RealTime IT News

E-Retailing in Asia Will Bloom

In one of the reports written by The Boston Consulting Group (BCG) last year, it said that B2C revenues have more than doubled in 2000, accounting for US$6.8 billion across the region and it predicted that despite the dot-com failures, B2C markets in Asia-Pacific will still grow by more than 100 percent per year.

But a closer look reveals that the success of B2C is not equally distributed across sectors, with the banking and finance sector being the most buoyant.

Take Singapore for instance. According to the Info-communications Authority of Singapore (IDA), it expects B2C revenues to top about US$1.4 billion in 2001 as compared to US$659 million in 2000.

For the January to September period in 2001, the banking and finance segment in the B2C arena posted the highest growth rate of 25 percent over the same period in 2000. This industry, which saw an online sales of US$223 million in the third quarter of 2001, accounted for more than 60 percent of the total B2C revenues.

Although a higher amount of people are buying consumer items such as airline tickets and hotel rooms online, even books and CDs over the web, the online consumer retail sector remains meager, not just in Singapore, but in Asia as a whole.

Barriers

A number of barriers have created difficulties not only for the consumer online retail business but also across sectors. In some countries, Internet penetration is still low and access to the Internet has been difficult and costly although the situation is improving.

Online retail spending per capita in countries such as Indonesia (US$0.01 per person), India (US$0.03 per person), Thailand (US$0.2 per person) and Malaysia ($0.5 per person) is also low, said BCG.

In addition, Asia does not have the same big base of installed personal computers. There are only an average of 0.01 personal computers per person in Asia, vs. about 0.40 in the US, according to IDC.

And in the affluent societies such as Taiwan, Singapore or Hong Kong, it is hard to get shoppers to shop online. There are shopping malls everywhere and consumers generally like to feel and touch the products, even try them on or test them out and compare the prices before they purchase them.

"Shopping is a pastime and in some countries such as Hong Kong and Singapore, there is a tradition of having a wide variety of goods and services grouped together in conveniently located shopping malls. Shoppers regard this combined shopping experience as a pleasure. If e-retailers are serious about attracting large numbers of shoppers online, they have to seek to translate this experience into an Internet equivalent," said Adam Kerr, director of Business Development, Asia Pacific, WorldPay.

On top of this, Asian consumers are very wary of using credit cards online.

Said Mark Burbidge, senior vice president and general manager of e-Visa International Asia Pacific: "More people in the Asia-Pacific region are spending more time online. However, when it comes to making purchases online, most consumers still express concerns over the security of credit card purchases and personal information."

To address this, Visa has come up with a verification service, called 'Verified by Visa' where customers get a personalized password to serve as an additional verification point. When they buy something from merchant websites' that are 'Verified by Visa', they are given access by entering their password as at ATM machines. More than 25 member banks are expected to launch the service to cardholders later this year.

Is It All Hype?

Despite the challenges, this is not to say that online retailing has no place in Asia.

Take WorldPay for instance. Since setting its Asia Pacific headquarters in Singapore in June 2000, the number of customers they have in the region has grown approximately 30-fold. And the region contributes about 10 percent to its worldwide revenue.

"All of our clients who are retailers are actively using the Internet as a channel to do business rather than just as a storefront. E-commerce has offered them a wider customer base as they sell globally now rather than just locally," Kerr commented.

One of its customers, Tai Hong Hung, which runs Chronograph.com, has been a bricks and mortar watch retailer since the 1960s. Back then, their clients were mainly sea merchants and sole proprietors but their current stores in Orchard and Chinatown caters to locals and tourists alike. Chronograph.com was added in 1997 to create an online presence to support their customers in after sales services.

Online retail has its place in Asia. But the growth will be gradual, maybe with the exception of Australia. And you will not see people rushing to book for gifts over the Internet during Christmas like you will in the US.

Security doubts

Where security over the web is concerned, it is best to stick with a local merchant because shipping is cheaper and payment disputes are easier to resolve.

If they must buy from overseas retailers, there are certain things shoppers can look for to ensure that their online transaction is secure.

"Look for the merchant's payment processor - does the payment processor have merchants in the gaming or pornography space? If so, it's best to avoid them - the fraud risk is disproportionately high in these areas and the processor will be a target," Kerr advised.

Next, what is the payment service provider's core business?

"If the merchants do not come from an established e-financial service background, with in-house risk analysis and customer screening units, your payment is much less secure. Many companies who diversified into payment processing from another industry have now gone out of business," Kerr cautioned.

So when in doubt, "look for an anti-fraud guarantee that protects both shopper and merchant against fraudulent transactions," Kerr added.