The Asia-Pacific region has undergone a significant period of growth in recent years, as technology innovation has resulted in a more-competitive e-commerce market. Now, due to the area being further along in its coronavirus recovery, Asia-Pacific — and China in particular — could provide an example for U.S. retail in what the next steps should be.
A report from consulting firm Bain & Co. found that three Chinese retailers now rank among the top 10 retailers worldwide — 10 years ago, there were only two from the entire region that made that list. Alibaba, JD.com and Pinduoduo have all exploded in e-commerce growth, and their technical infrastructure, reflective of a broader investment across the region, has enabled them to each capitalize on the shift to online buying during the pandemic.
One issue that has plagued U.S. retail has been the lack of digital presence pre-pandemic, resulting in brands needing to establish an e-commerce channel from scratch. Comparatively, Bain & Co.’s analysis found that the Asia-Pacific was able to leapfrog some of the traditional retail expansion stages, skipping straight to digital channels, which then positioned companies well for 2020.
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As a result of this investment in digital infrastructure, roughly three-quarters of global retail growth and two-thirds of online growth is attributed to the region. Asia-Pacific’s online sales in particular — despite beginning at a higher base level than the rest of the world — still grew at double the rate between 2014 and 2019: Online penetration increased from 9% to 19%, compared to the rest of the world’s growth, from 6% to 11%.
“In a region of 48 countries, there’s no single path to a thriving future,” said the Bain & Co. report. “Yet we do see similarities in how the nimblest executive teams are seizing opportunities. Crucially, they are prioritizing action in six areas: reinventing their value proposition; winning digital engagement; futureproofing assets and operations; mastering the last mile and supply chain resilience; defining their ecosystem destination; and retooling for digital.”
Asia-Pacific’s diversity is reflected in the different degrees of advancement in various markets. For instance, Australia, Japan and China are significantly further along in their technology evolution than others, while India, Vietnam and Indonesia were designated as “fast modernizers” by Bain & Co. Nevertheless, the consistent emphasis on digitization and disruption has allowed these countries to keep up and maintain growth, even as the pandemic has created new challenges.
One specific area in which these countries are ahead of the U.S. is in the adoption of mobile as a purchasing channel. A Forrester forecast predicted that 70% to 85% of e-commerce in those key regional markets would be conducted through a smartphone by 2023, compared with just 43% in the U.S. Yet the increase in mobile e-commerce here suggests that the country is simply earlier in its adoption curve than Asia-Pacific.
Within e-commerce, there has also been an uptick in the number of consumers purchasing through livestreams and short videos. A Bain & Co. survey of 4,700 consumers in China this spring found 35% of consumers would purchase through that format, versus 5% buying directly through a brand website or 19% through a mini-app. Shopping through a social community was the second most popular method, at 22%.
While the U.S. shopper is not currently exhibiting those habits, this could prove a lesson in what they will migrate to next. Therefore, the advice of Bain & Co. for Asia-Pacific could prove relevant to American retailers in the near future.
“Asia-Pacific retailers have to follow the eyeballs of their customers,” said the report. “They need to optimize their presence on super-apps and social commerce channels. They should keep asking themselves if they are serving up the right content formats for current preferences. Today, that might be short-form video; tomorrow, something new.”
