All About... E-commerce

The e-commerce industry in Asia-Pacific has been slow to gain momentum because of infrastructure and trust issues that have long been overcome in the West. And with Asia-Pacific’s demographic diversity, no single player has been able to dominate the region.

But this is starting to change as broadband penetration and payment methods develop. Recent months have seen growing interest in e-commerce sites in the region. In September, comGateway partnered with Visa and DHL to allow Asian consumers to shop on US sites without a US credit card.
Crucially for the broader media industry, a rise in e-commerce spending will have implications for online advertising.

1 Asia-Pacific’s e-commerce industry is fragmented into several localised sites. In China, the major player is Alibaba Group, owner of the popular business-to-business platform Alibaba.com and auction site Taobao.com. These combined sites control more than 60 per cent of the e-commerce market share.

However, Alibaba is coming under pressure from Baidu, which beta-launched its e-commerce site in August, and portal host Tencent, which launched Paipai in 2006. Their goal is to cash in on the growing market - the number of online shoppers in China grew by 12 million to 55 milion last year.

Meanwhile, eBay’s localised sites in Hong Kong and Southeast Asia continue to be popular. News Corporation’s Mocca.com is also picking up steam in Singapore and allows sellers to post videos of their goods. In Korea, SK Telecom launched The 11st Avenue earlier this year which lets buyers track their deliveries via mobile phones and offers a tutorial for retailers unsure of how to start marketing their items.

As in the West, travel has been one of the first sectors to take off - travel sites such as eLong, Zuji and CTrip dominate here.

2 Low web penetration and poor infrastructure have held e-commerce back. A major hindrance has been the lack of credit cards. Few consumers in Asia-Pacific own an American credit card, which was a prerequisite to shopping online at e-commerce sites based in the West. The major exceptions are Japan and Korea, the two most developed internet markets - according to a survey by Symantec, 99 per cent of Korean web users shop online, and 97 per cent of Japanese users, comparable with Western markets.

In China, India and Southeast Asia, delivery services have also become more reliable. “It’s sometimes overlooked, but a few years ago there were few-to-none shipping companies to deliver for these sites, and the post office was less than reliable,” says William Bao Bean, a partner with SoftBank China & India Holdings. “Now there’s competition and they’re working more efficiently.”

3 To accompany the growing popularity of credit cards, e-commerce sites have adopted instantaneous payment methods akin to eBay’s PayPal in the West. These services, including Alibaba’s Alipay and Tencent’s TenPay in China, give customers a safe payment method.

4 Rising e-commerce is expected to have implications for digital media. According to James Hawkins, director of DGM in Southeast Asia and Hong Kong, because Asian customers have been slow to frequent e-commerce sites, advertisers have also been sluggish to use the medium to its full advantage. But, as stronger internet connections enable more online shopping, the ads will come. Search is an obvious category that could benefit. It is no coincidence that Japan and Korea boast more developed search markets than elsewhere in the region.

Display, too, may be affected as direct-response ads can be linked directly to sales. In the long term this may have an impact on online measurement and payment; the ability to link marketing activity to online sales opens up cost-per-sale revenue models.

5 Affiliate marketing, which relies on cost-per-action and cost-per-sale models, is another area that should benefit, as brands which sell online recruit partners to help them drive traffic.

“From an affiliate-marketing point of view, companies will soon be able to find out what they’re willing to pay for advertising space on e-commerce sites. These are going to be the places affiliate marketers, as well as any advertisers, will want to be.”

What it means for…

Marketers

- Sectors such as travel are already focused on the web as a sales channel, but other categories, such as clothing and consumer goods, may begin to see the internet as a key outlet.

- The tendency to research online and purchase offline will not disappear for big-ticket items such as cars.

- Expect a shift in marketing priorities, and in particular the division of marketing between online and offline.

- There is also a decision to be made between selling via a brand’s own website and partnering with an existing e-commerce outlet. Taobao recently launched a shopping mall site offering brands a platform to sell to consumers.

- Online sales can lead to extra data streams which can be fed into customer relationship management programmes.

Media agencies

- Media agencies should expect clients with a growing reliance on web sales to shift budgets online.

- Search capability will be needed to ensure consumers are driven to online retail destinations.

- Agencies handling web-dependent clients should be thinking about media models based on cost-per-sale or cost-per-action.