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E-Commerce in Asean

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E-commerce research for ASEAN
Tags: e-commerce;asean;southeast asia;online retail;shopping;rocket internet;amazon;rakuten;alibaba;singpost

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E-Commerce in Asean

  1. 1. E-Commerce in ASEAN NITIN MITTAL
  2. 2. 2 Agenda Scope & Definitions Overview Landscape Growth in Middle Class Market Size and Forecast Value Chain Platform Architecture Framework for Competitive Analysis Regulations & Impact of Customs Similarities & Differences Among ASEAN Countries Appendix
  3. 3. 3 Scope E-Commerce is defined as sale of multi-brand goods online to consumers via PC or mobile and excludes services like travel, insurance etc.
  4. 4. 4 E-Commerce Definitions B2C Store – storefront and fulfilment Marketplace – storefront for SMEs/Merchants Daily Deals/Private Sales C2C Storefront for individuals instead of SMEs/Merchants Classifieds
  5. 5. 5 5 Key Factors Fuel E-Commerce in ASEAN Rise of Middle Class Greater mobile/Internet penetration More supply of new e-Commerce players Increasing logistic options Alternative Payment Methods Source: Singpost, Analysis
  6. 6. 6 Key Challenges Facing E-Commerce in ASEAN Lack of robust ecosystem Management of Customer expectations and Perception High customer service needs for small purchases Trust in online payments Securing supply chain Cross border commerce issues Inconsistent duties Logistics, taxes1, customs clearance, payment methods Corruption Lack of reliable, low cost logistics infrastructure Local contracts, deals, localization for each ASEAN country Fulfilment infrastructure not built to serve the scale of e-commerce scale Foreign Ownership Regulations Taxes in ASEAN can include import tax, excise tax, interior tax, VAT and other/ special duty; 90% tarriffs eliminated within ASEAN and between ASEAN and China but not the Western countries Source: Singpost, Analysis
  7. 7. 7 ASEAN E-Commerce Landscape Traffic in 000’s Source: UBS
  8. 8. 8 ASEAN Shopping Website Traffic Comparison Monthly hits in Millions With ASEAN population 2X that of US, the monthly hits to shopping websites are < 10% of those in the US, although the traditional hits are even lower at about 1% of those in the US
  9. 9. 9 Rise of Middle Class1 Country Size of Middle Class (2004/5, M) Middle Class as % of Population Annual Spend ($B) Percentage point change in middle class as % of population Change in Population (M) Change in yearly Expenditure s ($M) Thailand 56 86% 117 +17.6% +17 +55 Malaysia 22 89% 52 +5.6% +7 +22 Philippine s 48 55% 80 +12% +24 +48 Vietnam 44 52% 63 +57% +49 +77 Indonesia 103 47% 67 +46% +114 +168 Source: ADB 1Middle Class = Daily Consumption Expenditure of US$ 2- 20 1990 - 2008
  10. 10. 10 Greater Internet Penetration: ASEAN (2011 – 16) Source: Euromonitor
  11. 11. 11 Increasing supply of E-Commerce & Logistics Players Sourcing Company Retail Platform (Marketing + Distribution) Logistics (Warehouse + Delivery) Consumer Sourcing (33%) Marketing (30%) Distribution (20%) Logistics (17%) Manu- facturer Margin $10 +$33 +$50 +$17 $110 Yamato Emerging end-to-end e- commerce platform players like Acommerce, Velasaia, Singpost Source: Interviews; Numbers will vary depending category of product
  12. 12. 12 E-Commerce Market Size (2013) & Potential ASEAN E-Commerce at 0.2% of Retail Sales; China’s is 40X @ 8%; ASEAN like China in 2006-08 Source: WSJ; *E-commerce at 5% of retail
  13. 13. 13 E-Commerce Value Chain Sellers Platform Warehouse Delivery Consumer Owned/ 3rd Party (local, intl.) B2C Store/ Marketplace/ Hybrid Drivers Pricing Inventory Mgmt. CMS Payment Options/ Currency Marketing Merchant Tools Language Customer Support Owned/ 3rd Party (cost driver) Model Hub n Spoke Overseas/ Local Model Normal Post Courier Self-pick up Owned/ 3rd Party (cost driver) Overseas/ Local Reverse Logistics (Driven by Size Dependence/ Payment method) Logistics Warehousing: custom packaging, storage, picking & packing, returns, and next-day delivery; Source: Interviews
  14. 14. 14 Platform Architecture Product Metadata Descriptio ns, Pictures, Reviews, Ratings Forecasting tools for better gross margins; Merchant tools for listing, marketing, pricing, image/video uploading ; Engines: Recommend ation, comparison Routing Algorithms Online/ Offline Payments COD Bank Transfer Credit/Debit Cards Prepaid Card Features Wishlist Recommend ations Shipping methods Promotions Order history Online/ Mobile/ Hybrid App Web Social Media Forums Classifieds Messenger groups Omni Channel1 1in-store pick-up/returns, store locator, online-offline availability, ship to store CMS Inventory/ Pricing/Tools/ Engines Order Mgmt. Payment Shopping Cart Storefront Source: Interviews + Analysis
