2015 has been a turning point for e-commerce in Asia-Pacific, according to eMarketer. An eMarketer report cites that it is the first time APAC e-commerce market has surpassed other markets worldwide. Retail Asia looks at the state of e-commerce growth in the region.
With a high number of mobile users and rising middle classes in China, India and Indonesia, the Asia-Pacific (APAC) e-commerce market is surging to become, for the first time, the largest digital retail market in the world — and growing 10% faster than the worldwide average rate. APAC retail e-commerce sales is anticipated to increase to 20.4% of total APAC retail sales by 2019 from 10.2% last year. This is in comparison to a projected 12.8% worldwide average for 2019 from 7.4% in 2015.
Market research company eMarketer cited APAC e-commerce sales to reach US$877.61 billion last year, an increase of 35.7% from 2014. Driving this growth are India (with 129.5% e-commerce sales growth in the country), China (65.6%), and Indonesia (65.6%).
The report said that China will continue to gain share of the worldwide e-commerce market, exceeding 50% in 2018 and reaching 55.1% by 2019.
eMarketer forecasts that overall retail sales in APAC will reach US$8.57 trillion this year. The region’s retail market will continue to expand and is projected to hit US$11.460 trillion by 2019, representing 20.4% of worldwide retail sales.
The Asia-Pacific e-commerce market is surging to become, for the first time, the largest digital retail market in the world — and growing 10% faster than the worldwide average rate.
Highest growth in India
According to IT research company Gartner, at a growth rate of more than 40% every year, India’s e-commerce market is valued at US$7 billion.
India is currently the highest growing e-commerce market in the region. Though the country’s e-commerce sales only comprise less than 1% of India’s total retail sales, the pie is only going to get bigger due to high growth in mobile users in India over PCs.
Indonesian e-commerce boom
In Indonesia, a market with credit-adverse consumers, online shopping makes up only 0.5% of total retail sales in the country. Interestingly, Indonesia’s e-commerce market is driven largely by a small group of well-off Indonesians living in second-tier cities with less retail presence.
The Indonesian eCommerce Association is projecting the country’s e-commerce market to reach Rp283 trillion (US$20.5 billion) this year, triple that of 2014. This positive sentiment is supported by Bank Central Asia (BCA), Indonesia’s largest private lender which foresees a growth of 80% in e-commerce spending this year.
In December last year, Indonesia held two major e-commerce sales events. The three-day long e-Shopping Carnival was organised by BCA with 16 online merchants and 420 e-commerce businesses participating. Additionally, Indonesia’s National Online Shopping Day (Harbolnas), held from December 10-12 last year, featured 140 e-stores with sales of up to 90%.
Lazada’s South-east Asia reach
With 252.4 million Internet users in South-east Asia and an e-commerce market at its infancy stage compared to the more evolved North Asian markets, many e-commerce players are jumping onto the bandwagon to tap into this region’s online consumers.
A case in point is Lazada’s Online Revolution campaign in December last year which brought in US$40 million of Gross Merchandise Value (GMV) or overall sales in its three-day finale. The company claimed the online shopping event to be South-east Asia’s busiest online shopping event of the year.
In the final three days in the month-long sale, traffic spiked to an all-time high of 36 million visits to Lazada sites and apps, and more than 300 flash sales and hundreds of thousands of deals were rolled out across the six countries. The volume of online orders reached one million — a 300% jump over the same period in 2014. With approximately 1.7 million items ordered, mobile accounted for 60% of the GMV. More than 30,000 sellers including over 600 global and local brands across different categories took part.
The mobile penetration in Malaysia has reached 136% last year and the growth of connected devices have paved the way for a positive increase in the e-commerce sector with 47% of Malaysians using their smartphones to shop online.
Drivers in e-commerce in Malaysia
Joining the South-east Asian e-commerce fever is 11street, a Korean e-commerce marketplace established in 2008 with 400,000 sellers serving over 30 million consumers worldwide. It launched its operations in Malaysia in April last year. Since then, it has expanded its number of products to more than seven million units and achieved the top 29th rank at Alexa, which provides online traffic measurement services (as of 14 December 2015).
With Malaysia emerging as the third-ranked country with the highest percentage of Internet users (67%) in South-east Asia, after Singapore and Brunei, the promising Internet penetration result indicates Malaysia’s enormous potential for e-commerce market growth, said Hoseok Kim, CEO of 11street Malaysia.
