The growth of eCommerce in Asia should be a priority for American and European Brands. We explain why it’s important for them (and other suppliers, wholesalers etc) to establish a presence there.
Technological advancements and digitization have continued to transform the world economy into a more integrated, complex, and dynamic system. Ecommerce, a business model that allows businesses and consumers to electronically purchase goods or services, is rapidly expanding and growing across the different continents of the world. According to cumulative data from Statista, eCommerce sales worldwide are projected to grow from $1.9 trillion in 2016 to $ 4.5 trillion in 2021. In 2017, the worldwide eCommerce sales are estimated to grow to $2.3 trillion, accounting for one-tenth of global total retail sales according to eMarketer.
While Europe and America present some of the world’s largest and most dynamic eCommerce markets, Asia seems to be benefiting from retail eCommerce than any other continent in the world today. Ecommerce in many Asian markets is projected to record intense growth within the next 5 to 10 years. In 2017, according to eMarketer’s estimates, the Asia-Pacific region and the United States are projected to record a 30 percent and 15 percent growth rates respectively. The double-digit growth rate makes the Asia-Pacific region a global leader in eCommerce development.
China and India form the major eCommerce markets in the Asia Pacific by virtue of their sheer size. These two countries are the largest and fastest growing markets for eCommerce retail sales in Asia. In fact, China, being the world’s largest eCommerce market today, is projected to grow its market to $1.1 trillion in 2020. According to Forrester Research, China, India, Australia, Japan, and South Korea will grow their eCommerce revenues from $733 billion in 2015 to $1.4 trillion in 2020. The market research company writes that eCommerce growth rates in China are solid and more consistent. The country’s eCommerce annual growth rate is around 17 percent. With such growth rates, the Chinese eCommerce market will increase its share in the global retail eCommerce market from 30 percent in 2015 to about 40 percent in 2021. The days of unstable and staggering growth rates year after year for China are gone.
India’s eCommerce retail sales are set to expand five-fold, according to Forrester Research. Despite the country’s cash-based culture and underdeveloped logistics, the number of consumers buying online and the per capita online spend have been increasing over the recent years. Forrester Research’s report shows an increase in India’s eCommerce transactions on mobile devices from 2 percent in 2011 to over 50 percent in 2016. India presents a huge opportunity for retailers in developed markets such as Europe and America since its online retail spend is expected to grow at a compound annual growth rate of about 31 percent.
Why it’s Important for American and European Brands to Have an Active Presence in China and India
Both the Chinese and Indian markets have the characteristics of a mature eCommerce market. By all accounts, these two countries have a large percentage of online shoppers, high per-capita spending, fast-rising internet penetration (India), and high internet and broadband penetration (China). India is hugely dominated by some of the major players in the eCommerce industry- Amazon and Flipkart, Snapdeal; and has a fast-rising internet penetration. Millennials account for over 30 percent of India’s population. Each of these markets, however, has unique characteristics that eCommerce operators have to consider as they craft their offerings.
More traditional retailers in these markets are moving towards eCommerce, a trend that presents a huge opportunity for retailers to build a brand presence.
Alibaba and Weibo are the dominant companies in the Chinese eCommerce market today. Forrester Research says China’s online retail spend is poised to grow at a compound annual growth rate of about 20 percent until 2019 when it will exceed $1 trillion. Projections on mobile commerce in China indicated a growth rate of 55 percent in 2015, 45 percent in 2016, and 40 percent in 2017. The number of internet users in China has grown from 688 million in 2015 to 772 million in 2017, according to cumulative data from statisca. Off the 2.9 billion people using the internet across the world, China accounts for over 20 percent. 772 million internet users are more than Europe’s total population and more than double that of the United States.
eMarketer says China’s internet and broadband penetration stands at about 53.2 percent, a rate that’s lower than what’s in other Asian Countries. Mobile devices account for over 90 percent of internet users in the country. In India, the number of internet users grew by 11.34 percent to 481 million in 2017 and is projected to reach 500 million by June 2018. The country’s internet penetration stands at 35 percent of the total population. Nearly 83 percent of Indians who own a smartphone shop online. Though Indian market is characterized by additional inefficiencies, it presents great opportunities for domestic brands as well as international retailers, especially those in Europe and the United States.
At the bottom of the Chinese and Indian income pyramids lie trillions in disposable income. Financial services firm Morgan Stanley estimates that India’s eCommerce market will grow over 1,200 percent from $15billion in 2016 and $38.5 billion in 2017 to $200 billion in 2026. The country is experiencing a rapid rise in internet penetration, a shift to mobile device usage, reduction in data access costs, and increased flow of credit to enterprises and consumers.
The middle class of consumers is a demographic trend that characterizes the Indian and Chinese markets, as well as other emerging markets in Asia. This demographic has increased seven-fold in Asia. Unlike the first generation of cross-border shoppers, the rising middle-class consumers in India and China are less trusting and are more sensitive to high international shipping costs. Most of these consumers are more comfortable and prefer shopping from localized eCommerce sites. That’s an important reason for American and European brands to establish themselves in these local markets and have an active presence.
To successfully achieve this, brands and wholesalers of all sizes should work with a trusted intermediary like http://www.opencoastb2b.com who has deep experience in these markets. Open Coast is a free marketplace that connects Sellers and Buyers; it supports multiple languages, currencies and provides free shipping to over 200 countries.