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Friday, June 10, 2016, 14:20

Smartphones drive e-commerce explosion

By Karl Wilson

Owing to a rapid uptake of mobile devices, China leads the online shopping boom across Asia.

Smartphones drive e-commerce explosion

Delivery riders sort through packages ordered online at a roadside distribution point in Beijing in November. E-commerce in China is rocketing, with online retail sales of goods and services in the first quarter of 2016 up 27.8 percent year-on-year.  (Photo / AFP)

The physical act of giving hongbao, or red envelopes with cash inside, at Chinese New Year may soon become a thing of the past if WeChat has anything to do with it.

Three years ago the popular Chinese messaging app enabled users to send digital red envelopes via their mobile devices.

According to the digital news website Quartz: “Tens of millions of smartphone owners attached their bank cards to the app — thereby opening the door for purchasing rides, meals, and other goods on WeChat.”

WeChat’s parent company Tencent reported that users sent more than 8 billion red envelopes by the end of Feb 8 this year, an eightfold increase from the previous year. The popularity of the app even prompted Alibaba and the search engine Baidu to imitate the idea.

China has become the e-commerce center of the world, with almost half of all online shopping carried out on smartphones.

Speaking to China Daily Asia Weekly, Rajiv Biswas, Asia-Pacific chief economist with consultancy IHS Global Insight, said the Chinese e-commerce market is already the largest in the world, having overtaken the United States, with an estimated 400 million Chinese consumers already buying online.

Chinese online retail sales of goods and services in the first quarter of this year reached US$158 billion, up 27.8 year-on-year, he added.

E-commerce retail sales in China last year increased by 42.1 percent to US$672 billion, accounting for over 40 percent of all global e-commerce retail sales, according to the independent market research company eMarketer.

Nielsen’s latest Global Connected Commerce report said that in the 52 weeks ending June 2015, Chinese consumers spent the most on groceries and foodstuffs, with online sales of household products in China growing 86 percent, beverage sales up 72 percent and food sales up 52 percent, indicating the country is “experiencing an online shopping boom”.

“China’s online retail ecosystem is evolving quickly,” the report said. “Today, it’s not just people’s purchasing habits that are going digital: The whole retail experience is changing.

“The purchasing behavior of Chinese consumers is fast evolving with the advent of new technology.”

E-commerce is increasingly going mobile and the use of devices like smartphones to make purchases is “significantly higher” than average compared to other countries surveyed.

According to eMarketer, the e-commerce market in China is expected to reach US$1.57 trillion by 2018.

Analysts say with the development of mobile networks, the mobile commerce market is booming.

So what is driving online retail sales and e-commerce in China?

Rising demand for foreign products, new platforms and a push by the government are propelling the trend, according to the McKinsey Quarterly business publication, released in February.

“As incomes have risen in China, its consumers have stepped up their purchases of imported goods. But now, impatient for the latest products and better prices, they can buy directly from foreign retailers and suppliers at the click of a mouse or the swipe of a screen,” the report said.

“Cross-border consumer e-commerce amounted to an estimated 259 billion yuan (US$40 billion) in 2015, more than 6 percent of China’s total consumer e-commerce, and it’s growing upward of 50 percent annually.”

The report noted that Alibaba’s e-commerce site Tmall has expanded with a cross-border site, Tmall Global, while US e-commerce giant Amazon is also increasingly active in China.

More than 50 percent of these transactions are being carried out on smartphones, a trend visible throughout the region.

Southeast Asia is said to be one of the most mobile-centric regions in the world with countries like Singapore leading the way on smartphone penetration, and others like Indonesia and Thailand leapfrogging desktop PCs altogether.

As late adopters to the Internet, most households in the region never owned a desktop computer, and as smartphones were made more affordable and accessible, they have quickly become the main device by which people go online.

Jonathan Rees, advisory partner and digital lead for the Association of Southeast Asian Nations with consultancy EY, said smartphone penetration is expanding rapidly in Asia as brands release lower-priced handsets into the market.

“In developed markets such as Hong Kong and Singapore, smartphone penetration is already north of 80 percent,” he said.

Online retailers who aim to continue high growth patterns need to go beyond thinking “mobile friendly” and think “mobile first”, he added.

While regional data for mobile commerce is sparse, data from Singapore indicates that one-third of e-commerce consumer spending occurs via smartphones, according to Google.

“Anecdotally, some Internet retailers reported that number surpassed 50 percent across Southeast Asia in 2015,” Google said.

Japnit Singh, senior director for Singapore and India with Spire Research and Consulting, said the growing penetration of smartphones has led to a boost in e-commerce throughout the region.

“Currently close to 45 percent of online consumers are using their mobile phone, which is up from less than 10 percent in 2011.”

It would not be surprising if smartphones become the dominant mode of e-commerce for Asian consumers, Singh added, given that smartphone penetration in Asia Pacific is almost three times that of PC penetration.

“This would be especially so for rural parts of Asia.

“At the same time, in China, India, Thailand and Indonesia — where the gap between PCs and smartphones is high — mobile commerce already dominates, with more than 50 percent of the consumers using mobile phones to make online purchases.”

Biswas of IHS pointed out that the Indian e-commerce market is much smaller than China’s, but is growing rapidly, with e-commerce sales estimated to have risen from US$4 billion in 2009 to US$40 billion this year.

“Much of this growth has been helped by the rapid growth in sales of smartphones and tablets, which have facilitated online buying by Indian consumers.”

He noted that in the first quarter of this year, sales of smartphones in India grew by 23 percent year-on-year. “In Southeast Asia, e-commerce is also growing rapidly, buoyed by the rapid growth in the size of the middle class.

“IHS forecasts that Indonesia (in e-commerce) will grow at about 5 percent per annum over the next decade, with GDP forecast to reach $3.8 trillion by 2030, up from an estimate of US$930 billion in 2016.”

Biswas said that Indonesia’s e-commerce market is estimated to be worth $6 billion this year, dominated by e-sales to Indonesian consumers for travel-related spending, notably on airlines and hotels.

Despite the rapid growth in online retail and e-commerce throughout Asia, smartphone sales globally are expected to grow by just 7 percent this year, down from 14.4 percent in 2015.

According to research firm Gartner, the slowdown in the global smartphone market has been apparent for more than a year, with mature Western markets saturated and China’s growth engine also slowing as demand has topped out.

Gartner sees the biggest opportunity for smartphone growth in India and estimates 139 million smartphones will be sold there this year, growing 29.5 percent year-on-year.

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