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Developing eCommerce Market Entry Strategies in Asia PacificAdvisory Report 2015

Developing eCommerce Market Entry Strategies in Asia Pacific, Advisory Report 2015

FOREWORD

1 SNAPSHOT OF ECOMMERCE IN ASIA PACIFIC

2 KEY CHARACTERISTICS OF THE ASIA PACIFIC ECOMMERCE LANDSCAPE 2.1 Growing Internet Penetration Across All Markets 2.2 Growing Consumer Spending 2.3 Social Media a Driver for eCommerce 2.4 Mobile is Massive 2.5 Changing Trends in eCommerce Payment Solutions 2.6 Marketplaces Play a Dominant Role 2.7 Cross-Border Trade in the Region

3 HOW TO TAKE YOUR ECOMMERCE BUSINESS INTO ASIA PACIFIC 3.1 Planning and Strategizing Your Market Entry 3.2 Market Entry Strategies for eCommerce in Asia Pacific

4 ECOMMERCE BEST PRACTICES

5 CHOOSING AN ECOMMERCE SOLUTION AND PARTNER 5.1 Building Your eCommerce Digital Backbone 5.2 Leveraging Regional Expertise and a Strong End-to-End Partner

CONCLUSION

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CONTENT

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This report is a result of the collaborative strengths of two eCommerce leaders in Asia Pacific: Demandware, the category defining leader of enterprise cloud commerce solutions, empowers the world’s leading retailers to continuously innovate in our complex, consumer-driven world; and SingPost eCommerce, Asia Pacific’s leading full service eCommerce enabler, providing full service eCommerce solutions for global brands. The purpose of this report is to provide key insights and present the latest research findings on eCommerce in APAC, highlighting the region’s potential as well as the unique challenges present in its individual countries.

The region is expected to grow by 20% annually until 2018, surpassing North America in terms of online B2C sales1. Similarly, South East Asia reflects an upward trend; by 2020, the Association of South East Asian Nations (ASEAN) region is projected to be the world’s ninth largest economy and Asia’s fourth largest, translating to almost USD $1.9 trillion2. Faced with slower growth rates in their home markets, international brands and retailers have started to look towards APAC’s fast growing markets.

However, while the region is ripe with opportunity, entering and succeeding in the market requires brands and retailers to work with strategic partners that have extensive expertise and reach across the region, along with a deep understanding of local consumers as well as insights into the varying legal regulations within each market.

1 http://ystats.com/uploads/report_abstracts/1097.pdf, 2 State of eCommerce in South-East Asia, Econsultancy, 2014

FOREWORD

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1. SNAPSHOT OF ECOMMERCE IN ASIA PACIFIC Asia Pacific is expected to become the leading region for eCommerce sales globally in 2015, representing 33.4% of the total retail sales, compared with 31.7% in North America and 24.6% in Western Europe.

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Source: eMarketer, 2014

Source: We Are Social, 2015

Countries such as China, Japan, Australia, Singapore and South Korea have all been showing strong online retail potential. In terms of online market size, technology adoption and consumer behavior, infrastruc-ture and growth potential, they all rank within the top 15 countries globally4.

B2C eCommerce Sales Share Worldwide, 2013 to 2018 (percentage of total)3

COUNTRY

NORTH AMERICA

ASIA PACIFIC

WESTERN EUROPE

LATIN AMERICA

CENTRAL & EASTERN EUROPE

MIDDLE EAST & AFRICA

2013

34.9%

28.3%

26.4%

4.2%

4.1%

2.2%

2014

32.9%

31.2%

25.4%

4.3%

4.0%

2.3%

2015 (P)

31.7%

33.4%

24.6%

4.2%

3.8%

2.3%

2016 (P)

31.1%

35.1%

23.9%

4.1%

3.5%

2.4%

2017 (P)

30.7%

36.4%

23.3%

3.9%

3.3%

2.4%

2018 (P)

30.6%

37.4%

22.7%

3.7%

3.2%

2.5%

The Growth of eCommerce in Asia Pacific

JAN 2015 A Snapshot of Asia Pacific’s Key Digital Statistical Indicators

The growing spending power of the middle class is a key driver for the recent explosion in eCommerce5, with middle class consumers in Asia Pacific projected to account for more than 50% of the global middle class by 20206. Other key drivers for eCommerce growth in APAC include the rapidly expanding online and mobile user bases in emerging markets, increase in sales through mobile commerce, advancements in payment and shipping options and the push into new international markets by major brands7. SingPost eCommerce serves over 1000 brands across Asia and for most of these brands, growth rates reached 200% in 2014. This strong growth is expected to continue in 2015.

3 http://www.emarketer.com/Article/Worldwide-eCommerce-Sales-Increase-Nearly-20-2014/1011039, 4 A.T. Kearney’s 2013 Global Retail E-Commerce Index., 5 http://www.asiabriefing.com/news/2014/06/e-commerce-trends-developments-asia-pacific/, 6 http://www.oecd.org/dev/44457738.pdf,7 http://www.emarketer.com/Article/Global-B2C-eCommerce-Sales-Hit-15-Trillion-This-Year-Driven-by-Growth-Emerging-Markets/1010575

TOTALPOPULATION

URBANISATION45%

4,021MILLION

ACTIVEINTERNET USERS

PENETRATION35%

1,407MILLION

ACTIVE SOCIALMEDIA ACCOUNTS

PENETRATION26%

1,065MILLION

MOBILECONNECTIONS

POPULATION93%

3,722MILLION

ACTIVE MOBILESOCIAL ACCOUNTS

PENETRATION22%

879MILLION

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eCommerce Market Size of Countries in APAC

Individual markets across APAC, however, vary widely in terms of culture, regulations, infrastructural development, mobile usage, social penetration, payment systems and logistics networks. For instance, while Australia is one of the most sophisticated APAC markets when it comes to its payments infrastructure8, in India, Indonesia, Vietnam and Thailand, more than 60% of all transactions are still cash-based9. Differences such as these greatly impact where and how eCommerce adoption develops across the region.