  15. 15. 15 Framework for Competitive Analysis Sourcing Product Assortment Pricing Logistics Customer Service Technology  Track record with brands to educate and convince them go online  Network with brands vs agents affects access to product range  Exclusive products  Products unavailable in local stores  Variety  Pricing in price sensitive markets  Proprietary pricing data built over time  Owned vs third party; Warehous ing & fulfilment capabilities for large number of fast moving orders daily  First/Last mile delivery optimization  Same/Next day delivery capability  Delivery time  Return policies  Payment options  Delivery routing algorithms  Recommendation engines  Integration to supplier networks Source: Interviews + Analysis
  16. 16. 16 Foreign Ownership Regulations for E-Commerce Country Feasibility Method Remarks Indonesia Not allowed but workarounds - Nominee structure - Separate out pure online from offline (logisitics) Look at Alibaba and Baidu incorporation in Indonesia; JV structures have not worked well (Rakuten, Ebay) Vietnam Not allowed but workarounds - Nominee structure Similar to Indonesia Thailand Allowed Board Of Investment (BOI) Philippines Allowed Malaysia Source: Interviews + Analysis
  17. 17. 17 Status of E-commerce law in ASEAN Legislation is 2-5 years old in most countries Source: A.T. Kearney
  18. 18. 18 Impact of Customs in ASEAN Source: A.T. Kearney, Singpost If purchased from the US, customs value $90
  19. 19. 19 Status of Transport Networks in ASEAN SG, MY & TH offer the best networks Source: A.T. Kearney
  20. 20. 20 Country Differences Country Logistics Spend Per Transaction (US$) Social Commerce Online Shoppers using online payments Banked Indonesia Lazada built own; no nationwide provider $20 Instagram/Facebook /Twitter 4% 20% Vietnam Nationwide provider $20 2% 21% Thailand Warehousing strongest after SG $50 Facebook/Line 11% 79% Philippines Nation wide provider bu Smallest 3% 27% Malaysia $60 5% 66% Singapore Strongest in warehousing; has 20 of top 25 third party logistic companies $60 50% 98% Low banked levels and lack of trust in online payments make cash on delivery the most used payment method in ASEAN Source: A.T. Kearney + Interviews
  21. 21. 21 Country Similarities  Large percentage of e-commerce transactions from outside the capital cities  Thailand – 40% (Line)  Indonesia – 70% (Lazada)  Referrals from social networks like Facebook (Thailand) and Instagram (Indonesia)  No established large scale offline chains like Walmart/BestBuy etc.  Cash on Delivery Source: Acommerce + Interviews LINE flash sales by region, Thailand
  22. 22. 22 Appendix
  23. 23. 23 E-Commerce Market Size – ASEAN $7B, 2013 (much higher compared to WSJ report, which looks more reasonable considering regional Lazada/Zalora GMV in 2013 of EUR 150M and assuming 20% SEA e-commerce market share) Source: A.T. Kearney
  24. 24. 24 E-Commerce in ASEAN relative to other regions shows a huge opportunity to grow - 5X over the next 5 years to $35B, < 50% of the overall potential of $67-89B Source: A.T. Kearney
  25. 25. 25 E-Commerce Potential in ASEAN Source: A.T. Kearney
  26. 26. 26 INDONESIA
  27. 27. 27 Indonesia Middle Class Source: ADB
  28. 28. 28 Indonesia Online Shoppers Source: eMarketer
  29. 29. 29 Preferred E-Commerce Channels in Indonesia Source: Techinasia
  30. 30. 30 Preferred E-Commerce Payment Methods (2013) Source: Vela Asia
  31. 31. 31 Innovative Indonesian Payment Methods (2013) Source: Vela Asia
  32. 32. 32 Indonesia Top Shopping Websites by Monthly Traffic (March 2014) Note: C2C included
  33. 33. 33 Popular Categories (2013) Source: Statista
  34. 34. 34 Timeline Source: UBS
  35. 35. 35 Philippines
  36. 36. 36 Philippines Middle Class Source:ADB
  37. 37. 37 Philippines Top Shopping Websites, March 2014
  38. 38. 38 Timeline
  39. 39. 39 Thailand
  40. 40. 40 Thailand Top Shopping Websites by Traffic, March 2014
  41. 41. 41 Timeline Source: UBS
  42. 42. 42 Example of US Import tax calculation in Thailand Source: Singpost
  43. 43. 43 Malaysia
  44. 44. 44 Malaysia Top Shopping Websites, March 2014
  45. 45. 45 Timeline Source: UBS
  46. 46. 46 Challenges in SME Adoption Source: A.T. Kearney
  47. 47. 47 Vietnam
  48. 48. 48 Timeline Source: UBS
  49. 49. 49 Financials
  50. 50. 50 E-Commerce Valuations Source: UBS, June 2014
  51. 51. 51 Zalora Financials – H1 2014 Fashion category has higher margins – 30 – 50% (private labels) Source: Rocket Internet Financials
  52. 52. 52 Lazada Financials – H1 2014 Electronics category has very low margins – 10% and so Lazada is beginning to diversify to increase product categories 200% + Growth in GMV, Orders & Customers Source: Rocket Internet Financials
  53. 53. 53 Listed Logistics Companies Source: UBS, June 2014

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