Intra-Asia e-commerce growth potential: A silver lining for Covid-hit region
Asia already holds the lion’s share of the global e-commerce market. Still, its potential for intra-region growth — with economies recovering and income levels rising — makes the region the one to watch beyond Covid-19.
During the pandemic, lockdowns and movement restrictions sparked a surge in e-commerce as consumers and businesses turned to online channels in droves for their purchases. Unprecedented growth in shipment volume and express deliveries around the world followed, according to Ken Lee, CEO, DHL Express Asia Pacific.
“The speed of growth surprised us initially, but we knew that it was the most natural response, given how e-commerce can efficiently meet market demands for goods that are suddenly facing supply shortages,” said Lee.
But e-commerce within the region still lags. Overcoming obstacles from red tape to unfamiliarity with adjacent markets, should unlock significant opportunities for sellers.
For now, however, there is more than enough activity to keep sellers busy. Despite disruptions to mobility caused by the pandemic, global trade and data flow started to recover toward the end of last year, according to an update in the DHL Global Connectedness Index 2020. Moreover, as in-person contact shifted into the online world, international internet traffic, phone calls and, most notably, e-commerce received a timely boost.
Watch: Ken Lee on the accelerated growth of e-commerce in intra-Asia trade
Within Asia, in particular, e-commerce has skyrocketed. Now accounting for almost half of DHL Express’ revenue in APEC, intra-Asia e-commerce still has a long runway for growth. “Intermediate and finished goods are still largely assembled and manufactured here, but they are now also being shipped within and consumed in Asia,” said Lee.
As the region’s spending power gradually recovers from the pandemic, further cross-border e-commerce penetration, supported by efficient cross-border logistics solutions, will play a key role in the regional economic recovery.
The state of e-commerce
The high hopes for intra-Asia e-commerce to flourish are not unfounded.
Recent research by DHL Express highlighted the strong growth of the global business-to-business (B2B) e-commerce market, which is expected to grow from US$12.2 trillion (€10.26 trillion) in 2019 to reach US$20.9 trillion (€17.6 trillion) in 2027.
“Many Asia manufacturers are in the B2B space and are only just getting into e-commerce. There are plenty of opportunities for early adopters to benefit especially in this region where many of these businesses are based,” said Lee on the bright future for the sector.
Growth in the business-to-consumer (B2C) e-commerce sector is, likewise, progressing at breakneck speed, with the pandemic being a key driver. The global B2C e-commerce market, valued at US$3.67 trillion (€3.09 trillion) in 2020, is expected to expand at a compound annual growth rate (CAGR) of 9.7 percent from 2021 to 2028.
The development is unsurprising since the foundations for this meteoric growth were laid way before the Covid-19 pandemic. The entry barriers to e-commerce have been lowered significantly over the years with advances in technology helping to overcome the digital divide.
“Obstacles such as smartphone ownership and internet access are fast disappearing. During the pandemic, for instance, we saw how quickly some individuals seized the opportunity to get on e-commerce marketplaces such as eBay, Etsy, and Amazon to sell their goods,” said Lee.
Yet, with improvements in the uptake of e-commerce, cross-border trade through online and e-commerce channels still lags in Asia compared to other regions.
Each geography and country face unique challenges, such as the lack of spending power or the need to pay taxes to import foreign goods in some countries. For the latter, Lee believes a potential long-term solution should start with the Association of Southeast Asian Nations (ASEAN).
“For Asia to buy more within Asia, the ASEAN bloc could look into preferential tax treaties for ASEAN nations, given it has one of the fastest-growing incomes driven by a large middle-class growth in Indonesia.”
This, alongside the gradual reopening of the region’s economies from Covid-19, could provide the impetus and new opportunities for businesses to pursue cross-border e-commerce within Asia, shared Lee.
Why logistics is key
In the near term, however, the logistics sector is best placed to render support to e-commerce businesses to unlock the potential of the large, untapped e-commerce market within Asia.
“Sometimes, all they need is a nudge to get started. What we’ve done is work with partners in the regional e-commerce ecosystem to simplify the process for our customers to jump on the e-commerce bandwagon,” said Lee.
Like the restrictions imposed in different countries during the pandemic, the rules and regulations governing cross-border e-commerce imports across the region are also constantly changing, making it tough for businesses to maintain compliance.
“For instance, many countries are updating their customs codes to accommodate the increase of personal imports. We help sellers by regularly updating our shipping tools with the necessary features and functionalities that support these changes, so our customers are not caught unaware,” said Lee.
Cross-border e-commerce within Asia is expected to gather pace, and most logistics providers are prepared for an upswing in activity. For DHL Express, improvements are already underway to ensure convenient, seamless deliveries for customers.
“We will soon launch a new solution to help sellers manage KYC documentation requirements (government-recognized identity proof) imposed by customs in different countries, all while keeping to privacy standards and regulatory processes,” said Lee.
The removal of trade and customs complexities will not only empower sellers to focus on their core business, but will also augment the intra-Asia e-commerce experience for a post-Covid-19 future.