JapanChina

AustraliaRetail eCommerce sales in Australia will rise 14.4% in 2015, to pass USD $10 billion by end of the year10.

Online shopping has expanded at a CAGR of 70% over the past five years, rising from roughly USD $21 billion in 2008, to nearly USD $300 billion in 201311.

The eCommerce market was valued at USD $38 billion in 2010 and is predicted to hit USD $49 billion in 201515.

Retail eCommerce sales are expected to reach USD $36.76 billion in 2015, up 11% from USD $33.11 billion in 2014, accounting for 9.8% of total retail sales20.

IndonesiaAnnual online sales was forecasted to grow from USD $1 billion to USD $3 billion in 2014. It is expected to reach USD $10 billion by the end of 201514.

The online shopping market was projected to reach USD $2.7 billion in 2014 and grow significantly to USD $3.45 billion by 201519.

South Korea

Singapore

PhilippinesIndiaHome to 243 million Internet users, India’s eCommerce industry is growing at 38% annually. Analysts expect market size to touch USD $100 billion in the next five years13.

At USD $1.15 billion in 201317, the eCommerce industry is projected to increase at a CAGR of 101.4% during 2013 to 2018. The B2C eCommerce market is projected to grow at 107.4% during the same time period18.

A report from the Vietnam eCommerce and Information Technology Agency (VECITA) revealed that Vietnam’s eCommerce sales hit USD $700 million. USD $354 million of that amount registered officially on VECITA at the end of 201222.

Vietnam

MalaysiaOnline retail sales in 2013 were worth USD $250 million and is expected to double over the next five years16.

The eCommerce market is estimated at USD $1 billion and is expected to reach USD $6 billion between 2020 and 202521.

ThailandHong KongThe internet is expected to contribute about HK$146 billion to Hong Kong’s economy, which Boston Consulting Group (BCG), estimated to be about 7% of GDP by 201512.

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These countries present viable business opportunities but are clearly part of a highly fragmented region. For instance, while China has high growth potential but less favorable online consumer behavior and lower technology adoption rates (low internet penetration rates) relative to other countries, at least 40% of consumers who do go online make online purchases despite constraints in the local financial or logistical infrastructure23. Establishing a strong local online presence in these markets requires a focus on brand development that is consistent with global standards and delivery capabilities that beat the competition. In more developed markets like Japan, South Korea and Singapore where high technology adoption rates, advanced infrastructures and a track record of innovative shopping online prevail, brands must invest in interface technologies and back-end capabilities to differentiate their offerings24.

8 http://www.businesstravelnews.com/Expense-Management/Asia/Pacific-s-Business-And-Regulatory-Kaleidoscope-Complicates-Payment,-Expense/?a=trans, 9 http://www.speCommerce.com/asia-pacific-serving-consumers-without-credit-cards/, 10 http://www.emarketer.com/Article/Australian-Retail-eCommerce-Sales-Top-10-Billion-2015/1011823, 11 http://www.atkearney.no/web/digital-business-forum-executive-roundtable-2013/ideas-and-insights/detail/-/asset_publisher/VMEx2L1PhjPS/content/chinas-e-commerce-market-in-2014-the-logistics-challenges/10192?_101_INSTANCE_VMEx2L1PhjPS_redirect=%2Fweb%2Fdigital-business-forum-executive-roundtable-2013%2Fideas-and-insights, 12 http://hong-kong-economy-research.hktdc.com/business-news/article/Hong-Kong-Industry-Profiles/Internet-Industry-in-Hong-Kong/hkip/en/1/1X000000/1X0060U6.htm, 13 http://articles.economictimes.indiatimes.com/2014-11-02/news/55682482_1_mobile-apps-myntra-flipkart, 14 http://www.aseanbriefing.com/news/2014/06/11/e-commerce-markets-across-asean.html, 15 http://www.statista.com/statistics/274493/worldwide-largest-e-commerce-markets-forecast/, 16 State of eCommerce in South-East Asia, Econsultancy, 2014 17 http://www.slideshare.net/ronhose/philippines-startup-report-2013-24672346, 18 http://www.news.kenresearch.com/post/101829123338/the-philippines-e-commerce-market-outlook-to-2018, 19 http://www.speCommerce.com.s3.amazonaws.com/dl/fs/141211_fs_singapore_factsheet.pdf, 20 http://www.emarketer.com/Article/South-Korea-Home-APACs-Third-Largest-Retail-eCommerce-Market/1011803, 21/22 State of eCommerce in South-East Asia, Econsultancy, 2014, 23/24 http://www.atkearney.com/documents/10192/3609951/Online+Retail+Is+Front+and+Center+in+the+Quest+for+Growth.pdf/f6693929-b2d6-459e-afaa-3a892adbf33e

SingPost eCommerce serves over 1,000 brands across Asia and for most of these brands, growth rates reached 200% in 2014. This strong growth is expected to continue in 2015.

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Compared to global markets in the West, countries in Asia Pacific vary widely on several levels. With such unique characteristics of each market, brands looking to enter the region need to carefully consider these individual markets’ requirements in order to develop the best market entry strategy.

2. KEY CHARACTERISTICS OF THEASIA PACIFIC ECOMMERCE LANDSCAPE

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The ASEAN region had 199 million internet users (32% penetration) in 2014. This figure is expected to rise to 294 million (48% penetration) within three years26.

2.1 Growing Internet Penetration Across All Markets

Source: Nielsen, eCommerce: Evolution or Revolution in the Fast-Moving Consumer Goods World?, 2014

MARKET

Australia

Hong Kong

Indonesia

Malaysia

Philippines

South Korea

Thailand

China

India

Japan

New Zealand

Singapore

Taiwan

Vietnam

89%

75%

22%

61%

32%

83%

30%

40%

11%

80%

88%

75%

75%

34%

INTERNET PENETRATION

Internet Penetration in Asia PacificAUG 2014

In more developed APAC countries like Singapore, internet penetration has been bolstered by high connectivity and ownership of multiple mobile handsets. In terms of smartphone ownership, countries with the highest penetration are Hong Kong and Singapore at 87%, followed by South Korea (80%), Malaysia (80%), Australia (75%) and China (71%)30. The number of consumers with multiple mobile handsets are also rising, particularly in Malaysia (47%) and Hong Kong (31%)31.