“Leveraging the rise of Internet usage, indeed 2015 had been a fruitful year for all online businesses and e-commerce as Malaysia recorded one of the highest online transactions per capita in South-east Asia,” added Kim.
From 2010-2014, Malaysia’s e-commerce market size has seen a 31% increase in CAGR, and is anticipated to reach US$3.1 billion by 2018. Kim foresees mobility, better Internet and logistics, and security to be the three key drivers for e-commerce development in Malaysia.
Firstly, the mobility trend will continue to grow. The mobile penetration in Malaysia has reached 136% last year and the growth of connected devices have paved the way for a positive increase in the e-commerce sector with 47% of Malaysians using their smartphones to shop online.
Kim said: “Furthermore, Malaysia ranks third in the rate of growth of mobile shopping in Asia, according to a Mobile Shopping Survey, and with these results, it is not surprising to know that more than 50% of traffic to 11street is generated on mobile devices.
“This promising result has encouraged us to make a bigger commitment for mobile users. We believe the mobility trend will continue to grow and next year, 11street will put a stronger focus to serve mobile shoppers through a two-pronged approach.
“Mobile shoppers can expect more curated content from 11street’s app, with an improved user interface and user experience designs (UI/UX). Additionally, we will have additional personalised features, and introduce more mobile exclusive deals for an exciting mobile shopping experience.”
Kim is encouraged by the Internet penetration rate in Malaysia and improved logistics. “Driven by the progressive e-commerce landscape, the logistic industry, especially the courier segment, has seen exponential growth over the past one year. For instance, courier service contributed 60% of POS Malaysia’s total earnings in 2015, as compared to 41% in 2014.
“In preparation to serve shoppers better in 2016, we believe these supportive initiatives suggested by the government will aid sellers to meet future demands, by providing shoppers a seamless online buying experience with more timely delivery service.”
Online marketplaces such as 11street place high importance on offering pleasant shopping experiences from the moment a consumer start shopping online through to the delivery of purchased items. Several measures that the company has been implementing since its establishment include thoroughly briefing and training sellers on product delivery management, and providing shoppers with a tracking system to keep them informed on location, time of arrival, and delivery status of their purchased products.
11street also wants to maintain and boost user confidence in providing a safe and secure online shopping experience. Security issues discourage shoppers from heading online. Malaysia Computer Emergency Response Team (MyCERT), a department within CyberSecurity Malaysia, reported that the number of online scams in the country is on the rise. A total of 743 fraud cases were received in the first quarter last year, which is the second most reported incidents (25.54%) in total reports.
“Shoppers are always urged to make transactions with only trusted platform that offers product return policies, customer reviews on products, seller’s rate or scoreboard, as well as a trustworthy payment system. Online sellers and marketplaces have to bear this in mind and update their security measures from time to time in order to establish shoppers’ confidence,” warned Kim.
Online marketplaces such as 11street place high importance on offering pleasant shopping experiences from the moment a consumer start shopping online through to the delivery of purchased items.
This year, 11street implemented the ESCROW system, which is a financial instrument of placing a buyer’s money on hold and releasing it to the seller only when the delivery of the purchased item is fulfilled, thus protecting buyers from frauds. The ESCROW system has helped to prevent many fraud cases and it will continue to be invested by 11street in the future.
Its website is also strengthened with abilities to monitor all products, transactions from buyers and sellers to detect suspicious activities such as counterfeit product listing. Moreover, a number of its other efforts include a stringent application process, and regular product quality inspections will be enhanced to provide shoppers a safe and secure shopping experience.
A budget-conscious year ahead
“2016 will be another budget-conscious year for Malaysians in view of the rising cost of living caused by GST (Goods and Services Tax) implementation and the ringgit devaluation. To assist consumers to ‘shop smart’, we are gearing up to double our variety of product listings for ‘Shocking Deals’ with the lowest price guarantee by early 2016,” said Kim.
“It is also worth noting that cross-border trading (CBT) trends can be observed from the increasing searches for popular international products on the Internet in Malaysia. However, with the higher exchange rates and international shipping fees, today’s local shoppers might find it challenging to get their favourite overseas brands or items.”