Electric commerce or e-commerce is the activity of buying and selling online. Typical e-commerce transaction includes purchase of online books, music purchase and purchase and sales of many other items. Three known major areas of e-commerce include online retailing, electric market and online auction. Technologies such as mobile commerce, internet market, electronic funds transfer, and electronic data interchange (EDI), online transaction process and many others.
The practice of e-commerce in Southeast Asia started during the dot.com era in the 90’s just like in many parts of the world. The dot.com era refers to the period where companies started using doing for most of their businesses on the internet, usually through a website that uses the popular domain “.com”. During the dot com era southeastern Asia mainly purchased items from American and European companies that would be delivered in their countries. During this era companies with electronic commerce had shown great prospect with their fast growth and promising profits. Companies’ stock prices skyrocketed and Asia was pretty happy because the rise had resulted to a bubbling economy through electronic commerce.
Asia then began to attract nearly half of the total capital inflow from developing countries appealing them with high interest rates. Countries like Malaysia, Singapore, Thailand and Indonesia experienced an increase in their GDP rates. Around the year 2000, the e-commerce market was mainly involved in a business to business (B2B) transaction due to customers mistrust after going through the 1997’s financial crises and the bubble burst in southeast Asia – bubble burst is often identified only in retrospect once a sudden drop in price has occurred – The burst is usually profitable for buyers and not sellers. In the 90’s a lot came up as hindrances to the upspring of electronic commerce
– In those days, aside mistrust e-companies had other issues of which Southeast Asian countries were also affected. As a result of its structural shortcomings, a much more diverse range of payment solutions have become common in the region. The average internet penetration around southeastern Asia with the exception of Singapore was 38% while leading countries have an internet penetration of 70-80%, this made cash on delivery offered by 80% of the players in both Vietnam and Philippines, though bank transfer is another very popular payment method across the SEA. With each of the countries having 94%, 86% and 79% of merchants in Indonesia, Vietnam and Thailand respectively offering it.
– In addition to a lack of uniformity in payment methods, there is also significant market fragmentation the Southeast Asian consumers have so many platforms to choose for their daily need.
– Culture also was an inhibiting factor –the influence of Traditions in the Asian region overtime had made people have low trust in bank system and electronic payment, for example; credit card owners and other means used in payment other than in cash is small – government in those times pushed for a cashless policy in their society by trying to implement laws to suit online transactions.
– Fraud and high level of corruption was another setback to the growth of electronic commerce in the region.
The prospects and thrive; the battle for supremacy
The gold rush in the online ecommerce of the as left traditional offline retailers in the Asia region like Thailand and Indonesia scramble for an online business move.
Over the years until this day the massive growth in e-commerce around southeastern Asian has attracted big name investors into the region. In 2016 the release of the Google Temasek SEA Economy spotlight highlighted Southeast Asia as the world’s fastest growing internet region. With an existing internet user of 260M which was projected to grow to 480m users by 2020. In the research they predicted that southeast Asia’s internet economy will grow to 200B by 2025 and that $40 – 50bn in investment will be required over a decade to achieve that goal, fast tracking to 2017 they observed that the southeast Asia’s internet user base continues to grow rapidly. there will be 330m monthly active internet users by end of 2017 adding over 70m new users since 2015 13% CAGR. They estimate that Southeast Asia’s internet economy will reach $50b in 2017, meaning it will Grow at a rate of 27% CAGR outpacing their 20% 10year CAGR projection.
Asia as a continent had an increase in of around 4.5 billion in the GMV ( gross merchandise value ) of first hand goods and has had a 41% compound annual growth rate ( CAGR ) in the past couple of years- 2015 to 2017- as given by Google –Temasek’s economy southeastern spotlight 2017 report. The Temasek report went further to predict that CAGR will rise from $5.5bn of 2015 to $88bn by 2026. 2017 witnessed events which proved high results are expected from the e-market in southeastern Asia. The explosive growth in E commerce as lured china’s two e-commerce giants Alibaba and sd.com to the southeast online market. Amazon much awaited recent entrance into the E-market of a southeastern nation ( Singapore to be specific) to fast track its online market expansion in southeast Asia also proved there was an attractive raw material in the cyber space of the region.
The record breaking 1billion dollar sales of shares of Lazadas to Alibaba with alibaba also putting its grip on Tokopedia; arguably a future competitor in Indonesia. The resilience of another China based heavy weight company; Tencent. Tencent has also kicked start investments in companies like SEA (previously Garena) predominantly a gaming powerhouse that runs Shopee, Go-jek, Traveloka, Tiki.nn and Pomelo. The US based KKR in a bid not to be left out of this massive growth phase through emerald media put US$65million into e-commerce arms dealer Acommerce. This trends of acquiring more shares and grabbing more local companies across the Asian borders by these online giants is expected in coming years as all stated above points to the fact that the riches in online space of these Asian nations is worth risking for.
