Etail of the Tiger: Asian retail shoppers log on for business

Etail of the Tiger: Asian retail shoppers log on for business

JAKARTA (JP): Asia is on the verge of a retail revolution that
has already struck the United States and is sweeping through
Europe.

Internet based retailing, "e-tailing", is transforming the
shopping experience -- from choosing products to postpurchase
customer support. Consumers across Asia can now plug into the
Internet and access the best the world has to offer in multiple
product categories in a range of competitive prices.

Asian retailers are already scrambling to get online. The
Boston Consulting Group (BCG)'s ongoing Asian Online Retail Study
has identified over 1,400 Asian-based sites selling to consumers
across the region, but this is just the tip of the iceberg. BCG's
criteria concern site size, popularity, design features and
functionality. Many operating sites do not match our criteria and
more sites are going online every day.

Japan has the biggest number of large, well-functioning sites,
but South Korea leads the rest of Asia. Singapore, Hong Kong,
Australia/New Zealand and South Korea have the most sites per
capita, while the largest Asian countries -- China, India and
Indonesia -- have the fewest large, well-functioning sites.

Across Asia, there are significantly more pure-play retail
sites (i.e., those that only have a presence on the Internet)
than there are sites belonging to retailers who also have a
"bricks and mortar" presence.

Asia is logging onto the Internet in droves, with 20 million
new users last year alone. The pool of Internet users is expected
to grow from 66 million to nearly 375 million by 2005. Japan has
the largest user base -- an estimated 20 million -- but China,
Australia, South Korea and Taiwan also have sizable Internet
populations. By 2005, this distribution is likely to change, with
China taking the top spot and Japan, India, South Korea and
Taiwan following.

Explosive growth in user numbers will translate into explosive
growth in online selling. If buying levels approach those now
seen in the U.S., the online market in Asia could be worth US$25
billion by 2003. At present, however, the market is relatively
small. Online buyers number 10 million across the region,
concentrated mostly in Japan. Only 0.5 percent of Asian shoppers
have purchased online, compared to over 12 percent in the United
States (Japan and Australia have considerably higher penetration
than the rest of Asia, at 6 percent and 4 percent respectively).

Asia's top online retail categories appear to be computer
hardware/software, cards/gifts/flowers, books, financial services
and travel. Interestingly, some categories that are very big in
the U.S., such as collectibles (person-to-person auctions), have
been slow to catch on in most Asian markets.

One of the product-category winners is likely to be financial
services, as many Asian countries, including Hong Kong, Taiwan,
Japan and South Korea, allow online trading and large segments of
their trading populations tend not to use intermediaries. Indeed,
online brokerage trading in South Korea now has over 40 percent
of the share of total brokerage trades, well above the 15 percent
penetration seen in the U.S. Other product categories make up
around 60 percent of the Asian sites we identified, suggesting
that Asian online retailers are experimenting across a broad set
of product areas.

The Asian business to consumer (B2C) e-commerce market is now
worth $3 billion -- a 264 percent increase over last year's $1.1
billion market level. Approximately 90 percent of the market is
in Japan and Australia, but a group of countries led by Taiwan
and South Korea is likely to grow significantly in the near
future.

Survey data suggest that consumers throughout Asia are gearing
up to spend online. For example, 58 percent of Japanese Internet
users plan to buy online, compared with the approximately 30
percent who actually do so now. In South Korea and China, an
astounding 80 percent of Internet users intend to buy online in
the near future. Even in Thailand, a relatively underdeveloped
market, 15 percent of Internet users intend to buy online, a
significant increase from the 3 percent we see today.

The prospects for B2C e-commerce in Asia are clearly bright,
but e-tailers will need to overcome some important obstacles if
they are to reach their full potential.

First, infrastructure limitations such as low telephone line
and computer penetration in countries such as China, India and
Indonesia will hinder e-tailers' ability to reach large numbers
of potential consumers.

Second, an important set of payment and delivery issues need
to be addressed. Much of Asia is still not oriented toward using
credit cards to settle transactions. Delivery will also be an
obstacle, and expensive international and regional shipping rates
may deter potential online buyers.

Finally, privacy and security are ongoing concerns for
consumers. In Japan, worries about these issues were the main
reasons given for not buying online (only concerns about online
retailers' reliability ranked higher).

Although important, we do not expect any of these issues to
halt the progress of online retailing. For example, enterprising
Asian retailers are already exploring convenient and secure
alternatives to credit cards. The issue is not whether these
problems will be solved, but when. Successful e-tailers will move
quickly, but remain flexible enough to exploit infrastructure and
other improvements as they occur.

-- By Boston Consulting Group