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The Far East is Closer than you think

The Far East is Closer than you think

Uncovering the opportunities and challenges of expanding to Asia-Pacific

Asia-Pacific signifies the quickest growing and most significant market for eCommerce development. Brands and retailers are looking towards Asia-Pacific markets to develop and advance their businesses, with slowing growth rates in national markets. Nonetheless, navigating the rules and regulations, understanding how to get there, and launching an eCommerce presence in Asian markets can be complicated.

Each country in the region has its unique characteristics and laws, and regulations. Therefore, it is essential that businesses wanting to expand to the area fully recognize the challenges of entering and succeeding in Asia-Pacific markets. This must include insights into consumer behaviors to assess product demand and develop marketing strategies for penetrating the market.

Equally important is understanding rules, regulations, and logistical strategies for determining how to sell products in the region and how to deliver products to the customer. Here, we will explore the Asia-Pacific eCommerce opportunity.

The Asia-Pacific Ecommerce Opportunity

The Asia-Pacific region is made up of countries with varying degrees of ecommerce maturity and population size.

4 Factors Driving Asia-Pacific Ecommerce Growth

  • Internet Penetration: The most prominent factor in online sales growth is the large population in emerging markets coming online and buying online for the first time. As more and more of the region’s population come online, these numbers will continue to fuel global ecommerce growth.

Studies show that in 2014, there were 1.4 billion active internet users in Asia-Pacific, accounting only for 35 percent penetration.

  • Growing Middle Class: The spending power of the middle class in the region has increased substantially in recent years. Middle-class consumers in Asia-Pacific are projected to account for more than 50% of the global middle class by 2020. Whereas North America and Europe accounted for 64% of the global middle class and 54% of spending in 200, and these numbers are projected to fall to 46 and 32 percent, respectively, by 2020.
  • Mobile: Mobile usage for online shopping is forecasted to contribute to overall global ecommerce growth. This is important to note since mobile penetration in Asia-Pacific is notably higher than in other countries. In many Asian markets, consumers have a higher mobile proficiency using their phones for digital shopping and mobile payments than those in the US.
  • Infrastructure: Global solutions providers make it easier for brands and retailers to enter Asia-Pacific. Australia is one of the most sophisticated Asia-Pacific markets when it comes to its payment infrastructure, while in India, Indonesia, Vietnam, and Thailand, most of all transactions are still cash-based. Differences such as these greatly impact where and how ecommerce adoption develops across the region.

Advancements in payments and shipping are also fueling growth in these markets.

As internet usage and online shopping penetration in these emerging markets continue to rise and as the payments and logistics infrastructure improves, Asia-Pacific is forecasted to continue its rapid ecommerce growth rate.

Asia-Pacific Market Characteristics

Understanding consumer demographics and spending habits across the region is critical to identifying demand and the strategic growth markets. While Asia-Pacific as a region is growing rapidly, culture, ecommerce maturity, delivery infrastructure, payment systems, regulations, internet, and mobile penetration – all these vary widely among Asia-Pac countries.

As the Asian middle class grows, there are several key characteristics that should be taken into consideration when evaluating and developing an ecommerce expansion approach to the region.

  • Younger Consumers: Asian consumers are significantly younger than their Western counterparts. The population is expected to increase as the Chinese baby boomers are likely to double the country’s birth rate. Current laws in China state that if both parents are an only child, they are permitted to have two children. Similarly, India has one of the world’s youngest and most rapidly growing populations.
  • Mobile Proficiency: Asian consumers are generally more proficient with mobile devices than personal computers. In 2013, there were approximately 2.5 billion mobile phone users in Asia-Pacific. To put it simply, that is ten times more than in North America.
  • As smartphones in Asia-Pacific become more affordable, it is expected that Asian consumers will become even more mobile-savvy. Because the use of cell phones is more widespread than personal computers, the way they shop online is also different and will have a notable impact on the prospect of ecommerce in the region.
  • In China, 70% of internet users have made a purchase via a smartphone and in 2013, 55% of Chinese consumers had used mobile payments. In comparison, only 19% of US consumers had made a mobile payment in 2013.
  • Value Seekers: In general, Asian consumers are “value seekers.” They look for a good value on any product or service they purchase. Whether shopping for luxury goods or everyday bargains, they want to get the most for their money. Although most prevalent in lower-income households, the value mentality extends to high-income segments as well.

