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The eCommerce boom in Asia

Madhusudan Murthy, SapientNitro

eCommerce commenced in developed countries with single-brand online stores attracting customers with competitive pricing, attractive promotions and loyalty points. The industry has since exploded with web marketplaces, with the Asia leading the growth in this decade. Madhusudan Narayana Murthy, Director, SapientNitro shares his viewpoint about the future of eCommerce in the region. 

China and India are the two key markets in this region that have massive growth potential in this sector. Some of the popular web marketplaces in the region are Taobao Mall, ULE, Yahoo Marketplace in China and APAC region; and Junglee.com from Amazon, eBay, Olx and flipkart are doing brisk business in India. The Chinese eCommerce industry is expected to grow at the rate of 22–26% touching USD 1.3 billion while the Indian eCommerce industry is headed to trade close to USD 1.4 billion in 2012 with a phenomenal growth rate of 30-35%.  In such a scenario, innovative offerings and capturing customer interest will be the key to success.

Listed below are a few essential factors which will significantly contribute to the boom of the eCommerce industry in emerging markets:

Customer convenience – Flipkart and various other eCommerce websites have started offering cash on delivery payment option that has further eased the online buying experience. Customers have been wary of vendors’ credibility and thus shy away from providing their credit/debit card details to unknown entities. Hence, providing CoD option has increased consumer confidence, thereby culminating in almost 40% online orders.

Replacement guarantee – Customers can now breathe easy with vendors offering a 30-day replacement guarantee, provided the product had delivery related issues or defects. This acts as an additional point of solace for customers who are worried about defective products or inefficient delivery services.

Reach – Mobility is a huge focus in Asia. As many as 500+ million customers in China and 235+ million customers in India are expected to shift to smart devices by 2015. Hence, it is not only sufficient to have a good online presence, but enabling mobile capable sites and supporting mCommerce capability becomes crucial.

Location based services – Since customers these days are always on the move, promoting the right product at the right time and location becomes an integral aspect. When a customer is in a store browsing a particular product, understanding the customer preferences and targeting the customer with an eCoupon while in store is a great way to capitalize on the location based services. Smart devices play an important role in this aspect by supporting the location-based services.

Multiple Payment options – All eCommerce sites in the APAC region (China, India, Hong Kong & Taiwan) support payments via an escrow account, this is besides the standard credit cards, debit cards and bank payments. AliPay, TenPay seem to be the leading providers of escrow accounts in China while BillDesk, CCAvenue are the leading providers in India and AsiaPay in Hong Kong. Providers have also started supporting Co-Branded EMI (Equated Monthly Installment), Cash on Delivery (CoD) options for easy payment facilities.

Content – Getting the right content and targeting customers with crisp and relevant information is of utmost importance to users on the move. Smart Phones, Tablets each have different resolution capabilities and screen sizes, hence customizing content for all these devices is critical to provide the right amount of information and better conversion rates.

Price Comparison – Customers in this region are extremely price sensitive by nature. Providers offering instant price comparison are highly popular amongst the price conscious customers. This feature increases consumer confidence resulting in closure of sales.

Shipment option – Low cost of shipping ($1) in China is a huge advantage in eCommerce. However, there may be issues in guaranteed deliveries. Customers placing high value orders may need to spend additional money on delivery confirmation and tracking services. Providers in Taiwan have tied up with popular convenient stores like 7-11 and a few others to deliver orders closest to the customers’ workplace or residence (delivery at convenient stores). The convenience of collecting orders post work while returning home has become a popular and economic method of shipment.

Logistical challenges – Both China and India are vast and spread-out, posing huge logistical challenges. A country as huge as China would require two logistics providers – one to cater to the customers in Northern China & the other one for customers in the Southern part. Similarly, in India, the geographical spread throws logistical challenges. The kind of products being offered by providers should determine the logistics planning.

 Legal challenges- Some countries have a legal requirement of generating invoices for online transactions and reporting periodically. Few commodities in India may necessitate the collection of Octroi and other taxes which need to be taken into consideration prior to the transaction.

In conclusion, the eCommerce market is thriving and poised for robust growth in the Asian markets. There are players who made a good beginning. Their success depends on their understanding of the market & offering many of the stated features. Over the next 12 – 18 months, the market will see a consolidation where serious players with sufficient capital will be able to sustain, or else they might be bought over by larger players.