How top Western ecommerce players are approaching Asian expansion

Ecommerce in Asia is booming, so it makes sense that many of the world’s biggest ecommerce companies are keen to conquer the market.

Several factors make the region so attractive as a global expansion opportunity. Asia is home to 60 percent of the global population and several of the world's fastest growing economies. Over half of the continent's population has access to the internet. Of these, almost 1 billion are already shopping online. By 2021, another estimated 450 million will join their ranks.

“Asia already has the highest share of retail sales at 12 percent, but we’re still seeing a gap in the platform market, so we believe that there’s major opportunity available,” said ecommerce veteran Dene Schonknecht, who serves as the director of Asia for BigCommerce, which opened an office in Singapore earlier this year. “Given the size and diversity of the region, we’ve opted to focus core efforts on five to six markets where we feel we have the best market fit first.”

Indeed, despite the significant opportunities presented by the Asian ecommerce market, outsiders face some serious challenges when expanding here. The region’s cultural diversity, unique market conditions and entrenched competition are particularly troublesome to many companies.

The Asian ecommerce space is also already dominated by homegrown ventures, many of which have grown into global giants in their own right. For instance, Alibaba and Jingdong have become massive enterprises, rivaling even the biggest Western players in revenues and profits.

None of this has stopped a number of Western players from trying to enter Asia. Here are the ways these companies are approaching their respective Asian expansions.

Serving underserved needs

Despite rapid growth, Asian ecommerce is still undergoing some birthing pains. Many smaller merchants don't have the technical expertise to establish their own ecommerce channels, relying instead on online classifieds and social media marketplaces. Those with bigger margins to work with opt to participate in marketplaces that charge fees or sales percentages.

As such, marketplaces like Lazada and Shopee have built significant participation from such merchants and both are bullish on Southeast Asian online retail growth.

Other enterprises, however, are big on branding and would rather have a strong ecommerce storefront of their own. They believe that having their own channel promotes their image better rather than risk just being a participant on one of these marketplaces. This mindset has given platforms like BigCommerce and Magento opportunities to cater to companies that want to manage their own branded ecommerce domains. BigCommerce, for example, powers the ecommerce presence of Asian brands like Isetan.

A major challenge for these platforms is providing customizations to fit the Asian experience. Asia has a large number of unbanked consumers, so merchants have to support other payment methods like cash on delivery (COD) and mobile money. In addition, integrations to local logistics providers aren't readily available, so platforms have to set up these integrations when expanding to Asia.

Going to toe-to-toe

Amazon is arguably the world's largest ecommerce player today, and Asia hasn't escaped its sights. While it supports many Asian territories on its global website, Amazon has also been increasing its local presence in various countries.

Today, Amazon operates localized portals for Japan and India. It opened up a facility in Singapore a few years ago to support its Prime Now offering. It has also lined up investments in Indonesia and recently opened a customer support center in the Philippines.

Unfortunately for Amazon, however, its forays into certain countries have been met by competition. The global giant found itself battling toe-to-toe with established ecommerce players in major markets like China. Tough competition from Alibaba and Jingdong prompted Amazon to bow out of the country, opting instead to simply support China through its global site.

"There is too much domestic competition and Amazon lacks the kind of brand awareness that Tmall or JD.com have,” commented Ben Cavender of China Market Research Group. “That leaves Amazon in a position where it has to spend a lot of money to acquire customers while also competing aggressively with multiple strong players on price."

Acquiring players

US retailer Walmart's ecommerce presence in Asia may not be as apparent as other Western brands. The company opted to establish a foothold in Asia by acquiring Indian marketplace Flipkart for $16 billion in 2018. Walmart hopes to tap into India's potential as a market for its retail business, which makes sense considering that only China has a larger population.

But like Amazon, Flipkart has also run into complications. Changes to regulations on foreign direct investments in India introduced certain restrictions concerning supplier exclusivity that forced the marketplace to delist items and sellers. Despite this, Walmart continues to invest in its interests in the continent.

There are still a multitude of homegrown ventures focused on ecommerce and related services coming out of Asia that Western players could consider acquiring. However, even with mergers and acquisitions, they are still bound to face competition with Chinese giants looking to consolidate and acquire these startups.

Tapping into ecosystems

Given what giants like Amazon and Walmart have experienced, it does seem like Western players face an uphill battle establishing themselves in the Asian market. Homegrown ventures have a leg up in making sense of consumer behavior, especially when bolstered by analytics.

"Alibaba did start as an e-commerce company for international trade but Alibaba, as a company, now does pretty much everything in China,” shared Alibaba marketing chief Chris Tung. “Alibaba has built an ecosystem of brand building for the future. Alibaba is uniquely positioned as provider of a single source of consumer truth by digitalising the entire lifecycle of consumer brand relationship.”

Perhaps Western companies would do best to focus on pursuing less competitive verticals and leverage the key strengths of their offerings. The immaturity of the space would surely present opportunities for them to offer value. Discerning consumers eventually gravitate to those that offer real value so playing to their strengths should greatly help these ventures carve out their share of the market.

This is exactly why BigCommerce is building relationships with agencies and developers as a key aspect of its Asian growth strategy. “BigCommerce sees itself, first and foremost, as a partner-first business, and we believe that agencies are the force-multipliers of our business,” Schonknecht said. “They are an extension of our brand and value proposition and typically are the source of 50 to 60 percent of our net new business. By providing those partners with a SaaS platform that is built for scale, openness and efficient economics, they are able to more effectively build, extend and integrate solutions for merchants.”

Better shopping for tech prosperity

The entry of more ventures into the Asian ecommerce space ultimately benefits consumers. Competition pushes innovation, drives prices down, and gives consumers the power of choice. Asian shoppers are only glad to have access to better experiences and more affordable products and services. These attempts by Western players should keep homegrown giants on their toes.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.