Asia-Pacific Ecommerce Challenges

A recent global ecommerce research study revealed that logistics, culture, and technology were the greatest challenges faced by retailers and brands when expanding to Asia-Pacific. More specifically, the challenges included local tax regulations and compliance, local market needs, language barriers, shipping difficulties and cost, local preferred payment types, and cross-border currency settlement.

Most retailers recognize the opportunities but, since most Asian markets are still “foreign” to many North American brands and retailers, there is a lot of uncertainty and hesitation about how to get started.

  • Customs, duties, taxes, and regulations: As soon as you cross country borders, some specific rules and regulations need to be considered. Each country has its laws, tax rules, and customs duties for online purchases. For instance, China has the lowest duty-free threshold, which varies internally in different regions of the country. Overall, it is incredibly fragmented, with several import gateways for various commodities. Each gateway and region applies its interpretation of its rules and regulations, making it complex to navigate the Asia-Pacific region.

A solid understanding of the global ecommerce complexities and areas that need to be addressed will help build the expansion strategy and avoid common pitfalls.

  • Logistics: Figuring out how to ship packages to Asia-Pacific and navigate internal delivery infrastructures and local carriers is one of the most challenging aspects of ecommerce in the region. Doing it the right way will greatly impact the speed and time-in-transit as well as decrease costs. Customs clearance can be very complex in many Asia-Pacific markets and can lead to delays, fines, penalties, and higher duties and taxes, if not handled correctly. Therefore, it is essential to associate with a solution provider with extensive custom clearance expertise and a local presence.

Strong connections with regional customs offices ensure that parcels are delivered quickly and at the cheapest charge.

  • Payments: The payment landscape in Asia-Pacific is very fragmented. The favored mode of payment differs from country to country, depending on the ecommerce maturity level. To succeed, it is crucial to present prices in regional currencies and accept local payment methods. Most of all, in emerging markets like India, Indonesia, Vietnam, and Thailand, online transactions are still cash-based.

Smartphone adoption and mobile proficiency in Asian countries are paving the way for a sophisticated mobile payments market.

  • Localized shopping experiences: Depending on the market entry approach, the ecommerce site may need to be localized to the specific market. This includes content, design, language, and currencies, as well as ensuring that final checkout costs include all fees, customs charges, and taxes. Translation into Asian languages is more complicated than, for instance, European languages.

Association with a solution provider that can recognize cultural differences as well as the brand and translate in a way that maintains the brand voice.

Marketing: Building brand awareness and demand requires substantial marketing resources and careful planning that takes into consideration the cultural differences and preferred channels at every stage of the shopping journey.

Online search is an effective way for Asia-Pacific shoppers to discover and research products. Search is especially a critical component of the marketing mix in countries such as China, where shoppers are highly value conscious.

It is critical to investigate and focus on search engines that are most used in each country.

  • Marketplaces: Marketplaces offer great opportunities for leveraging existing traffic and assessing product demand but still require some resources to manage properly. Japan-based Rakuten, for instance, is all in Japanese and therefore involves translation. Products sold still need to be shipped and delivered to customers in foreign markets.

Organizations must partner with a logistics provider and should enter the marketplace with a strategy in mind.

  • Customer Service: Great customer communication and transparency are essential when selling in any market. Providing excellent and timely customer service in Asia-Pacific presents challenges to US-based retailers and brands with respect to time differences and language barriers. To offer customer care in Asia-Pacific, retailers should leverage a partner that provides regional or local customer support for both phone and email.

To ensure that customers in Asia-Pacific enjoy the brand experience, the customer service representatives must have access to order information and understand the brand and products sold.

Succeeding in Asia-Pac

There is no question that the region presents important and viable ecommerce growth possibilities. However, the decision of whether to increase ecommerce sales to Asia-Pacific and to prioritize which markets in and which to expand in should be carefully be assessed. It is essential to understand that the region is highly fragmented as each market in the region is different, and cultural as well as logistical considerations must be a crucial part of the decision-making process.

Without a doubt, the Asia-Pacific region presents a highly attractive opportunity for retailers and brands looking to expand their global ecommerce presence and stimulate sales. However, before beginning your Asia-Pacific expansion journey, it is highly important to do your homework, learn what is fueling the growth and what is relevant to customers, and plan for the difficulties of growing into this interesting market.

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