The Future of Asia: Forces of Change and Potential Surprises – Supplementary Report

Policy Horizons | Horizons de politiques May 1, 2014

Image of yellow arrows going from left to right against a white background for The Future of Asia Forces of Change and Potential Surprises Supplementary Report blog post

E-commerce Speeding up Asian Consumption

What is it?

The emergence of digital marketplaces in Asia is helping it shift from an investment-oriented society to a more consumption-driven one by offering more choice, ease and temptation while shopping.¹ ² ³ ⁴ Indeed, for every US$1 spent online, as much as 40 cents is new spending (or spending that consummers would not have incurred had they purchashed off-line). The Asia-Pacific region is expected to become the largest online retail market in the world this year, with China a particularly large market due to population, the prevalence of the Internet and the rate of cellphone uptake. Online sales in China were an estimated US$190–210 billion in 2012. This amounted to 5% to 6% of total retail sales in 2012, compared with 5% in the U.S. By 2020, China’s online retailers might sell $650 billion worth of products.

Why is it important?

This trend will likely continue to stimulate entrepreneurship and innovation in Asia. Online commerce is breathing life into some small and medium-sized businesses (SMEs) searching for niche markets. There are reports of poor and excluded individuals who cannot obtain physical store permits but who can operate online businesses.⁵ Online retailers are also expanding the range of services offered to banking and to facilitate export (label translation, licensing, etc.).⁶This should influence the makeup and configuration of supply structures both in Asia and globally. It might also advance economies through traditional stages of development more quickly as remote regions can now more readily develop online.

The rapid increase in online retailing should continue to affect infrastructure and real estate by reducing the need for physical stores.⁷Ongoing challenges to successful e-commerce (payment mechanisms, logistics and distribution channels, consumer attitudes about security or product quality, etc.) might be at least partially offset by increased participation and certain innovations.⁸ ⁹ ¹⁰ However, political challenges could linger. Chinese banks are lobbying against the rise of competing financial services and governments may not like the idea of commercial interests having so much data on citizens.¹¹