China has shown the most dramatic increase in internet penetration from only 2.1 million total internet users in 2000, to almost 600 million in 201327. This growth was spurred by strong PC sales, the rollout of broadband connection and growing 3G connections28. The abundance of affordable mobile devices and mobile subscriptions have also contributed to this upward trend29.


JAN 2015 Global Internet Penetration Figures

Canada

Argentina

France

Turkey

Nigeria

UK

Russia

South Korea

Malaysia

Hong Kong

China

Indonesia

USA

Brazil

Vietnam

UAE

Poland

Singapore

Mexico

Thailand

Germany

Saudi Arabia

Philippines

Australia

Italy

Spain

South Africa

India

Japan

Egypt

Global Average

93%

84%

60%

89%

75%

49%

44%

90%

79%

54%

87%

66%

47%

28%

92%

81%

58%

89%

67%

49%

44%

37%

89%

77%

53%

86%

60%

46%

38%

19%

42%

26 http://simontorring.com/wp-content/uploads/UBS-report-2014.pdf, 27 http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Newsletters/China-360/Documents/China-360-Issue15-201401-E-commerce-in-China.pdf, 28 http://simontorring.com/wp-content/uploads/UBS-report-2014.pdf, 29 http://etc-digital.org/digital-trends/mobile-devices/mobile-smartphones/, 30/31 http://www.nielsen.com/ph/en/insights/news/2014/asian-mobile-consumers.html

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Home to some of the most socially active countries in the online space such as Indonesia and South Korea, the region has a consumer base that is highly engaged across multiple international social media platforms such as Facebook and Twitter, but also localized social media networking sites like Kakao (Korea) and WeChat (China).

In terms of online engagement, Asians also surpass their Western counterparts. There is a large overlap of social networking and eCommerce, with social media integrated into the purchase path of consumers. For example, before making a purchase, Chinese consumers often first collect information and advice from their peers on social media. After the purchase, they continue to stay engaged in the online social space by posting ratings or reviews of their purchases. In China, 75% of internet users post at least one review or rating per month, whereas less than 20% of users who do so in North America and Europe33.

2.3 Social Media a Driver for eCommerce

JAN 2015 Social Media Regional Overview

690

103

199

41

190

206

79

197

197

17

157

3

45%

32%

47%

9%9%

37%

45%

58%

48%

45%

17%

4%

REGION

East Asia

Southeast Asia

West Europe

South Asia

Central America

Oceania

North America

South America

East Europe

Africa

Middle East

Central Asia

ACTIVE SOCIAL MEDIAACCOUNTS VS TOTAL POPULATION

ACTIVE SOCIAL MEDIAACCOUNTS, IN MILLIONS

SingPost eCommerce (2015) reported that the growth of eCommerce in APAC is driven by the rise of the middle class, particularly in China, India, Indonesia, Malaysia, Thailand and Vietnam. Asia will make up 64% of the global middle class, contributing to 40% of its consumption by 2030. Along with greater spend-ing power, APAC’s consumer base is also maturing in terms of technology adoption. They are increasingly tech savvy and open to adopting new technologies such as online payments. This increasing trust in on-line shopping technology has made a positive impact on eCommerce32.

2.2 Growing Consumer Spending


32 http://www.speCommerce.com/asia-pacific-serving-consumers-without-credit-cards/, 33 http://etc-digital.org/digital-trends/eCommerce/insights-for-marketers-eCommerce/regional-overview/asia-pacific/

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China’s Tmall, for example, has integrated social media as a consumer-powered review and recommendation system where products with higher scores are given more exposure, indicating just how impactful social media reviews are on a product’s online visibility and in a larger sense, a brand’s reputation. Active social media users in China largely overlap with consumers that have spending power, compared to the West where those with greater spending power tend to be much older and use social media less34.

Facebook continues to reign as the dominant social network being used across Asia Pacific, with Twitter ranking second in the region. However, the usage rates for these international platforms vary across markets. While consumers in Indonesia and India led in terms of Twitter users, Chinese instant messaging app WeChat and business networking site LinkedIn also showed significant usage35. WeChat has also leverages social media to promote services to its 300 million users, including 100 million overseas, by offering various services from mobile payments, mobile commerce options, taxi booking services and consumer-to-consumer (C2C) money transfers. Users can even link their credit card account to the app to complete transactions through their mobile device36.

Source: Waggener Edstrom Communications, 2014

34 http://www.forbes.com/sites/helenwang/2014/08/25/why-china-will-lead-innovation-in-social-and-mobile-commerce/, 35 CONTENT MATTERS: The Impact of Brand Storytelling Online in 2014, 36 http://etc-digital.org/digital-trends/eCommerce/social-commerce/regional-overview/asia-pacific/

In South Korea, a leading apparel brand powered by SingPost eCommerce launched a social campaign on Kakao. In the week prior to the social campaign, total visits stood at 11,637. After the campaign, the brand saw a significant jump to 20,110 total visits, an almost 100% increase, illustrating the success of the campaign and the impact of social on eCommerce in the region. Just like the broader eCommerce sector, APAC’s social media landscape is highly diverse and as such success stories indicate, it is critical for brands to take a local approach to their social media and content strategy by carefully considering consumer preferences in each country.

JAN 2015 Top Five Social Networks in Asia Pacific, by usage

FACEBOOK

TWITTER

WECHAT

LINE

LINKEDIN

8%9%15%15%43%

54% 18% 15% 8% 5%

Never Rarely Occasionally Frequently Very Frequently

11%9%16%14%40%

12%15%22%19%32%

48%18%10%5%6%

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APAC accounts for half of the world’s mobile subscribers, with 1.7 billion unique mobile subscribers. This figure is expected to grow further by 5.5% a year (CAGR) until 2020, reaching a staggering 2.4 billion subscribers37.

