China e-commerce market to hit $1.1T by 2020, India $75B

Total online retail revenue for China, Japan, South Korea, India, and Australia will hit US$1.4 trillion in 2020, and is already larger than the combined online retail markets of US and Western Europe.
Written by Eileen Yu, Senior Contributing Editor

China's e-commerce market will climb to US$1.1 trillion in 2020, predominantly pushing the total online retail revenues for five key Asian markets to US$1.4 trillion.

Overall e-commerce revenue for China, Japan, South Korea, India, and Australia will almost double from US$733 billion last year to US$1.4 trillion in 2020. As it is, these five Asian online economies already outpace the combined online retail markets in the US, and all of Western Europe, according to Forrester, with China and India the two largest and fastest-growing markets worldwide.

Having surpassed the US market in 2015, China remains the world's largest e-commerce market, despite seeing its economic growth dip below 7 percent for the first time since 2009.

"While the days of staggering year over year e-commerce growth in China are gone, current growth rates are solid and more consistent with other mature markets in the region, like Japan and South Korea," wrote Lily Varon, lead author of the Forrester report and analyst for e-business and channel strategy. She said China would continue to lead the region's market, growing to be nine times larger than Japan's US$122 billion market in 2020 and 17 times larger than South Korea's US$65 billion.

India would see its online sales expand five-fold, fuelled by the growing number of online buyers and per capita online spend. However, Varon noted, the country's underdeveloped logistics, "challenging" last-mile connectivity, as well as largely cash-based culture would pose significant challenges to online retailers in India.

The five markets had all of the characteristics of a mature e-commerce market, including high internet and broadband penetration, a large percentage of online shoppers, and high per-capita online spending. Each, however, had unique characteristics that e-commerce operators in the respective market would need to know and consider when crafting their offerings.

One defining trend across the region, for instance, was the dominance of web-only retailers such as Rakuten and Amazon in Japan, Taobao, Tmall, and Jingdon in China, and Flipkart and Snapdeal in India. "Consumers have flocked to online pure-plays rather than their traditional retail counterparts," Varon wrote. "In very few markets in the region do traditional retailers hold any dominant position, or even come close to competing with the web-only giants."

With the significance of web-only players, the Forrester analyst noted that omnichannel functionality had not been as robust as markets such as the US or UK. This, though, was starting to shift as more traditional retailers move towards e-commerce. Suning in China, for example, considered omnichannel its top business priority, while Australian retailers were forced to catch up with omnichannel offerings such as click-and-collect from global players including TopShop and Zara, which had brought their omnichannel services to the local market.

Mobile also would continue to play a key role in the region's e-commerce landscape, though, mobile usage varied widely among the markets. South Korea, for instance, had among the world's highest mobile penetration rates, while India's smartphone adoption remained low.

Currently, mobile accounted for a small percentage of overall online retail revenue, but this was changing rapidly, according to Forrester. Mobile devices contributed 38 percent of Taobao and Tmall's gross merchandise volume last year, compared to just 7 percent in 2013. In Japan, Rakuten's mobile-driven sales were 44 percent of total sales in 2014, while mobile accounted for the majority of online sales for India's Snapdeal and Flipkart.

Mobile commerce represented nearly 50 percent of online retail sales in India, compared with 48 percent in China and 34 percent in the US. Forrester said mobile sales in India were expected to surpass PC-based sales this year, reaching US$51 billion by 2020.

"Brands must tailor their approaches to each market, understanding that marketplaces play different roles in each country, and that mobile adoption rates and usage vary greatly across the region," Varon penned. "Although most brands today have wisely moved well beyond the one-region/one-strategy approach, many still tend to use a similar approach to markets in Asia-Pacific."

"Given Tmall's dominance in China, for example, many brands will look for other marketplaces in the region as points of entry. Knowing that mobile is a huge force in India and a rapidly growing one in other markets, they will move up mobile initiatives in their launch strategies. At a high level, these approaches are not misguided-problems only arise when assumptions about one market are blindly applied to others."

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