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eCommerce segment too big to be ignored in Asia

Jan. 16, 2008

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Two years ago, B2C (Business-to-Consumer) eCommerce sales for the five major markets in the Asia-Pacific region totaled a little over $59 billion, and Japan actually accounted for the largest share of that total. However, this situation is in a constant state of flux and is expected to change soon.

Overall, eCommerce sales in Asia will grow at about a 23.4 percent annual rate, reaching over $168 billion in less than three years from now, according to eMarketer. Jeffrey Grau, eMarketer Senior Analyst said that "on average, Japan was by far the largest market in the region, with about a 62 percent share of online sales in 2006."

Grau added "however, in three years from now, Japan and South Korea will potentially lose market share to two online markets: China and India. Both China and India are growing rapidly, but they are far from reaching their vast potential."

On any given day, the top reason that Internet users in China do not buy online is uncertainty about the security of the online shopping process, this according to a China Internet Network Information survey.

Smaller developing countries in the region, such as Thailand, the Philippines and Malaysia, are also on track to become viable B2C and e-commerce economies.

Grau said "for Western e-commerce firms with global aspirations, the challenge is to decide what to do in this region and how to do it. These markets are usually very different, so prospective entrants must seek local solutions."

"A number of problems must be solved to ensure sustainable long-term growth. Such problems include immature online payment systems, poor delivery networks and distrust between buyers and sellers, to name just a few," added Grau.

In addition, in developing countries, the online shopping process is often at odds with traditional business practices. B2C transactions in China and India are conducted on a cash-basis, requiring eCommerce companies to provide alternative-payment methods, such as cash on delivery and wire transfers.

"Nevertheless, and no matter what the obstacles really are, the markets in Asia are simply too big to be ignored," says Grau.

He added "overall, most countries in the region, particularly China and India, lack a nationwide credit card system or an efficient delivery network. These are essential infrastructures that have greatly facilitated e-commerce and B2B sales growth in more advanced countries."

However, before jumping in, companies should be warned that it will take a lot longer for e-commerce to advance from its formative stage in India and China and other developing countries in the region than it did in advanced industrialized countries like the U.S., Japan and most of Western Europe.

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Source: eMarketer

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