Three countries that lead globally in the mobile space in terms of smart phone adoption are Hong Kong (87%), Singapore (87%) and South Korea (80%). In Singapore, an average user has at least 3.3 connected devices, also one of the highest rates in the world38. The reason for this trend is clear - Compared to the West, people in Asia are generally more likely to use a smartphone than a desktop computer to go online. More consumers in Singapore (48%) and Malaysia (41%) would use their smartphone to research products online compared to consumers in UK (21%) and Germany (20%)39. Consumers in developing countries are also quickly growing as sophisticated as those in developed countries, with their extensive pre-purchase research done online, along with price comparisons and soliciting of friends’ opinions through social media and blogs40.

APAC accounts for half of the world’s mobile subscribers, with 1.7 billion unique mobile subscribers. This figure is expected to grow further by 5.5% a year (CAGR) until 2020, reaching a staggering 2.4 billion subscribers.

2.4 Mobile is Massive

JAN 2015 Mobile Users in Asia Pacific

Mobile Regional Overview

1565

358

900

191

521

1296

294

744

583

76

519

42

98%

79%

139%

126%

124%

112%

77%

119%

125%

101%

91%

109%

East Asia

Africa

East Europe

WestEurope

NorthAmerica

CentralAsia

CentralAmerica

South Asia

SoutheastAsia

South America

MiddleEast

Oceania

Mobile Connections, vs Total PopulationMobile Connections, in Millions


37 http://www.gsma.com/newsroom/press-release/asia-pacific-home-half-worlds-mobile-subscribers/ 38 https://www.consumerbarometer.com/en/insights/?countryCode=GL, 39 http://www.digitalnewsasia.com/mobile-telco/asian-smartphone-use-eclipsing-the-west-google-tns-survey, 40 http://www.atkearney.com/documents/10192/3609951/Online+Retail+Is+Front+and+Center+in+the+Quest+for+Growth.pdf/f6693929-b2d6-459e-afaa-3a892adbf33e

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JAN 2015 Global Mobile Commerce Rates 2.5 Changing Trends in eCommerce Payment Solutions

Given the region’s advancement in the mobile space, having a mobile strategy and strong mobile capabilities are no longer optional but a key suc-cess factor for retailers looking to explore APAC’s eCommerce landscape.

Smartphone adoption and the strong growth of tablet usage have also opened new avenues to pay-ment solutions: mobile wallets like WeChat and Ali-pay in China, and Paytm and Freecharge in India44, eWallets like Smart Money and GCash in Philippines and Dompetku in Indonesia, have all emerged as in-novative, viable ways for consumers to make pay-ments for their online purchases by leveraging mo-bile devices45.

In January and February 2015, one of SingPost eCommerce’s clients, a leading apparel retailer in the region, saw 63% of its traffic coming from mobile and tablet in the Singapore market alone. In Australia, the same retailer saw significant traffic (53%) coming from mobile and tablet devices during the same period. Across Southeast Asia, another SingPost eCommerce client also noted that half of its traffic was coming from mobile and tablet devices.

37%

18%

15%

9%

27%

17%

14%

8%

22%

16%

12%

19%

15%

11%

27%

18%

14%

9%

23%

17%

13%

6%

20%

15%

11%

19%

15%

11%

South Korea

UAE

Hong KongGermany

Malaysia

SpainUSA

China

Singapore

Turkey

UK

ArgentinaItaly

VietnamSaudi Arabia

AustraliaBrazil

Mexico

CanadaPoland

FranceSouth Africa

PhilippinesThailand

IndonesiaIndia

RussiaJapan

41 http://www.statista.com/chart/3057/mobile-share-of-e-commerce-transactions/, 42/43/44/45 http://www.specommerce.com/asia-pacific-serving-consumers-without-credit-cards/

The payments space is also highly fragmented. With markets having various maturity levels, a one-size-fits-all-solution does not work in APAC. On one hand, credit card penetration remains low in de-veloping markets like Indonesia (6%) and Thailand (5%)41. Likewise, transactions in India, Indonesia and Vietnam and Thailand are predominantly cash based, as SingPost eCommerce reported (2015). In contrast, more developed markets like Singapore and South Korea have credit card ownership as high as 3.3 and 5 cards per person, respectively42. When SingPost eCommerce enabled bank transfers for one of its leading brands in Malaysia, the brand en-joyed an increase of 30% in conversion rates within the month following implementation. This 30% in-crease was reflected in revenue growth as well. With such varying readiness levels and payment method preferences, it is critical that brands offer localized payment options that best suit the markets they are serving, taking into consideration local regulations and market infrastructure43.


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In APAC, market places like Alibaba’s Taobao and Tmall in China, Rakuten and Yahoo in Japan and eBay’s Gmarket and Auction in South Korea are dominating the online retail channels46. Alibaba’s Tmall, in particular, has become a strategic gateway to China as it accounts for almost 50% of the B2C market in the country. Tmall has over 100,000 brands, of which an estimated 2,000 are foreign, and over 500 million registered users47.

eCommerce growth in the region is also attributed to the increasing amount of cross-border trade. The cross-border trade figures for China alone are staggering; in 2013, 18 million online shoppers spent RMB 216 billion, with projections for this figure to hit up to EUR 11 billion by 201848. Top overseas sites for China were the US (48%), the UK (46%), Austria (33%) and the Netherlands (16%)49. Another key market indicative of growing cross border trade in the region is Australia, with its 6.3 million online shoppers spending AU 6.5 billion in 2013. By 2018, this is expected to hit AU 16.6 billion annually50. These findings send a clear signal to brands that Asia Pacific is actively shopping on international sites and are seeking access to international products. However, to fully leverage this growing demand and capture the online market, international retailers should go beyond cross-border and set up eCommerce operations in local APAC markets.

