Insights on Building ecommerce Strategies In Asia

Transcription

1 EXECUTIVE REPORT Insights on Building ecommerce Strategies In Asia Global Brand Executives Share Lessons Learned while Navigating the Age of ecommerce Authenticity Produced in partnership by The Research Trust and Demandware

2 Table of Contents Executive Summary 3 Chapter 1: Dawn of the Age of Authenticity for Consumers in China, Korea and Japan A Vast Opportunity Awaits Global Brands China Leads Korea and Japan Present Advanced Digital Behavior Direct-to-Consumer ecommerce Adoption China: Mobile and Social Momentum Moves Markets Building Trust with Authentic Products and Experiences Authenticity: The Aspiration of the Rising Global Middle Class APAC Shoppers Embrace Direct-to-Consumer Case Study: West Learns from East Affinity for Rich Content at Crocs Chapter 2: Balancing Channel Options: To Marketplace or Not to Marketplace? Executives Weigh in on ecommerce Maturity and Channel Options In China, It is Time to Get Strategic China s Balancing Act: To Tmall or Not to Tmall? Japan: Sophistication and Similarities to the West Offer D2C Opportunities Korea: A Fragmented Digital Retail Scene Gears Up for Growth Spotlight on Singles Day: Balancing Sales Volume with Margins Chapter 3: As Markets Evolve, Consumers Embrace Direct Relationships with Brands The ecommerce Adoption Path As ecommerce Becomes More Stategic, Resources and Investment Shift to D2C Site Operations Juggling Global Brand Issues with Local Needs What Do the Past and Present Tell Us about the Future of ecommerce in China? Direct-to-Consumer Has Arrived for Asia Pacific ecommerce 17 2

3 Executive Summary Retail brands establishing a digital commerce presence in Asia-Pacific and especially in China have found that each country requires a unique approach, as market maturity and consumer preferences vary widely by country. Leading ecommerce executives tell us that as ecommerce becomes increasingly critical to their retail presence in Asia, and as consumer shopping habits evolve, they are shifting resources and investments to build direct-to-consumer (D2C) site operations. Nowhere is this evolution more evident than in China where today marketplaces generate the lion s share of ecommerce revenue. Yet China s online shoppers are increasingly looking beyond Tmall as their only shopping destination and towards brand sites and D2C commerce sites for richer content and premium product that marketplaces don t always offer. As a result, brands looking to grow in China should not wait to begin building the foundation for their D2C ecommerce presence. Retailers building the foundation of official sites whether a brand content site or a transactional one have done so to provide APAC shoppers a more authentic, differentiated, and engaging shopping experience than can be found on marketplaces. Many are now seeing their hard work come to fruition. They have been testing and optimizing across channels to drive traffic and learn what messages and tactics perform best. They are exploring which product assortments sell better via direct sites than marketplaces. D2C sites also provide them with previously unavailable customer data and insights, intelligence that helps them learn more about their shoppers and create more relevant experiences. The following insights, observations and executive perspectives on Asia Pacific ecommerce are examined: How mobile, social and demographic trends guide the journey of the Asian consumer and what this means for the future of ecommerce in this region. How retail brands balance marketplace, content and D2C ecommerce strategies as they pursue strategic opportunities to build their brands and grow sales in Japan, Korea and China. It relays why retail brands are paying more attention to key performance indicators and exploring deeper investments in content and direct-to-consumer sites to spur sustainable long-term growth. They are finding that marketplaces are a reasonable starting strategy, but should not be the endpoint of a comprehensive local ecommerce strategy. It concludes with lessons learned in Japan, Korea and China to help ecommerce entrants to the region navigate Asia s Age of Authenticity. 3

4 The Asian consumer requires a more entertaining experience than their Western peers to make their transaction online. They pay attention to authenticity and want more signals that the goods are genuine and that they can trust the brand. They demand a level of content and storytelling that Western customers are just starting to ask for. VP of ecommerce Global Footwear Brand 4

