How Ecommerce Started
In a nutshell, ecommerce or electronic commerce commonly refers to the activity of buying and selling online. This includes the transfer of information or funds via the internet. In layman terms that means any online business or commercial transactions such as online shopping, exchanging of goods and money transfers.
Ecommerce emerged shortly after the World Wide Web was introduced in 1990. Pioneering online shopping sites, Amazon.com and Craiglist were launched in the United States in 1995, with eBay appearing the following year.
All three had different approaches to online commerce; Amazon.com had a traditional store format with set prices, eBay provided a meeting space for buyers and sellers to come together to bid for items, whilst Craiglist was a community message board.
Back in the day, online stores were very basic and much more limited with what they could do in terms of graphics and programming.
Setup of an ecommerce website required 3 fundamental areas:
- Payment methods – must facilitate online banking payment
- Shipping fees – the price of shipping/postage fees can influence consumers
- Fulfilment process – as does delivery time
Ecommerce Players in Southeast Asia
Ecommerce growth over the past five years has skyrocketed into the billion-dollar mark; 2014 alone saw an increase of 20% in worldwide sales with a total of almost US$840 billion.
Alibaba, an online shopping site set the record for US$25 billion in Sept making the China-based company’s value at US$170 billion.
Malaysia and Thailand were the largest e-commerce markets, generating revenues of US$2.3 billion and US$2.1 billion respectively.
Total e-commerce retail sales in Asia were projected to hit more than US$1,000 billion by the end of 2016, with 80% of that figure contributed by China alone.
As consumer behaviour adapts with technology, newcomers such as Carousell and Shopee are taking advantage of the increasing number of users purchasing products and services online, placing Southeast Asia on the cusp of an ecommerce “golden age”.
As a result, we are seeing more unique e-commerce platforms emerging namely ShopBack which offers cash-back, voucher codes and discounts off online purchases.
What Spurs the ASEAN Ecommerce Growth?
The 5 key factors contributing to ecommerce in ASEAN:
- Rise of the middle class
- Greater mobile and internet penetration
- Supply of new ecommerce players
- Increase of logistics options
- Alternative payment methods
The ASEAN population is double the size of the United States, presenting a great opportunity to existing and upcoming ecommerce players to increase their market five times over in the next few years.
It is estimated that the internet penetration by 2020 will be 62% or 360 million users. Asia also has the added advantage of a younger population with a growing disposable income.
The Malaysian Ecommerce Market
With its population size of 30 million and high internet penetration of 70%, Malaysia is a viable ecommerce market.
On average, Malaysians spend around 5.5 hours on the internet every day with 78% having shopped online, making those who have never shopped online a minority.
Interestingly enough, 33% of those who haven’t shopped online have asked someone else to do it for them.
Below are the top 10 online/ecommerce retail sites in 2016 as well as the average time that is spent by each shopper on each website.
What are Malaysian online shoppers *buying?
- Daily Supplies 39%
- Fashion & Accessories 23%
- Special/Rare Items 20%
- Home Appliances 7%
- Consumer Electronics 7%
- Food/Health Items 4%*as of July, 2016
- Capturing consumers’ attention in an overly crowded online platform
- Education, consumers are still not fully informed on the benefits of shopping online
- Investment of time and money should be done with full commitment, speed and long-term plan as ecommerce is neither easier or cheaper than traditional retail
- Determining a pricing strategy that is not identical to offline and incorporating membership and loyalty programs that are attractive
- Online security is still a major concern with two main concerns; safety of personal information and quality of purchases that are lower than that advertised
Despite the general boom in Asia and its market size potential, one considerable hurdle to ecommerce in Malaysia is the buying behaviour of the general public. Many are still reluctant to conduct financial transactions online.
On the technical front, the main obstacles encountered here are poor bandwidth, limited coverage of network and technical problems on the website setup that can frustrate and turn online customers away.
The main challenge for online retailers and even ecommerce marketplaces is attracting organic traffic. If you’re an online retailer, you will need to work hard to get visitors to your website and win their trust. Many retailers resort to competitive prices and internet security features.
Staying Ahead With Ecommerce
As customers are becoming more digital-savvy and demanding, they expect to be able to shop at any time, from any location and always on the lookout for the right price and flexible delivery options.
