How is digital evolution impacting the luxury retail business, and how do the two co-exist?
This study takes a close look at the evolution of online marketplaces and examines the current retail reality through a market by market analysis. The paper presents the Asian online landscape through the Group’s own experience, its local market partners, and the major online players in the region.
With a predicted e-commerce penetration in 2023 of 35% (Source: Euromonitor International), China is leading the pack in digital innovation. However the consumer journey is not merely confined online in the country. Quite the opposite: brick-and-mortar retail still accounts for more than 80% of total retail sales. The uniqueness of the Chinese retail market and its true omni-channel structure is complex, and the many players offer distinct solutions to retailers.
HONG KONG SAR
Hong Kong’s unique positioning within the Greater Bay Area (GBA) places it a large advantage in terms of its geography and diverse talent pool. However with its high population density, people can easily access consumer goods from physical stores, and brands have not digitised at the same rate as in Mainland China. How will established brick-and-mortar brand footprints within the city compete with its unique position to become a center for the GBA digital centralization?
Despite the island’s fairly small size, Taiwan has one of the highest online retail penetration rates in the world. Driving the growth is the national youth, most of whom do their shopping online, but also homegrown e-commerce platforms. 80% of users have downloaded retail apps on their phones, with an average of three shopping apps installed per mobile. How have digital marketplaces evolved in Taiwan?
As the world’s third largest e-commerce market, Japan has a highly unique retail ecosystem, both in terms of demographic and cross-border opportunities. Unlike Taiwan, where younger generations are the main driver for e-commerce, Japan has a large older population of spenders. In addition, Japan has one of the lowest cross-border shopping rates due to language barrier, as the majority of the population only speaks Japanese. This plays a large role in the development of local marketplaces, and whilst bricks and mortar shops remain the preferred norm in terms of consumption habits, there are signs that even the older population is adhering to online for certain product categories.
South Korea, with tech-savvy consumers, strong technological and mobile adoption, and an advanced internet infrastructure, has proved fertile ground for a number of big players and startups focusing on different offerings, from marketplaces to search engines and messaging/ social commerce platforms. Even traditional retailers have increasingly turned their attention to their online businesses, and have a plethora of marketplace options to choose from. Each venture is competing for a share of the revenue in what is an increasingly overcrowded market. Who are the winners in such a competitive market?
Despite the differences in the growth of retail infrastructure and e-commerce across the region, online retail is beginning to occupy a bright spot in Southeast Asia. According to the Google-Temasek e-Conomy SEA 2018 report, e-commerce is estimated to exceed US$100 billion in GMV by 2025, from US$23 billion in 2018. Nevertheless, online commerce still only makes up 2-3% of total retail sales in the region, due to challenges in building a solid distribution network offline.