5 CHAPTER 1 Dawn of the Age of Authenticity for Consumers in China, Korea and Japan A Vast Opportunity Awaits Global Brands Inside Asia s great walled gardens, ecommerce harvests are bountiful. In China, Alibaba s marketplaces will produce close to US $394 billion in gross merchandise volume (GMV). 1 Tencent s digital properties, including mobile chat service WeChat, will yield incredible volumes of traffic. As shoppers search for richer content and more engaging stories at direct-to-consumer sites, China s top search engine, Baidu, also continues to thrive. Across Asia and within China, shoppers are on the move. The upwardly mobile shopper wants authentic, premium product. They respond well to deeper interactions, more inclusive storylines and digital displays of commitment and loyalty from the brands they love. They prefer not to be walled in. China Leads China s online sales opportunity speaks for itself. Forrester says the Chinese online retail spend is poised to grow at a compound annual growth rate of nearly 20% per year until 2019 when it is expected to exceed $1 trillion. 2 But the real explosion is in mobile commerce, projected to grow 55% in 2015, 45% in 2016 and 40% in As mobile device availability accelerates China s Internet penetration, 750 million Chinese citizens will be prospective online shoppers by Korea and Japan Present Advanced Digital Behavior Our interviews clearly indicate China is the priority country when brands weigh the pros and cons of entering and developing ecommerce in Asia Pacific. Yet Japan and South Korea also present attractive ecommerce opportunities. Dubbed Digital DNA markets by A.T. Kearney for their advanced state of online consumer behavior, Korean and Japanese consumers have more readily adopted technology and ecommerce than many of their Western and emerging market counterparts. 5 High engagement in mobile and social is driving further growth of digital commerce. 6 Key Digital Benchmarks by Country January 2014 *Based on survey of each country s internet users 1 Source: Alibaba s March Quarter 2015 and Full Fiscal Year 2015 Results, Alibaba, May, Source: China Online Retail Forecast, 2014 To 2019, Forrester Research, Inc., Feb 4, Source: Mobile Commerce in China Statistics and Trends, Go-Globe (aggregating multiple sources), March 29, Source: Alibaba: Here Are The Key Growth Drivers In The Chinese E-Commerce Market, Forbes, June 2, Source: A.T. Kearney 2013 Global Retail ecommerce Index, A.T. Kearney, November 18, Source: A.T. Kearney 2015 Global Retail ecommerce Index, A.T. Kearney, April 7,

6 One executive we interviewed described South Korea as a leader in fashion and entertainment [that] drives trends in Asia. A cultural hub of APAC, Korea is seen as a strategic market for building brand awareness throughout Asia. Korean TV, movies and music as well as fashion styles influence consumers in China, Japan and Hong Kong. Digital commerce is growing quickly in South Korea and opportunities to connect with Koreans abound. Direct-to-Consumer ecommerce Adoption As their ecommerce preferences have become more sophisticated, Japanese shoppers have gravitated towards direct-to-consumer sites and away from marketplaces. Brands have responded by investing more resources in these sites. In Japan, approximately 60% of fashion brands and 30% of watch & jewelry brands now operate direct-to-consumer ecommerce sites. 7 We re seeing a similar trend evolve in China, especially among consumers of cosmetics and beauty products. Cosmetics brands have been investing in China longer than any other product category. As a result, the Chinese consumer of higher-end cosmetic products seeks more specialized online shopping experiences and tends to rely disproportionately on brand sites, as L2 s China Beauty Digital IQ Index highlights below. China: Mobile and Social Momentum Moves Markets Mobile and social adoption is also driving the increasing sophistication and evolving preferences of Chinese shoppers. Smart bets by brands operating D2C mobile ecommerce sites are also paying off. One Hong Kong-based executive we spoke with pointed to a local Asia-based fast fashion brand that saw nearly a quarter (23%) of its digital revenue originate from mobile after launching its mobile commerce site in April Previously it had no mobile presence. Trusted social networks are also highly influential in driving consumer behavior in China. A.T. Kearney found in a 2014 consumer study that social networks had 10 times more influence on purchase decisions in China versus the US. 8 This was particularly true for millennials; for those aged 26 to 35, only 7% of US consumers stated social networks influenced their purchase intent versus 68% in China. 9 Mobile commerce innovators like Tencent are using messaging platforms to offer another ecommerce touchpoint, and brands are taking notice. Tencent s Weixin/WeChat China s top messaging app with 549 million monthly active users is drawing more attention to chat commerce. 10 Companies in online payment, ticketing, digital goods and gifting sectors China Beauty: Direct-to-Consumer E-Commerce Adoption January 2014 Prestige (n=49) Mass (n=35) 47% No E-Commerce 53% E-Commerce 11% 89% E-Commerce No E-Commerce 66% Brand Site 81% Trial 15% Tmall 19% Both 19% Both 2014 L2 L2inc.com 7 Source: Digital IQ Index : Japan & Korea Luxury, L2 Inc., January 23, 2015, p Source: Chinese consumers 10X more reliant on social media for purchasing decisions than Americans, Resonance China, December 8, Source: Ibid. 6

