Voice of the Industry

Ecommerce in Asia – lessons learnt during the pandemic

Tuesday 19 January 2021 08:57 CET | Editor: Stefana Ivan | Voice of the industry

Joshua Chong, Kapronasia: 'One of the charms of ecommerce is the inclusion of social and entertainment components on the platform, otherwise known as shoppertainment. During the outbreak, ecommerce players have taken full advantage of this'

The impact of COVID-19 on ecommerce in Asia

When Brunei, a tiny sultanate in Southeast Asia, opened a national store on Chinese ecommerce giant JD.com, the first product offered to Chinese consumers was the blue shrimp. The national store – the Brunei National Pavilion – now includes a wide variety of Bruneian-made food products and fresh produce. Since the start of 2020, ecommerce in Asia has been growing at an unprecedented rate, and along with it the range of products available online has ballooned. At the nexus of this shift is the COVID-19 pandemic that has altered consumers’ behaviours and accelerated digitization in the region. 

The latest forecasts from Forrester show that online retail sales in 11 Asia-Pacific countries (Australia, China, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Thailand, and Vietnam) are expected to receive a boost due to COVID-19 and reach USD 2.5 trillion in 2024, with a CAGR of 11.3%. A key factor contributing to this growth is the surge in the amount of groceries bought on the internet. The ‘online groceries’ category has been relatively underpenetrated due to logistics issues. But a report from Bain & Company and Facebook found that the sector grew almost three times during the period of the outbreak in Southeast Asia, while one in three surveyed users said they planned to continue purchasing groceries online in the future. 

A recent report from the iPrice Group and App Annie sheds light on changes in ecommerce usage and spending patterns in the second quarter of 2020.

In Southeast Asia, the total number of sessions on shopping applications grew by 39% from Quarter 1 2020 to reach 65.1 billion. The average basket size also increased by 23% year-over-year, reaching USD 28.50 per order. While most signs seem to point to a boom in ecommerce, non-essential categories such as fashion and beauty took a hit. Of note, the well-known Indonesia-based fashion ecommerce startup Sorable was forced to shutter its operations after demand dropped precipitously and pandemic restrictions hindered its ability to restock new goods.

In any case, the data clearly indicates a change in online shopping preferences, with more demand for essentials such as groceries and health supplements. Furthermore, analysts say the market share gained by online channels will be ‘sticky’ as the extended length of the pandemic makes it more likely that these shopping habits will become ingrained. It is no surprise then that ecommerce companies are racing to adapt. 

How are ecommerce companies responding? 

The more obvious tactics ecommerce platforms employ are sales strategies designed to increase purchase amounts and basket sizes. These include flash sales and shopping festivals such as the ‘Double Five’ in China, named after its launch date of 5 May. Coupons and discounts are also handed out more frequently to increase customer retention and encourage repeat purchases.

However, ecommerce companies are also including new features such as instant delivery with the goal of improving the consumer’s experience in the midst of the COVID-19 movement restrictions. For instance, Indonesian ecommerce unicorn Bukalapak has partnered with Grab and Gojek to tap into their delivery services. We can expect that logistics will continue to be a hot topic, closely related to ecommerce, and we will (very likely) see more innovation in this area. Ninja Van, a tech-enabled express delivery startup in Southeast Asia, has implemented live tracking of parcels for improved visibility and a live chat feature that enables recipients to better communicate with shippers. 

Additionally, Shopify has partnered with the Australian logistics technology startup Shippit to launch a cash-on-delivery service for buyers in Asia. Given that most consumers in the region largely deal in cash, cash-on-delivery services present a golden opportunity for online retailers to reach a previously inaccessible section of the market. At present, cash-on-delivery is still an under-utilised feature and will likely see more widespread usage in the near future. 

One of the charms of ecommerce is the inclusion of social and entertainment components on the platform, otherwise known as ‘shoppertainment’. During the outbreak, ecommerce players have taken full advantage of this to further drive user engagement and sales. Shopee Feed, a social feature on the Shopee app, enabled users to watch live-streams of K-pop concerts and exclusive interviews with popular K-pop stars during an event held over a week in June 2020. Similarly, Lazada has held live-streams of music concerts since 2019, and more recently it hosted a virtual charity concert to help in the fight against COVID-19.

While many of the dominant ecommerce players in the region have their focus on highly populated capital cities, competition is increasing from smaller upstarts that are looking to capture the largely untapped smaller cities. In the case of the Vietnamese ecommerce startup Sendo, this means looking beyond Hanoi and Ho Chi Minh City to target the tier 2 cities which are home to 70 million Vietnamese – or about 72% of the country’s population. Moreover, Sendo features more localised content, and thus it has the edge in attracting onto its platform local businesses that were previously not online. 

As ecommerce surges ahead in Asia, having a government-initiated national store on an ecommerce platform, as Brunei did, could become the norm. Following in the footsteps of its neighbour, Indonesia recently launched a national store on the Chinese ecommerce platform Pinduoduo and sold 100,000 items within two days of its launch. The store stocks products from many different Indonesian SMEs, giving them an online presence and a channel into the Chinese market. Indeed, it seems that the ecommerce boom in the wake of COVID-19 has brought greater recognition to the immense scale and opportunity of selling cross-border in APAC, a happy byproduct of the pandemic.

This editorial was first published in our Cross-Border Payments and Ecommerce Report 2020–2021, which assesses the change of pace that occurred in 2020 and provides a comprehensive overview of the major trends driving growth in this space, being the ultimate source of information for players interested in selling across borders. 

About Joshua Chong

Joshua is an analyst at Kapronasia and has experience across banking, payments, and capital markets. Before Kapronasia, Joshua was with Morgan Stanley Equity Research in London and held strategy and business development roles with UK-based fintechs in the payments and asset management industries. Joshua graduated from the London Business School with a Master of Science in Financial Analysis and holds a BBA degree from BI Norwegian Business School. 

About Kapronasia

Kapronasia is a leading independent research and consulting company focused on the Asian financial services industry. We help financial institutions, technology vendors, consultancies, and private equity companies understand the impact of business, technology, and regulatory issues in banking, payments, insurance, and capital markets.

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Keywords: Joshua Chong, Kapronasia, ecommerce, shoppertainment, COVID-19, SMEs, Asia, online shopping, cash-on-delivery
Categories: Payments & Commerce
Countries: Asia
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