Tuesday 26 May 2015

Why Global e-Commerce giants are yet to conquer South East Asia

South East Asia (Popularly referred as SEA) is considered to be the most diverse & rapidly changing market in the world. With the population in excess of 650 million, the market is too huge to be ignored for any global player especially in the current booming space of online retail. In spite of this, we haven’t seen much of an activity from giants with likes Amazon, Alibaba & Rakuten in the region.

Let’s have a look at some interesting statistics.

Currently online shopping accounts for a minuscule number in the region. But with rapid penetration of internet & smart phones in the region the market is all set to explode. According to a report from Frost & Sullivan the region may see fivefold growth by 2018.

What is so very different about South East Asia?

1.       Six Countries six cultures:

Region comprises of 6 countries Singapore, Malaysia, Thailand, Indonesia, Philippines, Vietnam. Each of these countries has a different population mix, different language, religion & culture. Which is an important indicator of product preferences of people.

2.       Cross border transactions:

Crossing international boundaries means customs clearances, which add the complexity of payments of duties for imports, legal regulations on imports & restricted items in a particular country.

3.       Online security & cyber theft:

      The region in past has experienced some severe cyber theft cases. In the absence of a cross border jurisdiction mechanism & gaps in regulations potential consumers deter from online shopping.

4.      Penetration of Credit cards: 

Credit card penetration in SEA region is only about 10%. Add to that skepticism of those not very open to share the card details online for the fear of fraud. As a result cash on delivery (COD) & AT transfers is the preferred mode of payments. Handling of cash payments presents a bigger challenge than anything else. In most of the countries postal networks are either sluggish or unreliable. This means retailers need to have sophisticated delivery partners or build an in-house delivery capabilities.

5.       New sales channels:

With rapid penetration of social media & messaging services like “Line”, home grown e-retailers have already entered into strategic tie ups with the companies for exclusive promotions & campaigns in the region.

With above factors being critical to be successful in the region, even if likes of Amazon, Alibaba enter the market, it will take considerable amount of time for these companies to replicate the local knowledge acquired by home grown online retailers
In spite of all the factors SEA may still prove to be a market big enough for several large e-retailers to co-exist. However will it be profitable for these businesses, time only will answer that question.

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