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As Retail Moves Online in Asia, Stores Face Tough Decisions on How to Sell Online

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Many have predicted the inevitable growth of ecommerce in Asia. However the world’s largest continent is very diverse when it comes to the motivations, needs, and constraints of shoppers and sellers. As Gwendolyn Regina Tan, who leads business development at Tech in Asia, has pointed out that there’s a divide between urban and rural Asia, which are two hugely different worlds.

Understanding the Urban and Rural Divide

Some of the challenges facing urban consumers in Asia are familiar to those faced in North America and Europe where ecommerce has become relatively commonplace. These challenges include the additional cost and difficulty of shipping goods within and between countries.

But one of the biggest challenges is establishing trust between buyers and sellers. Buyers want reliable information about what they’re buying, that what they buy will arrive, and that it work as advertised. Sellers mostly want customers who pay.

One way of dealing with this is providing a rating system for buyers and sellers, originally popularized by US online auction site eBay, but that is also present in other marketplaces such as Alibaba. This helps establish a baseline level of trust between strangers, and clearly outlines the responsibilities of the each party and provided recourse for indiscretions.

A major challenge of stand-alone online stores, which are self-hosted on their own domain, is that they don’t necessarily have an online system that oversees how they operate. However, it seems that urban consumers are getting more comfortable purchasing from online stores not affiliated with marketplaces that rate their service.

In contrast to urban Asia, rural Asia faces steeper challenges. Internet penetration isn’t as high, and because so few people have credit cards, online stores need to provide alternative ways to process payments such as bank transfers and cash on delivery. Furthermore, places like the archipelago nation of Indonesia have remote regions where delivery is difficult, slow and costly.

In her response to a question on Quora, Sukriti Bhardwaj, who works at Get Me A Shop, has noted that e-commerce has only 12.5 percent penetration in India. Creating and managing an online store in addition to their brick-and-mortar shop is overwhelming for many businesses.

Ruchika Kumar, founder of fashion search engine Boutiika, has noted that online sales channels aren’t actually where most purchases happen – the vast majority of consumer spending is still happening in-store. In many cases, consumers will research products online, but then head to a brick-and-mortar store to see items in person, ask questions, and complete their purchases.

This means there’s a value to having a website where consumers can find information on products – even if it isn’t a full ecommerce site.

Realistically, all retail isn’t moving online overnight, meaning that companies have to find reasonable ways to bridge the online and offline customer experience. Many of those who are successful online actually reach out to customers through traditional ads on TV, billboards and newspapers, which helps drive awareness and convince consumers that a website is trustworthy. Of course, businesses also have to drive online traffic, and do so through online ads, email distribution lists, and other tactics.

The price of setting up and running a stand-alone ecommerce site has been steadily declining, but the combined efforts involved in a site becoming successful can be a major expenditure for Asian retailers, and it’s crucial that these efforts are offset by new revenue.

China’s Role in Defining Ecommerce in Asia

Further differentiating the ecommerce landscape, we see China, Japan, South Korea, India and Indonesia as the countries with the most buying power, but is highly weighted towards China which spends about $6 for every $10 spent online in Asia.

According to the Ali Research Center, Chinese e-commerce transactions will be worth USD 540 billion in 2015, and is on a course to be larger than those of the US, Britain, Japan, Germany, and France combined by 2020.

Interestingly, however, China’s ecommerce brands and consumers aren’t particularly interested in stand-alone online stores, but rather sell items under the umbrella of an ecommerce site.

According to a KPMG report on the Chinese e-commerce market (PDF), Alibaba is the country’s undisputed market share leader of e-commerce, and its Tmall (天猫) service provides a B2C marketplace where consumer brands in an “online mall” similar to Amazon’s marketplace. Tmall provides each brand a virtual store, and has an arrangement where sellers don’t need an ICP license which is usually needed to operate an online store in China. Alibaba’s influence is also growing throughout Asia.

Like in the case of eBay, these online marketplaces provide trust and an easy way to find products like Amazon. Sites like Tmall end up becoming a place where consumers look for products and reviews, as opposed to the wider internet.

Indicating the future trajectory of ecommerce which could become more narrow and app-based, Amazon has created its own phone with features to more easily buy products. While this makes ecommerce even more easy and integrated into daily life, it also might mean that someone’s first search for an item does to Amazon sellers rather than stand-alone sites.

Stand-alone Sites vs. Multi-Seller Marketplaces

The long-term problem with sites like Tmall is that the retailer doesn’t have complete control over their users’ experience, making it difficult for retailers to create distinct brands which contribute to customer loyalty.

A new Singapore-based ecommerce platform, Globby, has recently emerged with a relatively unique focus on providing ecommerce software and hosting for retailers in Southeast Asia.

Globby is aimed at allowing businesses to easily create their own online store, and is similar to services like Bigcommerce and Shopify. These services provide everything needed to build an ecommerce service along with a website builder, a content management system, and website hosting, while also hiding much of the complexity. These are geared towards smaller companies whose products aren’t excessively complicated, and who don’t have IT staff on hand, which fits the bill for many retailers.

Large North American and European web hosts have revamped their own ecommerce packages including GoDaddy and 1&1 to essentially make them easier, more powerful, and more like Bigcommerce and Shopify.

It’s likely that the sort of stand-alone ecommerce service provided by Globby will appeal to a certain demographic of shops within Asia, but it’s important to remember that the continent is divided into camps where stores and consumers are willing to gamble on a stand-alone site, and those who would prefer to be associated with a major ecommerce hub.

About the Author

David Hamilton is a Toronto-based technology journalist who has written for the National Post and other news outlets. He has covered the hosting industry internationally for the Web Host Industry Review with particular attention to innovative hosting solutions and the issues facing the industry. David is a graduate of Queen’s University and the Humber College School of Media Studies.

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