Major players to benefit from growth to date include Amazon, JD.com, Pinduoduo, Shopee, and Lazada. During the last six months of 2020 these platforms not only saw increased sales, but also attracted many new consumers and received more visits per customer.
This makes marketplaces an attractive option for businesses planning to go online for the first time or to expand their reach in Asia. Here we look at the benefits and challenges of marketplaces and where they could fit in your online sales strategy.
Ecommerce Growth in Asia
It is estimated that consumers throughout Asia bought US$2.45trillion worth of goods online in 2020, an increase of almost 19% from 2019.
Almost 60% of the region’s online retail sales are in China where purchases increased by 14.5%, compared with the previous year. In Singapore, retail sales fell by more than 50% between May 2019 and May 2020 while ecommerce volumes increased by almost 25%.
Many of the region’s businesses turned to online sales during 2020 as stores closed and travel was restricted during the pandemic. Without the time, expertise, or resources to launch new ecommerce sites the solution was to use online marketplaces.
Marketplaces vs Branded Ecommerce Sites in Asia
Businesses that want to expand in Asia might consider creating their own branded site, but marketplaces can deliver results quickly and effectively and offer some features that are attracting loyal visitors in increasing numbers.
Set-up costs and margins – joining an online marketplace will cost much less than creating an exclusive branded site because much of the infrastructure is already in place to begin selling online. Even businesses that already have an established online presence might consider a marketplace strategy to extend their reach.
Many marketplaces actively encourage a strong branded offering to increase overall credibility. Customers enjoy the opportunity to view and compare brands in a single location before making their choice.
However, while sales volumes might increase, businesses considering this option will need to look carefully at the costs of listings and commission and the impact these will have on margins. Coordinating product information across multiple marketplaces will also present administrative challenges requiring integration of your business systems.
User reach – established marketplaces have a large customer base and high traffic volume. For example, Shopee, leader by average monthly visits, has grown dramatically since its launch six years ago and now receives almost 198million visitors every month.
A lot of the traffic will be driven by paid-for advertising and your products will be viewed alongside your competitors, so your longer-term strategy should include building customer loyalty to your brand.
Speed to market – for the many businesses that are now starting to sell online, marketplaces can present products to consumers in just a few days. They are a good way to test interest in new products or to sell older stock items. In contrast, creating an own-brand ecommerce site will take time, investment, and a long-term strategy.
Customer-service – while you can communicate with your customers within most marketplaces, you won’t normally have their contact details to allow you to build an ongoing relationship with them. On your own site you could use chatbots, live chat and other direct-communication channels. Communications with customers buying from a marketplace will normally take place indirectly via the platform as part of the purchase process.
Marketing – marketplaces provide high visitor volumes but it is more difficult to achieve targeted marketing, updates, and special offers or new product launches.
Integration with your social media channels and marketing automation is likely to be limited.
New ways to reach customers
There are clearly some practical ‘pros’ and ‘cons’ for both marketplaces and branded ecommerce sites. However, it’s clear that customers across Asia have taken the immersive experiences offered by marketplaces to their hearts.
Young audiences – Shopee, for example, has focused on optimizing user experience and engagement for mobile devices. Their aim is to meet the needs of younger customers who expect to use mobile devices for entertainment, communication, and collaboration. As a result, it can offer end-to-end shopping experiences via its mobile app.
Destination marketplaces – although first-time visitors often don’t make an online purchase, marketplaces have embraced the idea of ‘stickiness’, developing their online brand as a destination for shoppers to browse and enjoy multi-media content.
Engagement – entertainment is becoming part of the marketplace experience across Asia. Visitors can play in-app games and win points or coins to spend later, for example, or use the social feeds to share their purchases and favorite products.
Shopee and Lazada have been leading the way with live streaming. Streamed content on ShopeeLive increased by almost 200% from February to June 2020. In the Philippines six out of 10 businesses are using live selling. In China around a third of the population viewed live streams in 2019 and the figure was expected to rise to almost 40% in 2020. Some new ecommerce platforms in India are using only live streaming to deliver content in local languages such as Hindi or Bengali.
Augmented reality – customers can see and potentially test items before buying using augmented reality (AR) on many marketplaces. When it isn’t possible to visit a showroom or shop, this has been an important addition to the online experience. It has been applied to everything from home entertainment to cosmetics. Apple and Google have announced their plans to develop mobile AR, complemented by the anticipated widespread adoption of 5G in the region.
Blockchain – cryptocurrencies like Bitcoin and Ether can be used as ecommerce payment methods. They provide access to customers without banks which, across Southeast Asia alone, could be a market of 438million people. This could become a popular option for online marketplaces across Asia.
Looking to the future
Asia is now benefiting from opportunities for cross-border ecommerce and the expansion of economic digitization.
Online marketplaces are more than a fast and cost-effective way for businesses to start selling online. Across Asia, where geography, culture, language, currencies, and limited payment methods could previously have been barriers, customers have embraced online marketplaces.
While many sellers will want to take control of their customer relationships, build their brand, and optimize sales on their own ecommerce platforms, marketplaces will remain a strategically important part of their plans.
Speak with one of our experts if you would like to explore the potential of ecommerce in Asia for your business.