Currently, predictions have given that the home based Asian companies will have to pick sides with either of or stand their ground against the foreign forces from both the western and eastern part of the world. Predictions went further to specify that foreign based companies like Alibaba, Amazon and Tencent is likely to have a bloodbath battle for the monopoly of the regions electronic commerce or share the Asian online customers, some term this head to head of the western state and eastern state as the clash of the online titans. It is hope that this clash will result to a much needed gold-shed To Help in the growth of the developing region
Joe Tsai, Alibaba vice chairman, in speaking with Retail News was quoted as saying “is there a land grab right now for these kind of assets? I think in the land grab they [Tencent] are following us. They are seeing that we have positioned ourselves very well, and they are sort of playing a catch up game. So what we want to do is to work with local entrepreneurs. ”
Experienced, grown and growing
Marc woo, Google head of ecommerce , travel and financial services was quoted to have said “Asia pacific (APAC) accounted for 40% of global ecommerce sales in the 1st quarter in 2017, but vast majority of those sales went to larger or more mature markets in the region, particularly china, but also japan, Australia, South Korea, and India. That leaves Southeast Asia as the next frontier for ecommerce in the region. “
A steady increase in the advantages of electronic commerce in the region resulted to a 50% growth last year and now totals 200 million individuals across southeastern Asian’s top six economies. The southeastern Asian nation Singapore takes a top spot in Asia with an average of 14.04 sessions per person per year visiting amazon.com. It is rumored and expected that by the end of the year the ecommerce companies should erect physical stores in their resident southeastern nations. This will make a great boost in the economy of this regions. This huge development in ecommerce have led southeast Asian governments to launch a bid to introduce taxes on ecommerce sales as they look to claim their dollar-and-cents take from one of their most promising engine towards economic and financial buoyancy.
This though might increase the cost price of goods and services offered by the online companies but cannot override nor underestimate its advantage as compared to import and shipping processes. Taxing online sales will align practice with those of world leading countries. It puts online retailers on a leveled playing ground with brick-and-mortar counterpart. This growing market has also initiated an online network process between the Chinese and the Asian region as Alibaba is working to set up a digital free-trade zone in Malaysia and has signed a memorandum of understanding with the government of the Asian country and the authorities of china to simplify cross-border trade between the two regions.
If this deal falls through under the current government of china a long term mutual profit making relationship is expected to last for a very long time between the Asian nations and the Chinese government giving that the china parliament are rumored to have kick started plans in keeping their president more longer in office than usual. The critical factors responsible or observed to needed for the spontaneous growth of ecommerce in the southeastern region of the continent are
- A growing middle class – knowing that the middle class contains the highest number of mobile phone users and also the highest number of common goods purchasing.
- Rapidly expanding internet access are positive indicators for fast paced e commerce growth in coming years. Internet access needs to be at its best for the effective running of electric commerce in a state
The middle class population of the Asian region is expected to reach a 400million in 2020 from its 190 million of 2012, according to Nielsen project.
Internet access in the region as not only being expanding at a high pace but has also improved strongly over the years like stated in the research of Google Temasek SEA economy spotlight report stated above.
The electric commerce has also shown to be of disadvantage though not significant as compared to the many fruit yielded by the online market.
- The desire for local business owners and the nation’s mobile phone user population to switch online results to more cases of fraud because this system isn’t used to them.
- Competition between locals and foreigners which should encourage an healthy business environment is not observed as the big guns will slowly silently phase out the local brands
- The preference of foreign products to locally made products by locals isn’t favorable for the country’s economy.
- Owing to the creation of a good relationship with certain world leading countries, good tides with others could be altered.
- If not properly monitored, foreign companies might have a full grip of the southeastern nation economy.
One major benefit that has been observed to have taken the front line in the advantage of electronic commerce in the southeastern Asian region is the quest for each nation to outperform each other. Especially between Thailand, Vietnam and Indonesia, this healthy beef has led to varying developments in these nations as none wants to be left behind in the development and modernization of their country. These alongside the introduction of big time investors, the rise in economy growth, job creation in nations, strengthening diplomatic tides and many other advantages.
Stakeholders and experts have advised to government of these Asian nations to support the region to grow by fixing reasonable tax levies in other not to discourage foreign and local investors, encourage a competitive market, improve online network and provide adequate education to ease communication with foreign partners. With the huge wealth emanating from the electric commerce sector, if properly managed these nations can get a massive boost in their nations wealth and reputation. The potentials possessed to build a nations revenue by employing electric commerce cannot and should not be undermined.