The World's Your (online) Oyster

FF Fashion

Mon, Dec 14, 2009
The Business Times

By Farhad Irani, Business manager and vice-president, PayPal, Asia Pacific

ONE of the questions I am frequently asked is, when will e-commerce outpace traditional retail sales? My response is always, if I had a crystal ball I would be a very rich man, but if you look at the fundamental, underlying metrics that contribute to e-commerce, the signs for rapid growth are evident across all of Asia.

The recent economic slowdown has in fact hastened the pace of e-commerce adoption across Asia. This growth is most notable among the small to medium enterprises - quick to adopt new innovations that will help them sell globally while still operating locally. The pace of e-commerce growth in Asia today is relatively low at 20 per cent, with Greater China leading the pack. Yet valued at over US$100 billion, the Asian e-commerce market presents huge growth opportunities for sellers in this region.


So what's behind this phenomenon and what's the potential for e-commerce growth here in Asia? A host of factors. Increasing consumer broadband penetration, the availability of local Asian goods online, the ever reducing cost of the personal computer, and the explosion of smart phones are all technological reasons, but we cannot forget the demographic change with increasingly affluent 18 to 30 year olds across Asia who already consider cash as dead.

The Apec Business Advisory Report points to the fostering of cross-border trade as one of its post-crisis recovery recommendations and views e-commerce as a key driving force behind this. The recession has businesses looking beyond traditional business models and expanding online.

In the face of increased competition, high overhead and labour costs, cash flow challenges and economic uncertainty, adopting an online business model offers the appeal of new customers and increased sales. By casting the potential customer net wider, businesses can reduce their reliance on the local market and expand their business cross-border, reaching new markets and new customers. The value of e-commerce is undoubtedly there; the hard part is working out how to unlock it!

Building new relationships

The Internet has enabled a dramatic change in the relationship between consumers and businesses and a greater understanding of each other's needs. A myriad of new business models is emerging - from business-to-consumer and business-to-business, to now factory to consumer. Innovation is taking on a whole new dimension in markets like China which is fast discovering the online customer westward and offering a painless, immediate and secure shopping experience, direct from the manufacturing source.

Businesses entering the world of e-commerce need to consider the differing expectations of their online shoppers, compared to those in the offline world. Competitive prices and security are top of an online shopper's list. They are looking for products they can't find in their own country, or at a cheaper price than locally, and demand a convenient, fast and secure online shopping experience. National boundaries disappear with the click of a mouse.

In a recent buyer survey we conducted, the wide range of products, assurance in payment security, and also product quality, were top of the list for South-east Asian buyers.

Looking to the future

Understanding the future is the holy grail for any business. Making sense of today's trends is valuable to any business trying to plan for tomorrow - or five years from now. The pace of technological change is relentless and the time from discovery to 'live to site' cycle is reducing rapidly.

Traditional payment systems around the world simply weren't designed for the Internet. They are typically local in nature and don't connect to each other, and so they are certainly not available across national borders. We managed to build a payments platform that successfully bridged the two worlds - the traditional financial networks and the Internet - and it is successfully being used for domestic and cross-border trade by many Asian online merchants.

It comes back to choice and convenience - if you are a retailer today and you're not currently offering - or planning to offer - your customers the ability to participate in commerce whenever and wherever they want, and another retailer does, you're going to lose out.

As I mentioned earlier, making predictions is a tough business. One thing though is clear. More and more transactions are moving from local cash-based transaction to international ones that are increasingly digital. What's needed now, and in the years to come, is for businesses to monetise what's on offer to them.

The bottom line is: the wider the net, the larger the catch.