The lucrative promise of e-commerce is alluring for developing economies, particularly in Asia. Considering this emerging market of around 4.8 billion people with transaction value of USD 2.35 trillion in 2017, e-commerce is mushrooming at a vast rate across the region. Firms are racing to innovate, so they can better tap into the perks of trading globally. This leads to exciting development of m-commerce (sales via mobile devices) and s-commerce (sales via social networks). SaleStock, an Indonesian fashion e-commerce company, has a pronounced mobile shopping presence through their website whilst MatahariMall, a Lippo Group e-commerce venture, began with a mobile website before consolidating their desktop version. Informal customer-to-customer (C2C) e-commerce has boomed thanks to Instagram, Facebook, and Line (a messaging app). Merchants treat their Instagram or Facebook pages as an online catalogue, then receive their orders via Line. Line has appropriately boosted the power of social commerce by launching ‘Line Official Accounts’, which allow brands to blast one-to-many marketing campaign – usually followed by free coupons or sticker downloads to attract social media-savvy followers.
It is no wonder that the region is hailed as world-leader in e-commerce. Despite all the buzz, the benefits of digitisation have been largely happening at domestic level. E-bay claimed that it enables small and medium-sized enterprises (SMEs) to have better export capacity. However, the larger picture tells a different story as export rates of Asian countries are still relatively low. This means that Asia is yet to fully engage in cross-border digital trade. This is due to some key challenges.
Weak legal and regulatory frameworks dampen international e-commerce growth. Many Asian countries are still struggling with regulatory fundamentals. Indonesia, for example, faces an uphill battle against online fraud – which suggests that data verification remains an issue for many e-commerce participants. This is a roadblock to further discussion on data privacy, where Asia is outmatched, for example, by the EU’s comprehensive directive regarding the use of personal data that has been enforced strongly since 1995.
Border clearance procedures are unnecessarily complicated. Goods will need to pass through layers of bureaucratic red tape, which remain heavy on revenue collection. As a result, customers suffer from unreliable and sluggish delivery service that may turn them off from online shopping.
Online transaction is not well supported by the region’s financial system. Cash rules – for now. This hampers payment flexibility and cools market growth. Whilst e-commerce technology offers disruptive models to bridge the gap (e.g. electronic payment for the unbanked), it is still too early to declare this as the ultimate solution.
ICT infrastructure and ICT literacy are sporadic. Power supply and access to the Internet are unequally distributed – geographically, and by gender (see chart below). Moreover, citizens’ capacity to use the Internet is low, despite the high rates of mobile phone ownership. Consequently, many citizens currently miss out on e-commerce’s potential as a new avenue for economic participation.
What can be done to unleash Asia e-commerce’s potential? National governments play a crucial role in leading e-commerce development, particularly in ensuring policies and regulations for better trade logistics, ICT infrastructures, and e-payment options are in place and adhered to. Nonetheless, relying on the government alone as a catalyst to better e-commerce receptivity is not enough. The private sector can contribute by exploring innovative ways to improve the quality of goods and logistical support, as well as providing a more comprehensive return policy.
Stakeholders collaboration is key here. Given the possibilities of digital technology to enhance commercial activities, greater engagement around policy and innovative action would be welcome.