The Future of Asia: Forces of Change and Potential Surprises – Supplementary Report

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E-commerce Speeding up Asian Consumption

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What is it?
Why is it important?
References

What is it?

The emergence of digital marketplaces in Asia is helping it shift from an investment-oriented society to a more consumption-driven one by offering more choice, ease and temptation while shopping.1  2  3  4 Indeed, for every US$1 spent online, as much as 40 cents is new spending (or spending that consummers would not have incurred had they purchashed off-line). The Asia-Pacific region is expected to become the largest online retail market in the world this year, with China a particularly large market due to population, the prevalence of the Internet and the rate of cellphone uptake. Online sales in China were an estimated US$190–210 billion in 2012. This amounted to 5% to 6% of total retail sales in 2012, compared with 5% in the U.S. By 2020, China’s online retailers might sell $650 billion worth of products.

Why is it important?

This trend will likely continue to stimulate entrepreneurship and innovation in Asia. Online commerce is breathing life into some small and medium-sized businesses (SMEs) searching for niche markets. There are reports of poor and excluded individuals who cannot obtain physical store permits but who can operate online businesses.5 Online retailers are also expanding the range of services offered to banking and to facilitate export (label translation, licensing, etc.).6This should influence the makeup and configuration of supply structures both in Asia and globally. It might also advance economies through traditional stages of development more quickly as remote regions can now more readily develop online.

The rapid increase in online retailing should continue to affect infrastructure and real estate by reducing the need for physical stores.7 Ongoing challenges to successful e-commerce (payment mechanisms, logistics and distribution channels, consumer attitudes about security or product quality, etc.) might be at least partially offset by increased participation and certain innovations.8  9  10 However, political challenges could linger. Chinese banks are lobbying against the rise of competing financial services and governments may not like the idea of commercial interests having so much data on citizens.11

References

  1. “E-Commerce in Asia: Growth of the Online Marketplace.” Asia-Pacific Foundation of Canada, /eng/content/e-commerce-asia-growth-online-marketplace
  2. Dobbs, R. et al “China’s e-tail revolution” McKinsey Global Institute. March 2013. http://www.mckinsey.com/insights/asia-pacific/china_e-tailing(link is external)
  3. VanderKlippe, N. “E-commerce explosion: China clicks its way to a new economy.” The Globe and Mail. November 2013. http://www.theglobeandmail.com/report-on-business/international-business/in-china-online-retail-is-about-to-get-a-whole-lot-bigger/article15688956/#dashboard/follows/(link is external)
  4. Tan, G. “Rise of E-commerce in Asia.” February 2013. http://www.slideshare.net/Gwendolyn1/rise-of-ecommerce-in-asia-15675831(link is external)
  5. VanderKlippe, Nathan “China’s online markets give economic refuge to the poor and nonconformists.” The Globe and Mail. November 2013. http://www.theglobeandmail.com/news/world/chinas-online-markets-give-economic-refuge-to-the-poor-and-nonconformists/article15700830/#dashboard/follows/(link is external)
  6. “What is Alibaba.com’s Escrow Service?” Alibaba website: http://www.alibaba.com/escrow/buyer.html(link is external)
  7. Cole, M. “Jack Ma Takes in $5.75 Bil – And Takes on China’s Real Estate Barons.” November 2013. http://www.mingtiandi.com/real-estate/cre-news/china-retail-real-estate-news/why-jack-ma-shrugged-off-rmb-35-billion-to-fight-chinas-real-estate-barons/(link is external)
  8. Moore Gerety, R. “The secret to e-commerce in countries with few credit cards: cash on delivery.” Quartz. July 2013. http://qz.com/107346/the-secret-to-e-commerce-in-countries-with-few-credit-cards-cash-on-delivery/(link is external)
  9. Do, A. “CEO of Vietnam’s biggest e-commerce site reveals his secrets to success (INTERVIEW).” TechInAsia. November 2013. http://www.techinasia.com/indepth-interview-ceo-vietnams-biggest-ecommerce-site-vat-gia/(link is external)
  10. Horwitz, J. “Alibaba doubles down on NFC payments as Alipay partners with major Chinese retailer.” TechInAsia. November 2013. http://www.techinasia.com/alibaba-doubles-nfc-payments-alipay-partners-major-chinese-retailer/(link is external)
  11. “The Alibaba phenomenon: China’s e-commerce giant could generate enormous wealth—provided the country’s rulers leave it alone.” The Economist. March 2013. http://www.economist.com/news/leaders/21573981-chinas-e-commerce-giant-could-generate-enormous-wealthprovided-countrys-rulers-leave-it
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