2.6 Marketplaces Play a Dominant Role

2.7 Cross-Border Trade in the Region

46 http://www.horizons.gc.ca/eng/content/e-commerce-asia-growth-online-marketplace, 47 https://www.forrester.com/Five+Global+Marketplaces+All+Brands+Must+Know/fulltext/-/E-RES115420, 48/49/50 https://www.paypal-media.com/assets/pdf/fact_sheet/PayPal_ModernSpiceRoutes_Report_Final.pdf

With such varying readiness levels and payment method preferences, it is critical that brands offer localized payment options that best suit the markets they are serving, taking into consideration local regulations and market infrastructure.

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To fully leverage Asia Pacific’s customers that are actively shopping on international sites and are seeking access to international products, global brands should set up eCommerce operations in local APAC markets.

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In order to understand this region better and determine a strategy that best suits theireCommerce growth plan and available resources, businesses need to consider several key factors.

3. HOW TO TAKE YOUR ECOMMERCE BUSINESS TO ASIA PACIFIC

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3.1 Planning and Strategizing Your Market Entry

As a first step, do your research on the markets, specifically the size and growth of each market, number of active internet users, growth of online spending and other spending patterns, as well as share of online sales compared to total retail sales. Here are some key steps:

MARKET RESEARCH

Find out about the logistics infrastructure in each market you want to enter, considering the minimal level of each market to determine distribution center locations. Also consider differences in global, regional and local inventory management. Remember: the legal regulations in the region are varied and complex.

CONSIDER LOGISTICS, CUSTOM DUTIES AND LEGAL FRAMEWORKS

• Conduct overall market research• Determine your demand• Conduct competitor analysis.

Once you have done your groundwork research, size your opportunity by looking at:

SIZE YOUR OPPORTUNITY

• Share of online retail as a percentage of total market share• Your offline sales compared to total offline retail sales• Your existing brand site’s traffic as an indicator of traffic to your online store• Conversion rate analysis.

Once you have considered external factors, look inwards at what your business needs from a technological perspective. Each business would have its unique requirements but some key considerations include:

DETERMINE ECOMMERCE TECHNOLOGY REQUIREMENTS

• Flexibility to customize content to suit local markets in terms of marketing, merchandising, currency and languages• Customizable site experiences with an open platform• Centralized content and data management for greater speed and accuracy• Order Management System (OMS) that provides single view of orders, customers’ details, inventory and promotions• Omni-channel operations that provide an integrated set of tools and processes to serve your customers anytime, anywhere• eCommerce Platform that supports localization and better online customer experiences.

For eCommerce managers looking to explore the region, it is very challenging to assess the potential of individual eCommerce markets in APAC and develop a market entry roadmap that is tailored to your business. The next few sections cover key areas in planning a strategy and also propose market entry strategies for exploring this lucrative region.

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3.2 Market Entry Strategies for eCommerce in Asia Pacific

Going global with your retail website can take you down two different paths of cross-border shipping: A) By Parcel Forwarding or; B) Via Cross-Border Merchant Enablement:

While either option is an easy-to-implement interim solution, it creates a fragmented brand experience, as customers have to deal with a third party for delivery and fulfilment. Another key concern would be the potential negative experience customers could face when they encounter exorbitant shipping costs or delayed shipping by the third party. While not a service directly provided by retailers, customers will associate this experience with your brand, which could harm your brand image and customer loyalty in the long run. Brands can use cross border shipping as a first step to leverage the present and fast-growing demand for international brands and products among APAC consumers. While cross-border is an effective way of reaching global customers without established operations in local markets, it limits a retailer’s reach and revenue potential. Brands that have successfully penetrated Asia Pacific’s eCommerce market have done so with strong localized transactional eCommerce sites.

Consumers can choose to sign up with cross-border shipping providers to receive a virtual address overseas. International providers, such as vPost – a service by SingPost eCommerce -, Borderlinx, Comgateway and MyUS provide consumers in Asia Pacific with a shipping mail address in countries like the US and UK to buy products from online shops that do not support deliveries into the APAC region. Upon arrival of an order at the overseas shipment facility, the service provider oversees inspection checks and packing, and consolidates the packages for shipment to their overseas destinations.

A

As a merchant, you can partner with service providers such as Borderfree, International Checkout, BongoUS and Global Shopex. These service providers integrate international shipping capabilities into your site, allowing you to reach a global market.

B

SHIP CROSS-BORDER

a

While marketing will be one of your biggest challenges, key word analysis can help you understand your local market requirements and search behaviour. Also important is localizing your Search Engine Optimization (SEO) strategy as search engines vary across the region.

MARKET AND DRIVE TRAFFIC TO YOUR SITE

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PARCEL FORWARDING CROSS BORDER MERCHANT ENABLEMENT


Countries such as Japan and South Korea have spearheaded the region’s eCommerce sector, developing almost at the same speed as that of Western markets. To gain a foothold in APAC, many brands chose to enter these markets due to their already advanced technological infrastructure, high eCommerce penetration and ready consumer base. Many brands that have selected the developed eCommerce markets in North Asia for their market entry also often chose the marketplace route given the high market share of such players. However, this market place approach posed limitations on brand building and access to customer data.

Today, China is also a lucrative route for brands entering this region. Many global brands choose China as a key market entry point for APAC, particularly because of Tmall’s high market share in China’s B2C market. However, a marketplace-only strategy poses limits to long term brand building. It can also present consumer-facing issues over authenticity and fraud, potentially diminishing a monobrand’s credibility in the long run. Chinese consumers themselves are becoming increasingly mature and are looking for unique shopping experiences with brands. Their growing trust in online platforms extends beyond marketplaces; over 70% of luxury purchases by Chinese consumers are made at monobrand boutiques – this is over 20% more than the global average51.

North Asia is also not a quick and easy in-and-out strategy. Retailers eyeing this region need to be prepared for a long-term commitment. For monobrands that do decide to go with a combination of marketplaces and monobrand sites, it is important to have a presence in a marketplace, given their high market share, but also have a transactional and localized monobrand site that drives your brand messaging, serves as a means to ensure consumers that your products on other eCommerce channels are authentic and offers exclusive products that draw people to the monobrand site. Some brands have effectively combatted the price-driven nature of marketplaces versus maintaining their brand identity by only offering off-season or outlet products on marketplaces. In this way, brands can still participate in marketplaces as one of their acquisition channels, without killing their margins or diluting their brand.

