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E-commerce structuring in Asia

Asian markets, especially China, are nowadays driving growth in e-commerce worldwide. In 2015, e-commerce transactions in Asia-Pacific (including Eastern Asia, Southeast Asia, India and Australia) reached over US$870 billion, up 35% compared with 2014. Besides, Asian countries are pioneers in terms of m-commerce (i.e. sales made through mobile devices) and s-commerce (i.e. sales made through social media platforms).
 
Eastern Asia represents over 1.6 billion people and 8 countries (i.e. China, Hong Kong, Macao, Taiwan, Japan, North Korea, South Korea, and Mongolia), while Southeast Asia represents more than 620 million people and 11 countries (i.e. Indonesia, Malaysia, Singapore, Thailand, Vietnam, Brunei, Cambodia, Philippines, Laos, Burma, and East Timor). India itself accounts for 1.2 billion people. It represents a massive target of Internet users.
 
The area is far from being harmonized: Internet penetration rate, online sales’ volumes, online payment methods, differing internet regulations and language diversity across the region are all distinctive elements. Entering such a market is not an easy task. It has a youthful population which is mostly under 30, and an emerging middle-class with an increasing purchasing power. Many Asian start-ups are providing innovative products and services which stimulate competition. Logistic infrastructures (including delivery services) remain a key and strategic investments are being made in that respect. Southeast Asia’s integration under the Association of Southeast Asian Nation (“ASEAN”) Economic Community (“AEC”), shall progressively reduce border restrictions, and foster the emergence of major e-commerce players. E-commerce in Asia is becoming a must for brands with an international positioning.
 
Key trends in Asia include the following:
 

  • Positioning strategies: To enter the Asian market, foreign investors need first to decide which positioning to adopt on the Internet. Selling a brand through existing platforms such as Tmall (China), Lazada (Southeast Asia), Snapdeal (India) or Rakuten (Japan), certainly eases the process. It enables immediate access to the market, ready-to-use facilities, and local payment methods. This is less accurate for luxury brands, which often prefer to set up their own local website, in order to differentiate themselves and not to be assimilated with mass-market sales. The strategy is more time-consuming and requires in-depth knowledge of the local market and practices.
 
  • Omni channel sales: Choosing between offline and online sales is not any more the challenge. Both are complementary. Consumers may seek a product online but come to physical stores to try and buy it. Conversely, consumers may try a product offline and double check online or look for discounts before buying it. Providing customers with a consistent and coherent experience across all channels has become the real challenge. Integration is the key.
 
  • M-commerce: Asian consumers are becoming more and more comfortable using their smartphones to research and purchase goods online. It makes it imperative for e-commerce players to implement m-commerce strategies. Mobile applications are also becoming a popular way to provide customers with complementary services and to foster loyalty programs, with targeted offers and discounts. However, the desktop should not be neglected, as many customers still prefer using their PC either because they enjoy a faster and more stable connection, or because they lack mobile payment methods.  
 
  • Use of Social Medias: Social media marketing is vital in Asia. It enables customers to keep the community updated on their latest and future purchases and share their personal experience. Through social media, brands can get feedback on their recent and upcoming launches, while getting closer to consumers. In China particularly, the growing influence of WeChat makes it crucial for brands to adopt a WeChat account. Key Opinion Leaders also enable brands to communicate on their products with a different angle. One of the key difficulties of the strategy is to manage the massive flow of information exchanged through social media channels.
 
  • Online payment methods: Credit cards’ penetration rate varies greatly among Asian countries, and mobile payment methods are not yet available everywhere. In China, Alipay and Tenpay have become very common, while in Australia, consumers tend to prefer BPAY, POLi, PayPal and PayMate. Meanwhile, many Asian customers still prefer cash upon delivery (including in India, Japan and emerging Southeast Asian countries). Foreign investors must address this issue before entering a targeted market, together with currency issues and exchange control policies. Not being able to provide consumers with local online payment systems can seriously affect sales’ potential.
 
  • Logistics: Asian customers are getting used to fast deliveries and become less tolerant of delays. However, the poor infrastructure of many Southeast Asian countries sometimes deludes customers’ expectations. This is less the case in China, where infrastructure investments have been the priority of the government for a while. Besides infrastructure problems, many existing delivery companies were originally set-up for B2B deliveries and pain to adapt to B2C specificities, such as returns’ management, pre-calling, multiple delivery attempts and cash on delivery. In order to overcome those difficulties, some retailers decide to build their own logistical delivery fleet of vans and motorbikes.
 
As a general guideline, e-commerce players in Asia must continuously adapt their strategy in order to meet customers’ expectations and to distinguish themselves in an increasingly competitive market.

E-commerce businesses must consider the integration between the e-commerce sales and inventory systems, the banking platform and the accounting software. Read more on this topic at http://www.mybusiness-asia.com/en/structuring/accounting-for-my-business-in-asia

Due to the international nature of their business e-commerce business will also need to take into account the cross-border tax issues as discussed at: http://www.mybusiness-asia.com/en/structuring/cross-border-tax-planning-in-asia

January 2016