USD 2,357,000,000,000 – roughly equivalent to EUR 1.73 trillion – is the number predicted for e-commerce revenue in the year 2017, not even 36 months from now. Even I’m impressed by a number like that, especially since this is just the revenue predicted for the B-to-C segment. It’s an unbelievable number, and yet by no means the end of the global growth story.
I am convinced that e-commerce will be booming well into the future, because the Asia-Pacific region (AP) will be THE motor for e-commerce, especially in China, India and Indonesia. Experts predict that the e-commerce sector in this region will become the world’s largest market over the next few years, ahead of even North America and Europe.
Fast growth rates in e-commerce
So what is the current situation in these AP countries? In high-population countries such as India, we can say that online shopping does not yet play a major role. But, significantly, e-commerce growth rates today are already considerably higher than they were at the start of the e-commerce booms in the US and Europe.
When I look at the AP region, I see many different sub-regions with very different circumstances and very different needs. And what do most of these have in common? They lack mature infrastructure. The German market, in comparison, has one of the best supply chains in the world. Indeed, many ideas from Germany can be applied to the AP region.
The DHL study “Shop the World! Consumer attitudes towards global distance selling” provides some notable insights into the AP region. Research conducted for the study reveals that India’s young, urban and online-savvy population considers it very important to be able to select from a range of different delivery options. The region is still in the “emerging” stage, and yet it’s a real challenge for providers, including logistics companies, to satisfy the demands of consumers there.
Significant differences between individual markets
Anyone who wants to be a major player in these new markets needs to understand the different conditions and different needs across the AP region. Individual markets vary widely in terms of maturity, local infrastructure, the speed of internet service, internet usage, as well as pervasiveness of web-enabled devices such as tablets and smart phones.
These differences, along with the tremendously dynamic nature of the market, significantly impact the ability of any one e-commerce vendor to succeed in the AP region. Only the products and solutions that truly respond to the needs of each of these individual markets will achieve success.
Growth of global middle class fuels e-commerce growth
In Asia, C.O.D. service is taken for granted; it’s considered basic service. This is just an example of why logistics providers such as DHL must find ways to differentiate themselves on the market there – to “stand out” with services that give them a competitive advantage. Everyone in these markets is competing against a very strong field. In the AP region, it’s not just about competitive prices, but also about applying the latest technologies to offer customers the most innovative solutions. In short: establishing a solid, high-performance infrastructure will be the key to success.
It’s clear to me that overcoming the challenges of the AP region will require tremendous investment – not only financial investment, but also the willingness to invest in strong teams of people in the respective markets. And success in this region will also require a good deal of patience.
But the investment and effort will pay off. Consider these numbers: from now until the year 2030, more than 50% of the growth in the world’s educated workforce will come from India and China. What does this mean? In this same timeframe, the world’s middle class will increase by a factor of 2.6, and 90% of these new consumers will live in the AP region. At the same time, the internet and smart phone usage will become an even more indispensable part of daily life.
E-commerce will replace traditional commerce
A recent UBS study confirmed my expectations for growth and expansion in the AP region.
The study documents the tremendous challenge posed to traditional brick-and-mortar retailers by the new wave of e-commerce challengers. Already today, internet usage in the region is much greater than many European market observers assume. Add to this the new generation of inexpensive smart phones (retail price under USD200), which are driving the growth of mobile e-commerce.
To be sure, the AP region is still no paradise for e-commerce users. And yet consumers in Southeast Asia visit online retailers 41 times for every single visit to a traditional retailer. “The power balance has already tipped to the online platforms,” writes Raymond Maguire, Head of Research and Strategy at UBS in Thailand. “The traditional retailers really have to get their act together.”
The region still lacks the kind of price disrupting you see in Europe and the US – the deep discounts, offered by challengers such as Amazon, that make life so difficult for brick-and-mortar retailers. But Amazon’s Southeast Asia clone Lazada, founded by Germany’s Rocket Internet, is on an expansion course in many countries. Other challengers include Chinese e-commerce giant Alibaba and Japan’s market leader Rakuten.
I look forward to the next chapter of the e-commerce success story. Healthy competition and innovation benefits not only consumers and providers in the AP region, but the global economy as a whole.