Asia's e-commerce sites can outsell Amazon

Asia's e-commerce sites can outsell Amazon

Summary: More specifically, China, which can leverage its manufacturing hub and market size. However, e-commerce sites in the region should first resolve key challenges with user interface, service support, and logistics.

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TOPICS: E-Commerce, Asean, China
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Tis the season for many a festive shopping spree, and it's beginning to look like much of the spending will be heading online. 

According to Goldman Sachs, global e-commerce sales will climb 19.4 percent to hit US$963 billion this year, with Asia accounting for the bulk of it at US$323.1 billion, followed by Europe at US$283 billion, and the U.S. at US$235.1 billion. Among these three main regions, Asia will see the strongest growth of 27.5 percent, with Europe at 13.2 percent, and the U.S. at 12.4 percent.  

In fact, 2013 will mark the year China's e-commerce revenues are expected to surpass that of the U.S. to become the world's largest online shopping haven, predicted consulting firm Bain & Co. in a report in August.

The Chinese market last year chalked up US$212.4 billion in e-commerce revenue, not far behind the U.S. market's US$228.7 billion. The Asian economic powerhouse clocked a compound average growth rate of a whopping 71 percent between 2009 and 2012, while the U.S. grew at a lower 13 percent. Should its growth momentum continue, China would reign as the world's top e-commerce market by end-2013, hitting 3.3 trillion yuan (US$539 billion) in sales by 2015.  

China's two largest e-commerce platforms, Taobao Marketplace and Tmall, handled transactions worth 1 trillion yuan (US$153 billion) last year. During last month's "Cyber Monday" shopping festival held on November 11, the two sites--both of which are owned by Alibaba Group--raked in 30 billion yuan (US$4.9 billion) in just under 22 hours, where sales hit 1 billion yuan in six minutes, compared to 37 minutes last year. 

The numbers are staggering, and if the growth sustains, Tmall is expected to overtake Amazon by 2015 to become the world's largest Internet retailer, according to predictions from Euromonitor.

Alibaba's net profit for the quarter ended June was US$669 million and at margins of 48.4 percent, much higher than Amazon's 0.51 percent and eBay's 18.1 percent. In the previous quarter, the Chinese company more than doubled its fourth-quarter net profit to US$642.2 million, growing 80 percent in revenue totaling US$1.84 billion and a 35 percent profit margin. In comparison, Amazon booked first-quarter earnings of US$130 million on revenue at $13.18 billion over the same period.

The figures clearly indicate the potential for Asia, or more specifically China, to outsell Amazon and claim the throne as the world's largest online retailer. China's position as a global manufacturing hub and its market size alone will help pave the way. 

e-commerce

There are challenges, however, that need to be addressed. Site user-interface, for instance, needs some serious tweaking. One consensus among my friends is that it's not easy to navigate Chinese e-commerce websites, especially in comparison to Amazon's much more user-friendly interface. It's difficult to filter product searches, placing orders require tedious steps, and after-sales support isn't always consistent.

More importantly, most of the websites do not offer any other language support beyond Chinese. Even Taobao.com's Southeast Asian website, launched in September, does not provide English language support beyond its homepage--sub-sections, product pages, and item descriptions are all displayed in Chinese. 

For now, at least, the major Chinese e-commerce websites seem focused exclusively on their local markets and have yet to put in place a global growth strategy. And who can blame them, considering the size of the China market, but it is a great pity when their proximity to the manufacturing hubs of most global brands can prove a significant advantage.

Amazon currently only ships certain items to certain countries, offering free shipping to an even more limited list of countries and only for a minimum spend in one purchase order.

This offers an opportune gap websites from this region can jump in and fill, catering to an ever-growing online population in this part of the globe. And this region, today, is clearly still under-served by Amazon, which main focus is the U.S market.

If Chinese e-commerce players are unwilling to step in, perhaps due to their lack of language skills, then the likes of India's Flipkart.com can step up.

Asian e-commerce websites that are keen to serve a more global audience also may have concerns about high costs related with logistics and delivery channels. One possibility here is to consider linking up with local convenience store and large department store. These retail chains would typically already carry global brands in their outlets and can fulfill orders made online. E-commerce customers can then choose to pick up their goods at these retail outlets, or the e-commerce websites can ink a partnership in which the local retail stores would take care of the delivery. 

This hybrid e-commerce cum in-store model is already running locally in countries like India and China, so there's little reason why it can't be extended to include regional partners. 

If China is indeed keen to spur cross-border e-commerce trade, it'll be interesting to see how its e-commerce websites will evolve to answer the call. 

ZDNet's Monday Morning Opener is our opening salvo for the week in tech. As a global site, this editorial publishes on Monday at 8am AEST in Sydney, Australia, which is 6pm Eastern Time on Sunday in the US. It is written by a member of ZDNet's global editorial board, which is comprised of our lead editors across Asia, Australia, Europe, and the United States.

Topics: E-Commerce, Asean, China

About

Eileen Yu began covering the IT industry when Asynchronous Transfer Mode was still hip and e-commerce was the new buzzword. Currently a freelance blogger and content specialist based in Singapore, she has over 16 years of industry experience with various publications including ZDNet, IDG, and Singapore Press Holdings.

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  • i totally don't agree with it. such as taobao, jd.com , the search and filt

    One consensus among my friends is that it's not easy to navigate Chinese e-commerce websites, especially in comparison to Amazon's much more user-friendly interface. It's difficult to filter product searches, placing orders require tedious steps, and after-sales support isn't always consistent.

    --- i totally don't agree with it. such as taobao, jd.com , the search and filter is better than amazon. try Chinese versionof taobao. pls.
    dvd8g@...