Will Asia dominate the world e-commerce sector?
It is said that that East Asia's trade will play an increasingly important role because the scale of the economic recovery of this region is larger and faster than anywhere else in the world.
By 2019, Asia has become the world's second largest integrated regional trade network, behind only the European Union (EU), with a scale of 58% of total global trade. East Asia's trading system is likely to become more inclusive and sustainable with a rapid transition to digital platforms.
East Asia is leading the global e-commerce revolution. In 2019, business-to-customer (B2C) platforms - e-commerce, online travel, advertising technology, e-transport services and digital media - generated $3,800 billion in revenue globally, of which $1,800 billion belongs to Asia. E-commerce alone accounts for 1,900 billion USD in global revenue and 1,100 billion USD in regional revenue. China is the leading country, accounting for 45% of all e-commerce transactions.
East Asia is leading the global e-commerce revolution. / ph: pexels
In Asia, online sales account for 12% of total retail sales, higher than 8% of Europe and North America. The digital economy is expected to add $1 billion to Asia's Gross Domestic Product (GDP) over the next 10 years.
More than ever, the e-commerce movement is growing, encompassing cross-border transactions. Cross-border business-to-customer (B2C) e-commerce generated an estimated $404 billion in sales in 2018, up 7% from the year before. Although business-to-business (B2B) platform sales account for 80% of cross-border e-commerce, B2C represents the fastest growth.
The Covid-19 pandemic pushed these numbers even further as consumers were switching to online shopping. There is still room for this sector to grow. The penetration of e-shoppers, or the percentage of the online population that creates online shopping, still below 50% in Asia, much lower than in some other regions of the world.
The lack of technology infrastructure is an aspect that has hindered the growth of digital commerce in Asia, with only 56% of the region having internet access. But Asia has seen strong growth since 2010, notably Thailand (up 44 percentage points), Brunei (up 42 percentage points), Cambodia (up 39 percentage points) and Vietnam (up 38 percentage points).
The countries of the Association of Southeast Asian Nations (ASEAN) are adding 125,000 new users (internet) every day. About 94% of the region has 4G network coverage.
Digital consumers represent a new market. It is estimated that 40% of internet shopping spend in China and 30% in Indonesia exhibit a new consumer trend, replacing traditional direct purchases.
E-commerce platforms are stepping up access to unmet consumer needs. These platforms also drive consumer attention, such as discount information, offering more options and reducing transaction costs ...
Micro, small and medium enterprises earn many benefits. Digital platforms have extended the reach of micro, small, and medium-sized businesses (MSMEs). These new platforms also open up opportunities for people living in small cities, surrounding areas and rural areas. East Asians currently live mainly in rural areas, so digital growth is translating into inclusive growth.
E-commerce platforms connect young and urban consumers to many international brands. Tmall, one of the world's leading e-commerce platforms, Alibaba, is offering discounts to international companies, allowing these companies to sell on their platforms without needing License to operate in China.
In 2020, about 29,000 brands have joined the Tmall platform, of which 80% of the brands entered the Chinese market for the first time. Of Tmall's total users, 45% come from China's vicinity cities. The digital platform is connecting consumers outside the major metropolitan areas with a wider region.
One feature that makes cross-border buying on digital platforms easier is the presence of digital wallets, which can be used to buy any product on the platform.
Payment methods are increasingly integrated. Alibaba's AliPay payments app is acquiring a number of local startups across the region that specialize in mobile payments.
The growth of financial technology (fintech) companies is also dramatically expanding the size and expertise of the financial sector. An increasing number of individuals have access to a wide range of financial services without the need for an account with an officially accredited financial institution.
Inclusive economies recorded an increase in the number of more dynamic MSMEs. Digital platforms serve MSME in different ways. First, they help to reduce financial costs. Credit card fees cost US small businesses an average of 2% of total sales revenue. However, AliPay and WeChat Pay do not charge transaction fees on their digital commerce platforms and only charge 0.1% transfer fees with external transactions.
Second, e-commerce and fintech companies are using real-time social media and transaction data to improve risk assessment and provide loans to MSMEs. Alibaba's Ant finance company online lending model is designed to take 3 minutes to fill in information and 1 minute for money to be disbursed into the merchant's account without any manual action.
A service dedicated to small and medium-sized enterprises (SME) called Mybank, by Ant finance company, has served 25 million corporate customers by 2020, on the occasion of its 5th anniversary. Set up the company. Mybank also focuses on filling the financial gap for women-owned MSMEs, to contribute to increasing socio-economic integration.
Third, e-commerce platforms provide MSMEs with a wide range of technical support and market information services, helping to increase export productivity and revenue.
It is stated that East Asian growth supported by digital platforms will be strong and inclusive if the region invests more in digital infrastructure and human resources. It is recommend that governments also need to coordinate monitoring and regulatory mechanisms to ensure that new platforms are easily accessible and not exploited for illegal activities.
ASEAN has established an electronic payment alliance to support the development of a digital payment framework in the region. Therefore, more action will be required through international agreements and collaborations to protect data privacy and enhance cybersecurity.
Will Asia dominate the world e-commerce sector?
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