- Mobile payment is becoming more popular, eliminating complicated payment procedures. A one-touch payment option and possibility to pay with digital discount vouchers.
- Personalization of products and content, tailoring the online experience to each user and their preferences help you stand out in a market saturated with similar products and services.
- Analysing and understanding customer habits will make it possible to offer what they truly need and make it possible to offer a successful pre-purchase touch point. Eg: L’Oreal’s ‘Make-Up Genius’ app allows customers to create a picture of themselves using L’Oreal products.
- Availability of goods and perfecting the last-mile delivery process with instant and daily delivery to the doorstep, pick-up points or fulfilment centres.
- It’s not just about the product or service but creating a consistent experience at all touch points* to create a frictionless buying experience.
- To stand out, you need to foster consumer trust and loyalty with honest, unique content. One of the ways to offer content-rich experiences is storytelling.
- SEO (search engine optimisation) is an important component of online retailers’ strategy. 90% of users find new ecommerce websites through search engines.
*It is not necessary to be on all social media or have an app if the customer is not using it or does not ask for it. This keeps the number of touch points small.
Ecommerce Explorations in Asia Beyond 2017
- Brands are getting smarter and leveraging a marketplace presence as an initial and short-term strategy. The long-term strategy is to sell direct-to-consumer via their brand.com sites where they own all the customer data, control of brand image and can offer features like subscription commerce.
- Following its acquisition of Lazada last year, Alibaba will soon introduce its entire ecommerce ecosystem to Southeast Asia this year – Ant Financial, Cainiao and the Taobao Partner (TP) program just to name a few.
- Amazon was to enter Southeast Asia with a Q1 launch in Singapore but this has been postponed.
- Businesses will be exploring new markets geographically in Southeast Asia as large markets saturate making ‘greenfield’ ones like Myanmar more appealing.
- Following a similar trajectory as the US and China, startups in Southeast Asia will gradually move into insurance, finance and healthcare.
Outfitting Your Business for Ecommerce
Despite the challenges, there’s a huge potential for small businesses and entrepreneurs to explore ecommerce and grab a piece of the ecommerce pie, particularly in Malaysia.
As an entrepreneur, you’ll need to find where your business fits. Also, it’s good to understand that the success of ecommerce depends on many factors namely:
- consumer use of technology
- shopping behaviours
- infrastructure (online and offline)
- retail-specific activities such as promotions, deals and specials
Online, ecommerce or ebusiness involves either selling to businesses or end users or consumers. If you intend to go into ecommerce, understand which of these four categories or business models that you’re going into:
- Business to Business Ecommerce (B2B Ecommerce)
- Business to Consumer (B2C Ecommerce)
- Consumer to Business Ecommerce (C2B Ecommerce)
- Consumer to Consumer Ecommerce (C2C Ecommerce)
Know the type of ecommerce business you are dealing with so that you can make comparisons with similar businesses and know how you stand out or are different.
However, if you are an existing retailer, you have some upfront advantages such as:
- better understanding of customers’ demands
- existing products and merchandise knowledge
- established suppliers and partners
- physical outlet to support online marketing
- unlimited shelf space online
While you may have built-in advantages, you need to be prepared for:
- Warehouse readiness/storage facility
- Last mile delivery – lack of reliable, low cost logistics infrastructure
- Payment – trust in online payment, alternative payment methods
- Talents – customer service, securing supply chain
- Tax and customs – inconsistent duties, customs clearance policy, corruption
- Online security
Getting Started in Ecommerce
If you are starting an ecommerce business without the advantage of having a retail outlet, here are some tips.
1. Choose your products and create your brand image
Find out the niche of your products and how it solves your customers’ problems. Create your own brand to help define your position in the market.
2. Use a local website provider
You will be able to get support and troubleshooting solutions effectively and efficiently.
3. Link your website to popular ecommerce marketplaces and social media
It’s the best way to expose your brand to the world wide web.
4. Learn from successful online retailers
Read up about successful online retailers and use their success stories as motivation and inspiration. Follow us on Facebook and on Google+ (we share plenty of inspiring stories and articles about business).
This blog post has been researched and written by Elle, our communications manager.
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