Watch Out For Asia’s ‘Digital Dragons’

Despite the doom and gloom that pervades the world of dot bombed e-commerce,
B2C online activity is alive and well in the Asia-Pacific market and in fact
is growing more than 100 percent a year, says a new industry study.

The report from the Boston Consulting Group says that corporate
success online in Asia is coming mainly as a result of the online activities
of large, established consumer companies — companies that the eponymous
report refers to as “digital dragons.”

Online business-to-consumer revenues have more than doubled in 2000,
accounting for $6.8 billion across the region, and they’re set to double
again in 2001, reaching $14 billion, the report says.

“The focus on dot-coms has diverted attention away from the fact that
business-to-consumer markets in Asia are actually booming,” said David C.
Michael, a vice president in BCG’s Hong Kong office and one of the report’s
three co-authors. “Our research found 81 percent of online B2C revenues in
Asia are generated by large, established companies.”

That means clicks and mortar, in many cases, and a business plan that has
been helped along by the continuing growth in the Asian online population.
The report predicts a yearly increase of 36 percent in the number of people
online in the Asia-Pacific region, leading to an Internet population of 245
million users in 2004, up from the current 98 million users.

The report identifies three “killer categories” in Asia’s online B2C market:
financial brokerage, computer hardware and software, and travel.

Last year, financial brokerage was the strongest category with commission
revenues of $1.57 billion (+121 percent from 1999). Sales of computer
hardware and software reached $1.38 billion (+75 percent), and online travel
sales accounted for $980 million (+188 percent).

“Many Asia-based consumer companies believe their online channels are vital
to reaching out to their customers,” said Nikolaus S. Lang, a project leader
in BCG’s Kuala Lumpur office and a co-author of the report.

The report goes on to say that looking forward, consumer e-business in Asia
will be influenced by three major developments:

First, as online penetration reaches more than 50 percent in the region’s
developed countries by 2004, more and more large companies will face a
customer base in which at least one out of two customers will be online.

Second, online adoption of non-sales-oriented transactions (e.g., bill
payments) and information-related interactions (e.g., checking flight
schedules) will increase significantly. This suggests that large companies
even in industry sectors without typical retail sales processes can move most
of their customer interface online.

Third, after the demise of many Web-based retailers, the online strategies of
multichannel players will focus on developing long-term strategies that
create new revenue opportunities.