The Not So Far East: Asia, the Next E-commerce Frontier (Part 1)

With retailers worldwide concentrating their attention on Asia as the next frontier, many make the mistake of focusing too heavily on China.

Whilst China is undoubtedly Asia’s golden child, Asia comprises the largest and most populous continent with a combined population of approximately 4.4 billion, as such it presents a huge opportunity for the e-commerce industry.  In fact, Asia contributed a whopping 35 per cent of the world’s e-commerce turnover in 2014 and is continuing to grow.

There are numerous elements at play when considering the growth in this market aside from the vast populous mentioned above. In fact, research shows three distinct trends fuelling the rise in the Asian market. Alongside the continued desire for Western products, which is only increasing with the growing accessibility of global goods, the opportunities for online retailers are endless.

With barriers such as differing currencies, cultures and languages, let alone technology adoption and payment infrastructures, it’s important to approach each country, and often audiences within each country, with a specifically tailored retail offering. The barriers that currently exist need to be broken down and there are several things to take into consideration.

The three trends fuelling growth in Asia

McKinsey and Company identified three powerful trends fuelling this rise – rapid economic growth, urbanisation and the adoption of technology (notably Internet penetration and mobile technologies). Together these are transforming the region, its people and its economies, with e-commerce leading the way.

Outside of China, Nielsen predicts Southeast Asia will have a cash-rich middle class of 400 million by 2020, hold 688 million mobile devices and boast a GDP over US$2.4 trillion. The growth of e-commerce is rapid, with Frost and Sullivan projecting the compound annual growth rate (CAGR) of Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam at 37.6 per cent from 2013 to 2018, growing from US$7 billion to US$34.5 billion.

The desire for Western products

Asia’s continued desire for luxury Western brands such as Dior, Burberry and Chanel appears unbounded, with Japan now the second luxury market in the world. Burberry, for example, sold US$870 million in Asia last year, an 18 per cent growth on the previous 12 months and a total that now makes up some 39 per cent of its global revenue. Whilst 37 per cent of Dior’s global €30.9 billion revenue now comes from Asia.

Apple has also seen particular growth across Asia in the past 12 months. Recent research showed that Apple’s latest iPhone 6 and iPhone 6 Plus handsets have led to significant gains in Japan, China and South Korea. In the latter, it now enjoys a 33 per cent market share, overtaking LG to be the second most popular phone manufacturer behind local success story Samsung. In Japan, it enjoys an overwhelming 51 per cent of the smartphone market. Whilst in China, Apple’s iPhone sales have soared, increasing its revenue in the country by 71 per cent to US$16.8 billion (£11.03 billion), helped by gift-buying for Chinese New Year.