is available on the e-commerce page

*All estimates for e-commerce sales are sourced from eMarketer.com