The Economist Intelligence Unit: What are the key drivers of e-commerce growth in Asia?
Koen Thijssen, co-CEO, Asia Pacific Internet Group: The first is the sheer market size—we cover about 1.2bn people across our 15 markets, about 250m of whom have a smartphone, and a further 280m will have one by 2018. Many consumers are coming online for the first time, looking to use the services that the Internet has to offer. Part of that growth is driven by handset manufacturers in the region launching new Android phones that are attractively priced for emerging market consumers at less than US$100 per phone.
A second factor is Asia’s demographic profile. The median age is around 24 in the Philippines and 28 in Myanmar, compared with an average of 41 across Europe or 37 in the US. These young consumers are quite tech-savvy and are more willing to explore alternative methods for making daily purchases.
What benefits do e-commerce services offer to the Asian consumer?
In Europe, consumers buy online for convenience—it is easier and more comfortable than going to a mall. In Pakistan, unless the person is living in Lahore or Karachi, the reason why they shop online is availability—there might simply be no readily accessible shops that offer what you are looking for. Of the 180m people in Pakistan, only a small fraction lives in Lahore and Karachi. For the 165m that don’t, being able to buy online gives them access to a range of new products.
The second benefit is price transparency. Thanks to price comparison websites and being able to visit multiple e-shops at the same time, consumers can make more informed decisions instead of travelling around the city to figure out whether they are getting a good deal or whether the product is authentic.
Finally, e-commerce is more consumer-friendly. Benefits include being able to do cash-on-delivery transactions, being able to receive goods at your house, being able to exchange a product for a period of time, and being able to speak to a professional call centre if there are any problems. Brick-and-mortar incumbents don’t offer these benefits.
What is an example of a successful e-commerce venture in Asia?
Lamudi, a venture we launched in Myanmar in 2013, is a real estate classifieds website—like Rightmove in the UK. We moved into this space about 18 months ago, and within nine months we had expanded from Myanmar to Pakistan, Sri Lanka, Bangladesh, Indonesia and the Philippines.
When you enter such a market, you need to explain why you are relevant. Even in the Philippines, a relatively developed market, you still need to explain the benefits of listing on our website. We have about 40 locals and four expat employees on the ground there to build the business. It is now recognised as the fastest-growing real estate portal across the Asian countries in which it operates.
The consumer benefits from sites such as Lamudi, as it only deals with premium agencies with which Lamudi has built a personal relationship. By doing business with only trusted partners, the local population is happy with price transparency and being able to do business with trusted partners.
What are the challenges of running an e-commerce business in Asia?
Payment is a challenge: most consumers in these markets lack access to banks or credit cards, so you have to do cash on delivery. It is not easy: you have to use couriers, make sure they collect the right amount of money and get it back to your office.
Another challenge is the lack of a good delivery network. Try sending a parcel from one end of Pakistan to another—it is not easy. We have to build these networks ourselves, either by working with third-party providers or establishing our own operations.
A third challenge is fraud. In countries such as Pakistan or Bangladesh fraud can be an issue, whether it’s a fraudulent purchase or a supplier selling sub-standard goods. So people are reluctant to trust a website as they don’t know whether we are real or not. The challenge is to establish trust, and our startups tend to do that through frequent advertising, ensuring the goods they sell are authentic, and having a flexible returns policy.
Finally, foreign companies entering Asian markets need to make sure that their website functions in a developing market. A fancy website with lots of pictures won’t always work; Pakistan only got 3G this year, for example, so you need to ensure your platforms are optimised for a low bandwidth environment. Most consumers will have smartphones, so it is important to have a mobile-first strategy. You will also need to use the local language—and use it well to establish trust.
This interview is part of a series managed by The Economist Intelligence Unit for HSBC Commercial Banking. Visit HSBC Global Connections for more insight on international business.