Research shows that consumers in Asia Pacific are increasingly looking for international products and branded shopping experiences. However, the region is also highly fragmented in terms of languages, payment preferences and online shopping and social behaviour. Successful brands in the region have catered to such diversity by building localized shopping experiences. Local branded presence also provides a platform for global brands to have full ownership of customer data, build brand awareness and develop long-term customer loyalty. Below are two options to enter Asia Pacific:

A

GO LOCAL

51 http://www.chinaconnect.fr/the-store-and-website-luxury-brands-key-touch-points/

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NORTH ASIA FIRST


eCommerce businesses today need to show results over a short time period. For markets like China, a successful market strategy is usually a more long-term plan with significant returns often only after several years. This is because many brands are zeroing in on China and strong local marketplaces, while local brands dominate the market, making it a highly competitive environment a difficult market to penetrate for new entrants. For brands looking for a low-risk opportunity with significantly less investment in resources and time, entering the APAC region via a beachhead strategy focused on developed markets in Southeast Asia and the Pacific region can prove highly lucrative. These Southeast Asian and Pacific markets are home to a consumer base that is actively shopping online and have the supporting logistical infrastructure and technological development. These markets also make a great test bed for markets in North Asia, particularly so for China, given the large overseas Chinese population in these countries.

While marketplaces are a key eCommerce channel in these markets, many successful market entrants leverage both monobrand sites as well as marketplaces. Brands entering these markets need to build operations and technology capabilities that allow for quick time-to-market as well as localization.

B

GO LOCAL

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BEACHHEAD MARKET ROLLOUT


Successful international expansion requires time and careful planning. This de-mands a keen understanding of consumer behavior, knowing their preferences and differentiating nice-to-have from must-have features. In meeting consumer de-mands, brands should not shy away from adopting unique approaches. By carefully considering key factors in individual markets, brands can avoid pitfalls encountered by many early market entrants.

4. ECOMMERCE BEST PRACTICES

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Planning alone does not ensure success. Brands still need to develop a supportive ecosystem of trusted technology and logistics partners who understand the brand’s objectives, while providing local knowledge about the market. Apart from having an external support network, brands must also have the capability to go international for the long haul. The challenges are many: competing against established online retailers, not being profitable in the first one or two years, experiencing low conversion rates and unpredictable consumer behavior. Given these challenges, brands must be able to make extensive adaptations to the business. They need to go beyond the basics and leverage their best tools and features to compete on a global scale. The following best practices lay the groundwork for eCommerce success in the region:

Create A Seamless Customer Experience Across Channels (Omni-channel)Consumers today want a seamless brand experience across multiple touchpoints. To meet customer demands, brands should be able to manage, orchestrate and serve customers across all channels. Unlike multi-channel, where channels are separate and consumer engagement can be fragmented, omni-channel allows consumers to shop with no boundaries between online and offline. This means messaging must be consistent across multiple touch points, providing a seamless journey where customers can switch devices at different points of their purchase journey. Shopping experiences become more personalized as brands leverage consumer data at different points of engagement with the brand. Leading brands also enable ship-from-store fulfilmentand customer pickup in-store. Leverage Social to Drive Sales (Social Commerce)Engage customers in the social spaces where they gather. Make sharing easy with minimal sign ins and plug ins while providing customers with various options to connect using multiple social media channels such as Facebook, Twitter, WeChat, Line and LinkedIn. For social media to be truly effective in a brand’s eCommerce strategy, community management is key. It needs to be responsive, provide accurate information and have the capabilities and teams to manage the channel as a means to communicate with consumers.

Make Mobile Site Capabilities A PriorityOffer fully mobile optimized sites and experiences that go beyond being “mobile friendly”. While a mobile friendly website simply makes a website viewable on a smartphone, requiring cumbersome scrolling or zooming, a mobile-optimized website loads easily with content scaled for efficiency. Some mobile commerce best practices include using geo-location to direct customers to the nearest offline store; activating social logins and guest sessions to facilitate mobile check out process; providing alternative mobile payment options, incorporating mobile product videos; optimizing product image galleries and including social media share buttons52.

BEST PRACTICES CHECKLIST

4. ECOMMERCE BEST PRACTICES

52 http://www.smartinsights.com/eCommerce/eCommerce-strategy/optimising-e-commerce-sites-mobile/

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Offer Convenient Methods of Deliveries and ReturnsProvide delivery and return methods that support a dynamic and urban consumer lifestyle, such as providing parcel lockers that customers can access 24/7. Create clear and straightforward guidelines that are easy to find. Shipping costs should also be visible on the site rather than surprising customers on the check out page. Develop a capability for effective ‘cross-border’ returns such as offering free shipping on returns. Also, leverage promotions on delivery and returns to drive traffic, conversion rates and sales.

Provide Local Customer SupportProviding support in local language drives conversion. 75% of online consumers surveyed in Europe, Asia and South America prefer to buy products in their native languages, while 60% rarely or never buy from English-only websites53. Likewise, online transactions in Asia are driven by language; 70% of Japanese consumers surveyed made electronic payments in local-language websites54.

Consider Key Platform Capabilities RequiredAn eCommerce platform provides an integrated set of tools and processes to power your omni-channel strategy, reduce operational and integration complexity, and enable your team to create consistent brand experiences across channels.

Centralize Your Customer ManagementObtain a holistic view of the customer by managing a single customer record across channels and touchpoints, including purchase history, regardless of the purchase and fulfilment location. With a central customer record, you can measure the performance of cross-channel shoppers, assign them to customer segments and personalize their experience with dynamic and relevant content.

Focus on Content SyndicationIntegrated master and subsequent catalog structures allow you to easily share products across categories, catalogs and sites. You can also manage and maintain seasonal, branded and future catalogs simultaneously, putting an end to inconsistent information across channels. Deliver highly branded, personalized and consistent content across channels, and help your customers make smarter buying decisions.

