Shopping is one of the most popular online activities worldwide. This is even truer in Asia—a region where digital development is taking off in developing e-commerce markets such as Thailand and India, and online retail continues growing strongly in mature markets like Japan, Hong Kong, and China.
Asia’s e-commerce industry is thriving and the outlook seems even brighter: the industry is projected to grow by 12% annually, and to be worth over $2.1 trillion by 2021 according to a Worldpay report.
There are many explanations for why Asian markets have been attracting hordes of overseas entrepreneurs—enormous market potentials, growing purchasing power, and expanding middle-class populations. For companies seeking to test and launch new ideas, markets in Asia are more desirable because consumers show greater inclination to try new products.
A 2016 survey by Consumer Technology Association shows that nearly 60% of online consumers in China and close to 50% of consumers in Indonesia and Malaysia describe themselves as early-adopters of technology, while their U.S. counterparts see a relatively low figure of only 15%. Similarly, the Global New Product Innovation Survey conducted by Nielsen found that close to 70% of respondents from Asia say they purchased a new product during their last grocery-shopping trip comparing to only 31% of respondents from North America reported similar behaviors.
High barriers to entry
Asia makes sense as a testing ground for new startups and brands, but the barrier to entry is usually high. Without local market knowledge and deep enough pockets, chances are lean for younger companies to expand outside of their domestic market, let alone find success in Asia.
“Everyone is interested in selling in Asia, but that hurdle and barrier is quite high due to a number of reasons such as language, business risks, logistics, lack of local market knowledge and the ability to identify high potential partners,” Eric Wang, CEO of citiesocial, told TechNode. citiesocial is a curated e-commerce platform that focuses on high-quality home, electronics, and fashion accessories. They work primarily with young, boutique brands from the US and Europe. The Taipei-based startup recently announced a $2.75 million investment led by Alibaba Taiwan Entrepreneurs Fund—a NTD 10 billion (RMB 2.2 billion) fund to support young startups in Taiwan.
The company said the investment will be used to expand and upgrade their launchpad services, which aims to help emerging brands grow their market presence and business in Asia, as well as streamline the communication with their brand partners by building out better vendor portal and increase transparency of areas such as logistics and sales distribution.
Gateway for emerging brands and startups
Offering platform for western brands to sell in Asia is not an innovative idea—JD Worldwide, Global Source, and Tmall Global, Kaola all offer such a platform, but these e-commerce retailers target bigger brands. citiesocial has been doing something quite different.
“What we noticed is the hurdle for these emerging brands is actually high in order to sell well on these platforms.” So, there is an unfilled gap in the market that the startup is looking to fill. citiesocial act as a gateway for these emerging brands to help them sell and advertise in Asia through localization, including localization, marketing, translation, and photo and video content editing.
“We help them to navigate and identify the right channels to promote their products,” Wang explained that citiesocial not only help these foreign brands gain exposure to key opinion leaders (KOLs) such as local celebrities, internet celebrities, and bloggers and they also work with the vendors on merchandising, selling price, logistics, inventory, after sale services, and more.
Currently, the core of their sales is coming from Taiwan and Hong Kong region, but the company is planning on expanding to China, Korea and Japan markets, which they have been testing out on.
Addressing the shifting trends
There are two interesting shifts happening in Asian markets that will likely dominate the e-commerce trends in Asia according to Wang. The first shift is the growing consumption capability of middle-class and as well as the Gen-Z and millennials. Rising purchasing power of middle-class and these younger consumers mean that they are more willing to spend and have a stronger appetite for affordable luxuries.
Second, the taste and where consumers are looking to spend is different. “Five years ago, they are still very much focused on the luxury brands and the well-known brands from US and Europe, but we see that evolving, especially for middle-class and millennials, they’re looking at boutique products that express more individuality,” Wang explained. This unique group of consumers is increasingly educated, tech-smart, style-savvy, sophisticated, who are more exposed to foreign niche brands through overseas travel and the Internet. “We see that in Taiwan and Hong Kong as well, but I think it’s most significantly exemplified in China.”
China has the largest e-commerce market in the world that is projected to reach $1.42 billion by 2020.“The Chinese middle-class is at 500 million people, Gen-Z, and millennials about 200 million. Just those sheer numbers comparing to the US is significant, substantial.” Indeed, consumers from these age groups are more consumption-oriented comparing to previous generations and are thought to be key drivers of China’s spending trends.
The startup is not on its own on this ambitious quest, the team at Alibaba also acknowledges that these trends should be fully addressed. “We have witnessed a trend of Asian consumers, especially in Mainland China, increasingly seeking out products that let them express their own individuality. This is why we have chosen to partner with citiesocial,” said Andrew Lee, Executive Director of the Alibaba Taiwan Entrepreneurs Fund.
As a part of Alibaba’s investment program, citiesocial is set to leverage the market access, resources, and mentorship that Alibaba is offering. “[Alibaba has] a very well-developed logistics and operation chain that can help our vendor’s products to be delivered into the hands of Chinese consumers,” said Wang.