E-Commerce Emergence in APAC

Let me starts with a big picture – Few days ago Flipkart (India #1 online e-commerce site) announced a $1 billion fundraising and incidentally Amazon announced additional $2 billion investment into its India expansion which suggests something brewing in the India market with a growth potential similar to China, where consumers spent almost $300 billion online last year and India where consumers are widely accepting the entire ecommerce way of life. Further, the two emerging markets both have massive populations of over one billion, buoyed by a rising middle class, rapid GDP growth and challenging infrastructure. India's internet retailing sector grew 20 percent last year by value, according to Euromonitor International. Not only that the new wave of online ecommerce companies are targeting shoes, mobile, tickets, but it has also started to revolutionize the education sector in India with India’s leading e-commerce companies such as Flipkart.com, Snapdeal.com and Groupon.co.in are offering online courses and coaching materials, and are even facilitating long duration certificate or business education degrees. Even an interesting concept like Aaramshop that allows your trusted neighborhood retailers to serve their community consumers through their customized web/mobile fronts - https://www.aaramshop.com/.

Now, let me also give you an interesting figure of smart phone sales and internet penetration in APAC.  The reason of sharing the below is to suggest the potential of all these consumer who are foraying into the world of smartphone, which will allow of a percentage of it to move into exploring the world of internet and subsequently buying things online. And I am not talking years here…The tectonic shift is happening at a much faster pace. This not only suggests that consumer are embracing “onlinility or being online” but equally transacting online.   One estimate suggests that Asia-Pacific consumers will account for more than 45% of digital buyers this year and it will expected to grow by 23%.  The mentioned figures certainly endorse my argument that rise of smartphone penetration will also contribute to this retail shift. What’s more, by lowering barriers to entry and removing the need for a physical presence in remote or underdeveloped areas, online retailing will give the traditional retailers the opportunity to expand more rapidly, especially in tier 2 or 3 cities; which historically has been challenging to serve. A recent such example of Xiaomi Mobile Launch in India through flipkart and they claim that the nearly 70% of their first batch order came from tier 2/3 cities which has never been the case in mobile history of India.

  On global perspective eMarketer projections suggest that B2C e-commerce sales will grow by more than 20 percent this year to reach US$1.5 trillion, and surpass US$2.3 trillion by 2017. Forrester Research projections indicate this growth will be partly driven by five of the largest online retail markets in the Asia-Pacific region – China, Japan, South Korea, India, and Australia – which will see e-commerce sales rise from US$398 billion in 2013 to US$858 billion in 2018 at a compound annual growth rate of more than 16 percent. The below chart articulates the share growth potential which is expected in APAC.

Now even if I take the consumer expenditure and disposable income OR age demographics into consideration (as below) , it’s all suggesting one growth direction – up north

Being an Indian and have worked in APAC for man years, I certainly believe in the immense potential that the APAC market has to offer.

With all the above data I am just trying to allude to one fact that I got multiple endorsements in my recent APAC trip when I met many retails and merchants who wants an easy and relative cheap solution to sell their good(s) to a wider audience including serving tier 2 or 3 markets by jumping on the e-commerce bandwagon but don’t know where to buy the ticket or get started with. This forced me to pen this post. I would certainly encourage e-commerce vendors to look it into the opportunity that market has to offer. While, I have more proof points, however I will hold on to that for a later post.

How well is the Indian economy picking up?

Till a while back, a lot of uncertainty surrounded the rebound of the Indian economy. The June quarter saw a growth of 8.8% due to increase in private demands and investment demands. This rate of growth in expected to last the coming months. The fact that real estate rates are picking up and the car market is regaining momentum reflect this growth rate.

There are two factors that support this assumption. First, that the employment market picking up. Recruitment firm Manpower conducted an Employment Outlook Survey recently according to which the next three months would see robust hiring in India. The public administration, education and services sectors are likely to see the highest rates of hiring. The second is the huge FII inflows that India has been witnessing recently. The Indian Sensex is likely to reach the 20000 mark thanks to the large chunks of cash expected to come in. Overseas investors are showing tremendous interest in India and they would be interested in picking up local stocks.

The flipside is that a number of analysts still believe that India is not there yet when it comes to economic growth. This is primarily because India gets a huge chunk of its business from the US, UK and Japan, which are still reeling under the economic downturn. Equity analysts in particular believe that stocks are overvalued and we must expect a correction sooner or later.

Where the US, UK and Japan are still struggling to bring down unemployment levels, the next three months are likely to see heavy hiring in India. The International Monetary Fund director Dominique Strauss -Kahn has said that for the economic crisis to end, unemployment has to go down.

The challenge will be to see if India is able to maintain this growth despite the recession that the rest of the world is yet to recover from. Countries such as China and Taiwan have witnessed growth along with India. They have an advantage compared to India because of the outsourcing services that Indian economy is heavily reliant upon. The good part is that the Indian economy is growing out of outsourcing. The number of entrepreneurs is picking up and the manufacturing sector has seen a double digit growth.

Certainly, India is going to witness an upturn. And it is going to last. How far it will take the growth story is what we’ll wait and see.