Ensure You Have Clear Inventory VisibilityGive your customers “buy anywhere, receive anywhere” convenience by providing accurate inventory availability across channels. Real-time inventory visibility across multiple locations, including stores, is key to enabling the buy anywhere, fulfill anywhere experience. Reduce excess inventory, capture lost sales and promote the most profitable products to your customers.

53/54 http://www.commonsenseadvisory.com/Default.aspx?Contenttype=ArticleDet&tabID=64&moduleId=392&Aid=21500&PR=PR

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Offer Localized Payment Solutions to Suit Your Target MarketsOffer a wide array of payment options to facilitate purchase, be it online payment, cash on delivery or payment via mobile apps. Look into your market’s behaviour to get insights on how to localize payment options.


The next step to develop your strategy to go international is by determining the operational, logistical and technological capabilities your business needs to succeed. Having a supportive partner ecosystem with extensive experience and key insights into the region can make a huge difference. For eCommerce brands looking at international expansion, particularly for the highly complex Asia Pacific region, it is key that they find a partner ecosystem with the following capabilities:

5. CHOOSING AN ECOMMERCE SOLUTION AND PARTNER

Develops and launches eCommerce stores and operations quickly and easily.

Provides an eCommerce platform that enables agility, localization and quick roll out.

Has omni-channel capabilities that allow your consumers to shop anytime, anywhere.

Provides a cost structure that is manageable and scalable as your business grows.

Knows the markets and has valuable insights into each country’s requirements, growth drivers and unique consumer behaviors.

Supports your customers across multiple geographies and languages.

Has localized payment capabilities, whether online or offline, to suit local payment preferences. Has the ability to

drive performance marketing, specifically, drive traffic to your site through online and offline marketing and partnerships.

Has a regional reach and logistics network to manage shipping and returns across multiple countries.

Supports customers who are shopping cross-border.

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Easy-to-use applications empower business users to control and manage the shopping experience including branding, merchandising and promotions, with minimal IT involvement. An open development environment enables technical users to develop highly customized brand experiences. From content management to integrated responsive design to geo-location-driven experience management, the platform supports best practices in digital commerce and enables retailers to continually evolve the shopping experience to meet and exceed customer expectations.

The platform provides several options for bringing the power of the cloud into the store. Enterprise point-of- sale (POS) solutions range from mobile device-based to traditional register and till formats. For retailers that prefer to keep their existing POS infrastructure in place, a tablet-based, endless-aisle digital store solution provides store associates with access to customer records and web inventory, enabling them to reduce lost sales due to stock-outs and walk-outs, and to better serve customers.

The Demandware Commerce Cloud is based on a world-class cloud infrastructure that is fully built, proven and secure. Points of delivery (PODs) situated around the world are readily available to support the roll out of new brands, new sites and new omni-channel initiatives. The platform scales seamlessly to support any size business with 99.99% historic site availability around the globe. Critical security certifications, including PCI and SOC2, are always up to date. With Demandware, retailers can rest easy knowing that there is a world-class operating environment to support their growing business and a dedicated team of experts to make sure that it runs smoothly at all times, even during seasonal peaks.

Scalable RESTful APIs allow external web applications to interface with core commerce functionality. Developers can leverage the APIs to quickly build and deploy custom applications with confidence, knowing they work with the products, promotions and transactions in the platform, and will result in a consistent experience across every customer interaction.

The platform combines data sources to create a distinct data footprint for each consumer. It applies leading-edge data science to personalize the products, promotions and content presented to each individual shopper. It also collects, aggregates and anonymizes data from across all consumer interactions, providing Demandware clients with the ability to benchmark performance against their peers and optimize their business results.

Distributed order management capabilities enable retailers to provide “buy anywhere, fulfill anywhere, service anywhere” experiences. The platform helps to alleviate out-of-stock issues with a single, enterprise-wide view of inventory, including real-time inventory counts that track products on order or in transit. It can also help reduce customer service costs by enabling self-service functions, such as order tracking, cancellations or managing returns. It accelerates entry into new international markets with proven, secure solution purpose-built for global operations. And with its cloud deployment and multi-site architecture, time to market is reduced while allowing retailers to test new markets with minimal investment.

Empowering Business and Technical Users

Point-of-Sale and Digital Store Solutions

World-Class Operating Environment

Open APIs

Data-Driven Personalization and Analytics

Distributed Order Management

The Demandware cloud platform is scalable, secure and built to run digital commerce operations around the world, including China. It is purpose-built for cross-border and global expansion and allows retailers to manage local languages, currencies, customs, products, preferences and other geo-specific aspects from a central platform. Global retail teams can deliver locally translated commerce experiences that transact in native currencies – while maintaining central control over the brand experience. Our clients grow faster than their peers; in 2014, Demandware comparable clients grew revenue more than 30% last year, which twice the industry average.

5.1 Building Your eCommerce Digital Backbone

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SingPost eCommerce’s full service eCommerce solution provides global brands with Asia Pacific’s first end-to-end managed eCommerce solution. By partnering with SingPost eCommerce, your business gains access to a full suite of services: enterprise-grade eCommerce technology, regional warehousing, delivery and returns management, regional customer care supporting all relevant languages and dialects 24/7, as well as performance marketing to drive traffic and sales for your eCommerce store.

SingPost eCommerce’s knowledge and resources are seamlessly integrated into a full spectrum of capabilities; from customer service, to marketing and website management, to fulfilment, so as to provide brands with a one-stop-shop solution for their market entry into Asia Pacific.

5.2 Leveraging Regional Expertise and a Strong End-to-End Partner

eCommerce TechnologySingPost eCommerce experts build and implement enterprise-grade online stores for brands and retailers that utilize a stack of leading eCommerce technology software. These cutting-edge eCommerce technology solutions allow businesses to scale their business across Asia Pacific while providing a highly localized and customer-centric shopping experience.

