Predicting the Next E-Commerce Boom

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Payment Gateway Asia-Pacific APAC

SubscriptionTrends-Green.pngIf you had a crystal ball that could tell you where the next major market for e-commerce will emerge, what would you do? Would you seize the opportunity to expand your business into this burgeoning market?

The next boom in e-commerce may well be upon us, in Southeast Asia. This, according to Marc Woo, Google’s head of e-commerce, travel, and financial services, who recently made this proclamation to the Bangkok Post. The region includes Singapore, Malaysia, Indonesia, Thailand, the Philippines, and Vietnam, amongst others.

The evidence in support of Woo’s view is readily apparent. There are already very large and mature markets in Asia-Pacific (APAC)—foremost in China, but also in Japan, Australia, South Korea, and India. The region overall accounted for 40% of global e-commerce sales in Q1 2017—an impressive share of the e-commerce pie.

That leaves Southeast Asia as “the next frontier for e-commerce in the region,” according to Woo. Two critical factors are positive indicators for fast-paced e-commerce growth in Southeast Asia in the coming years: a growing middle class and rapidly expanding internet access.

According to projections by Nielsen, the middle class of the region will grow from 190 million in 2012 to 400 million in 2020 (as reported in a recent Business Insider article). At the same time, internet access has been expanding “at a torrid pace” with 130 million people in the region owning smartphones, contributing to the 200 million people in Southeast Asia who have some form of internet access. Woo expects that number to triple to 600 million by 2025. 

Additional research by Google and investment firm Temasek Holdings projects e-commerce sales in the region to grow at a 32% compound annual growth rate (CAGR)—from $5.5 billion in 2015 to $88 billion ten years later, comprising 6% of total retail sales worldwide.

Of course, expanding into new regions requires accepting the payments that are most commonly used in those regions, and this will differ in different parts of the globe. Whereas U.S. purchasers prefer credit cards, Europeans are increasingly moving towards making payments directly from their bank accounts.

Mobile payments are also extremely popular in Asia Pacific, with over half (53%) of connected consumers using their mobile phones to pay for goods or services at point of sale via apps, in comparison to 33% in North America and 35% in Europe, according to TNS Global. Mainland China is leading the way as the world’s largest and fastest-growing market for proximity mobile payments, with 40 per cent of Chinese consumers using new payment methods.  

In less developed countries, such as some in Asia, cash remains king. To do business in these cash-centric countries where credit or bank card penetration is low, such as India, can necessitate a cash-on-delivery (COD) payment option.

Partnering with a Payment Service Provider (PSP) can ameliorate some of the obstacles: in some jurisdictions they can be tied to a bank account instead of a credit card as the funding source. PSPs also simplify administration since banks in the region can be highly selective. Many banks won’t work with a merchant directly, unless it’s a very large, well established enterprise.

Recurly works with a number of PSPs and supports a number of payment methods, as well as payment gateways that serve Japan, Singapore, and Australia. In addition to credit cards, subscription businesses that choose Recurly can offer their customers a variety of other payment options. And we’re always adding additional payment methods as the market demands. To learn more, visit our Payment Options page.

 

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