A late starter to online shopping, Asia is slowly opening up to retail through the internet, writes Alisha Haridasani
In a recent study by the McKinsey Global Institute called Internet matters: The Net’s sweeping impact on growth, jobs, and prosperity, which examines the impact of the internet in G8 nations as well as Brazil, China, India, South Korea and Sweden, it is pointed out that if the internet were an economic sector it would hold greater weight than agriculture and utilities, standing just slightly behind transportation. Private consumption, defined as “the total consumption of goods and services via the internet”, including e-commerce, makes up a major part of that influence.
Online shopping has boomed throughout the Western world, and after a slow start Asia-Pacific, is fast catching up. Each country in this region now has its own variety of online stores that have taken an upward turn, pushing more people from street-side haggling to snapping up online deals. In fact,
29 per cent of internet users around the world spend between 6 and 10 per cent of their total monthly spending online and, in Asia-Pacific, that number stands at 31 per cent, states the 2010 Nielsen Global Consumer Report on online shopping trends.
Virtual markets
There are many success stories you could look to around the region that would testify to this trend. In Japan, Rakuten (the country’s top shopping site) dominates: approximately two-thirds of Japan’s online population flocks to Rakuten to buy clothing, cosmetics, pet food, electronics and even fruit, according to a PriceWaterhouseCooper (PwC) study. The group is now going international with partnerships abroad, such as its collaboration with the Chinese search engine Baidu, to form RakuBai.
In India, there are a handful of similarly large players. One example is Flipkart, which was launched in 2007 and already has more than two million registered users and up to 30,000 items sold per day. Foreign brands, such as eBay and Amazon, have also stepped into the picture to heat up the competition there. In China, TaoBao is the biggest player; according to PwC, it reached 80 million registered users in 2008 and collected revenues of more than US$200 million in 2009. In Indonesia, TokoBagus, launched in 2005, handles almost 212,000 transactions every month.
Aside from these “general stores” there are the niche stores, such as the luxury fashion site Doorstepluxury.com in Singapore, which resemble their Western counterparts Net-A-Porter and ASOS. Then, beneath this layer of shopping sites, there are the individual brands themselves, carving out their own online presence either via their self-operated websites, such as Burberry’s Chinese site, or through social media channels.
The popularity of online shopping, as with the West, is of course the convenience. A study on e-commerce by PwC revealed that the freedom to shop at any time of day is a major appeal for 28 per cent of online shoppers around the world including Asia. The ubiquitous, 24-hour nature of the web means shopping isn’t constrained by opening hours or physical hindrances such as weather conditions or traffic jams, which are major issues across the region from Beijing to Bombay and Jakarta.
Another reason online shopping is picking up is the unlimited choice. Many coveted Western brands have yet to make their debut in Asia, but their products have already infiltrated the market either because Asians tend to shop when travelling abroad or purchase items through online stores. Users are increasingly aware of different names and products that they might not find in their own country yet, but can locate online and purchase within a few clicks; according to PwC almost 4 per cent of online shoppers indulge in e-commerce because they are able to “buy products unavailable elsewhere”.
Clicks vs bricks and mortar
However, despite the increased popularity of online shopping, the number of malls and stores in Asia continues to rise just as rapidly. Many brands, especially fashion brands, are not only opening stores in key cities such as Shanghai, Hong Kong, Mumbai and Bangkok, but also in smaller, second-tier cities because demand is predicted to follow an upward trend. Research from the Economist Intelligence Unit predicts that demand for clothing in Asia will far surpass demand in North America and Western Europe by 2014, led by the region’s biggest market, China.
What this seems to show is that shoppers are not replacing the in-store experience with retail options in cyberspace. In fact, the two options complement one another. The effect of the internet on the high-street retail industry cannot be measured simply by counting the transactions that take place online, because that does not cover internet-influenced high-street shopping. Some shoppers prefer to do a little research in order to understand a brand’s offering, first comparing prices online before going out to actually purchase the item. Another retail study by PwC, titled Multi-channel Survey, indicates that almost 80 per cent of shoppers worldwide research online before going out to “buy electronics, computers and books, music and movies”, thus blurring the lines between online and offline transactions.
There is also the issue of distrust, which is still rife in Asia. While Western shopping sites have developed transparent systems that enable safe payment methods and tools to track goods delivery, most Asian counterparts lag behind in that area. In cases where some websites have adopted reliable systems, such as the cash-on-delivery option adopted by many sites in India, awareness and consumer confidence is still low, reflected in “worryingly high” rejection rates, states Amit Nawalrai, chief executive of Giftyaar.com, a new Indian online retailer.
Part of the distrust is rooted in the vast counterfeit markets across the region that are reason enough for shoppers to go to trusted stores instead of online portals, especially for high-value luxury items. In fact, China’s large underground market, one of the biggest in the world, was a major obstacle for Adidas before it stepped into the e-commerce market there. Christophe Bezu, chief e-commerce officer of the Adidas Group, told PwC that the high level of counterfeits on the internet meant that the brand “needed to have a strategy to work together with our retail partner [TaoBao] to maximise opportunities for both sides”, thus slowing down the procedure.
Another reason is, of course, the differing levels of maturity of the internet in each country. Some Asian cities and countries have lower internet penetration rates than the major players. For example, Hong Kong and Singapore have mature internet ecosystems and therefore residents in these countries spend up to 10 per cent of their total monthly spending online (88 and 83 per cent respectively, as highlighted in the Nielsen study). In contrast, places like Thailand, Vietnam, Indonesia and Malaysia show much smaller percentages spent online, and e-commerce will remain at nascent stages for a while in these markets, predicts PwC.
These hurdles will not disappear overnight, but once they are overcome the Asian online retail market will start to resemble the more efficient machines in the West (see box left). Until then, places like Mumbai’s Crawford Market, Chatuchak Market in Bangkok or Hong Kong’s Temple Street Market will remain as vibrant as ever.
Visionary Vendors
While Asian online retailers have to beef up their presence, the West is already pioneering more innovative cyber-shopping ideas:
1. In-store pick-up: Argos, a major general store in the UK, has a very sophisticated reserve-and-collect system that enables shoppers to put items on hold and pay for them upon pick-up at the store if they want to sidestep delivery charges. This system not only drives traffic to the store, but also means the customer retains the power to say no after physically viewing and “feeling” their product. As a result, Argos is one of the top ten online retailers around the world, according to a PwC survey. More online retailers are picking up on this and the trend will continue to spread.
2. Mobile apps: Other than a dedicated app for each brand or online store, there are now apps that scan barcodes to bring up more information about each product, such as ShopSavvy. Some apps offer price comparisons, others bring up reviews of the product from previous buyers, and some even inform the user whether a particular store has the product in its stockpile.
3. Experiential stores: As online retail grows further, brands will consolidate their stores, states a PwC study. Instead of having several branches, brands will set up fewer, “strategically placed” stores that focus on the experience, much like the few Apple stores around the world. The store will be “deliberately designed as a destination in its own right, with live demonstrations, expert advisors and personal shoppers available”.
4. Cashless transactions: Technological advances, such as Near Field Communication (NFC), will enable shoppers to pay for items at check-out simply by tapping their phones, an idea that Google is playing with in the form of Google Wallet.
Useful Websites
ASOS
DOORSTEP LUXURY
Flipkart
Giftyaar
Net-A-Porter
Rakuten
TaoBao
TokoBagus
