Asia is on the verge of an internet retail revolution, predicted Scott Desmarais, head of The Boston Consulting Group's (BCG) e-commerce practice area in Southeast Asia.
Speaking at a "e-Business: Hype Vs Opportunity" seminar by conferences.org, he said that e-commerce is "growing at an incredible rate", and cautioned that "Asia's wealthiest will log on, as they will take their relationships to online vendors."
Based on preliminary findings in the BCG's NetBizAsia study which is due to be completed early next year, the study found the presence of 1400 online retail sites in the region, with a significant number of large, functioning sites from Korea.
Based on a per capita basis, the leading online retail regions are Singapore, Hong Kong, Australia/New Zealand and Korea, said Desmarais. It was also found that pureplay sites, or sites that sell only on the internet, have a slight edge in numbers over multi-channel sites, or companies that have both online sales and brick and mortar operations. In Asia, pureplays make up 54 per cent of sites, while multi-channels constitute 47 per cent, said Desmarais.
"The bottom line is that multi-channel 'click and brick' companies will have the majority of online sales, as they have tremendous brand names, and the Internet is about brands," said Desmarais.
An added factor is that "first mover advantages are huge," he said. With the top 10 Asian internet sites controlling 48 per cent of the online revenue, and the top 50 sites having 71 per cent of the total online revenues.
The findings also show that the top categories of goods sold over the internet in Asia are computer hardware/software, cards/gifts/flowers, books, financial services and travel. It differs from the US where travel and collectibles are significant products, but appear to be slow to catch on in Asia.
However, Desmarais cautioned, obstacles to online retail remain. A key obstacle is the infrastructure issue, where telephone line penetration and PC penetration is low for countries such as China, India, Indonesia, Thailand, and the Philippines.
There is also the issue of payment and delivery, as much of Asia is not oriented towards using a credit card to settle transactions. In addition, worries about security and privacy when using credit cards and providing personal information online is an ongoing issue. Finally, international and regional delivery costs are high, which can prove prohibitive to Asian consumers.
However, Desmarais suggested that creative means can be utilized to circumvent these e-commerce obstacles. He cited the example of Japan where 7-Eleven stores are e-commerce hubs, where PCs are installed for surfing, with payment made at the cashier, and trucks delivering the merchandise every two weeks.
His parting words of advice were, "the biggest advantage is to be local in your country, you can develop deeper relationships here than Amazon.com."