Warehousing SolutionsThrough a network of 22 logistics centres across APAC as well as global hubs in US and UK, SingPost eCommerce builds the logistical backbone of eCommerce businesses for major global brands. Warehousing and fulfilment related operations for business-to-consumer eCommerce is fundamentally different from traditional logistics solutions for business-to-business trade. That is why SingPost eCommerce has developed industry specific eCommerce fulfilment processes that are integrated with state-of-the-art warehouse and delivery management systems.

Delivery & Returns ManagementSingPost eCommerce is a regional expert with an extensive network and thorough understanding of the diverse customer expectations, custom regulations and legal requirements. The wide range of delivery and returns solutions offered by SingPost eCommerce gives merchants’ customers a choice of affordability or speed with tiered offerings. Through well-established mail and courier networks, SingPost eCommerce enables brands and retailers to deliver their eCommerce promises to their customers while maintaining profitable cost structures.

Store OperationsSingPost eCommerce provides store operation services dedicate to delivering and managing the day-to-day operations. The team of experts covers management of product catalogue and content, coordination of marketing and oversees the order and inventory management. SingPost eCommerce’s end-to-end solution, provides all components required to manage the operations of eCommerce stores.

Customer CareThrough a network of customer care centres across the Asia Pacific region, SingPost eCommerce provides personable, multi-lingual customer care. The highly trained Customer Care team focuses on developing regional customer care strategies tailored to local markets across Asia Pacific to support eCommerce expansions, while enabling an economically viable cost structure.

Performance MarketingSingPost eCommerce provides performance marketing solutions that are focused on maximizing marketing spend. Through effectively harnessing existing data and monitoring trends, SingPost eCommerce gathers relevant insights to help better understand customers and their behaviour. Leveraging our deep understanding of Asia Pacific’s diverse markets, the performance marketing solutions are built on technology, relentless data measurement and analysis, and strategic usage of the best digital marketing channels.

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As eCommerce across APAC continues to grow at phenomenal rates, brands and retailers who want to expand their global footprint must take into consideration the key characteristics of this region: a growing middle class with greater spending power, an online population that is highly plugged into social media, increasing adoption and innovation of new technologies, particularly in the mobile and payments space, and a growing appetite for international products. Driven by unrelenting internet usage brought about by growing PC sales, the increasing availability of broadband and 3G connections and, more recently, the abundance of affordable mobile devices and mobile subscription rates, the Asia Pacific online consumer is more sophisticated and tech-savvy than ever before. They surpass their North American and European counterparts in terms of online social engagement and are increasingly lucrative for online retailers.

However, this highly lucrative region is also highly diverse. Individual markets differ in terms of culture, legal regulations, mobile usage, social media platforms, payment systems and infrastructural and logistics development, making a blanket solution unviable. The answer is localization. Apart from speaking the language of its consumers, brands need to gain a deep understanding of consumer behavior and preferences, coupled with a flexibility to adopt unique approaches that address the unique needs and preferences prevalent in each market.

Equally important to ensuring eCommerce success is working with strategic partners equipped with local knowledge and extensive reach across the region. By having a supportive ecosystem of trusted technology and logistics partners, retailers can look forward to valuable insights and support, agility and scalability that will allow them to grow their business across multiple geographies and languages. With localization in place and a robust network of regional support, brands can forge ahead with a market entry strategy that best suits their objectives, capabilities and strengths to realize Asia Pacific’s full eCommerce potential.

CONCLUSION

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Who We Are

What We Do

Get In Touch

As part of the Singapore Post Group of Companies, SingPost eCommerce is a full service eCommerce partner that provides global brands with Asia Pacific’s first end-to-end managed eCommerce solution which includes - Enterprise Grade eCommerce Technology, Warehousing, Delivery and Returns Management, Site Operations, Customer Care and Performance Marketing. We operate across Asia Pacific with a fully interconnected eCommerce infrastructure and 22 distribution centres, in addition to our global centres in the US and UK.

SingPost eCommerce helps global brands launch their online business and strengthen their eCommerce logistics operations in Asia Pacific. We help assess market potential and develop entry strategies, with a focus on maximum return on investment. Through our regional set up, we provide custom duties management and enable local delivery and returns. In many cases, clients can leverage our legal entities across the region and we can be Merchant of Record on behalf of the brand.

To learn more about our full suite of solutions, visitwww.specommerce.com/solutions

Alternatively, get in touch with us at +65 6841 2000 or email us [email protected]

Singapore • Australia • China • Hong Kong • Indonesia • Japan • Korea • Malaysia • New Zealand • Philippines • Thailand • United Kingdom • United States •

ABOUT SINGPOST ECOMMERCE

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An Open, Future-Proof Platform for Omni-Channel CommerceThe Demandware Commerce Cloud is a highly scalable platform that minimizes the complexities and costs of running extensive global commerce operations and enables seamless, high-impact consumer engagement across all devices, channels and geographies. Built on a scalable and secure multi-tenant cloud architecture, the platform provides enterprise capabilities with the agility of the cloud.

Speed, Agility and InnovationDemandware empowers retailers with the speed, agility and innovation required to accelerate the strategic business initiatives that drive growth. It provides an open and scalable enterprise cloud commerce platform that puts business users in control and enables impactful consumer engagement across devices, channels and geographies. Backed by a world-class cloud operating environment that is scalable, reliable and secure, and a business model that puts client success above all other priorities, Demandware reduces the cost and complexity of running global, omni-channel commerce operations.

Eliminating Barriers to GrowthRetail growth strategies come in many different forms. Whether it’s about providing customers with a more unified online and offline experience, expanding into new geographies and markets, or launching new brands and sites, Demandware provides a more agile and innovative solution for enterprise retail, without compromising quality, control and scale. It’s the reason why more and more retailers are moving away from rigid on-premise platforms and switching to Demandware’s industry-leading cloud platform.

ABOUT DEMANDWARE

Demandware Commerce Cloud

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Headquarters

US+1 781 425 1400

APAC and Japan Region

Australia

+612 8249 8307

China and Hong Kong+852 3798 2660

Japan

+813 6759 8281

For more information about Demandware solutions, visit us at:www.demandware.com or contact us at [email protected]

NOTES

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