7 embedding buy now links within Weibo posts and WeChat are exploring whether integrating ecommerce within social media makes impulse buying easier and viral marketing more effective. Others mentioned the customer service opportunity of WeChat-enabled commerce. Many brands are focused primarily on capitalizing on the large audiences active on China s social networks to drive brand awareness. Our conversations about chat commerce suggest that, although social commerce is nascent, it s a great opportunity for retailers to increase consumer engagement on social channels. One executive mentioned that his team has to be creative with limited investments; they have prioritized digital and social marketing to build their brand and have seen success with relatively low cost methods. Building Trust with Authentic Products and Experiences ecommerce, mobile and social are global trends. Yet the rising middle class of consumers now nearing the one billion mark is a demographic trend that is most characteristic of emerging markets, especially in Asia. Since 2000, the share of the global population falling into the middle class has doubled in Latin America, nearly tripled in Eastern Europe, and increased sevenfold in Asia. 11 How is the rising middle class consumer different from the first generation of cross-border shoppers, who tended to be wealthier and more comfortable shopping on English ecommerce sites? Many are new to online shopping and less trusting, which is why they prefer local payment options. They aren t as comfortable shopping English-language sites and are more sensitive to high international shipping costs, which is why localized ecommerce sites are so important. It s not a heavy trend but we are seeing indications of social driving traffic to D2C sites. Head of ecommerce in China Global Footwear Brand Yet similarities exist as well. Asia s rising middle class is embracing digital commerce just as wealthier shoppers have. They appreciate direct access to the global brands they know and trust, and hunger for a wide selection of products that aren t available or attainable locally. Authenticity: The Aspiration of the Rising Global Middle Class Price and selection the key tenets of the first era of cross-border shopping remain important. But trust and authenticity are key dynamics impacting more and more purchase decisions in Asia. The quest for authentic experiences and products impacts which online channels and touchpoints Asians shop and where and when they are willing to spend more. Alibaba has figured out how to operate in a low trust environment. [Western] companies are now investing in branded sites to serve a critical function of creating trust. Increasingly, it is a lot less about getting a deal and more about getting an authentic product. GM of ecommerce, Asia Pacific Consumer Electronics Brand Direct-to-consumer sites provide retail brands with the opportunity to build relationships with consumers, establish trust, and inspire shoppers with rich content and storytelling. One executive we interviewed says that as affluent shoppers shift their focus away from seeking deals, today s opportunity is to build more authentic shopping experiences on top of Alibaba s marketplace foundation. Brands with a direct site benefit as well, learning more quickly about consumer assortment, shopping behavior and marketing preferences. This invaluable information helps brands formulate more effective local strategies that can boost conversion. Brands can also price on their own terms a feat most cannot achieve in marketplace environments. 10 Source: Tech in Asia, May 13, Source: Allianz Global Wealth Report, Allianz, September, Allianz defines this wealthy middle class by taking the average global net per capita financial assets ( 17,700 in 2013), as a basis, and then encompasses all individuals with assets corresponding to somewhere between 30% and 180% of this figure. 7

8 APAC Shoppers Embrace Direct-to Consumer As Asia s first generation of online shoppers evolve beyond ecommerce marketplaces, they are embracing D2C sites that offer a local touch. A Bain report on China points to the success of Shangpin, which features a selection of full-priced, high-end fashion and luxury brands. The site s curators tell the stories behind the brands and offer in-house fashion advice and value-added services such as free dry cleaning, free shipping and returns. The retailer s success 75% of sales are from return customers highlights Chinese shoppers increasing demand for authenticity and the brand differentiation that D2C sites offer. 12 As a more mature ecommerce market where shoppers embrace D2C sites, Japan offers insights into the future of digital commerce in China and South Korea. The APAC consumer is mobile-enabled and sociallyinformed, especially in China. As this consumer is increasingly seeking more authentic products and experiences, D2C sites should prominently feature branded content, customer reviews and other social proof points to signal authenticity, to earn trust and loyalty and to grow sales. 8

9 SPOTLIGHT ON CROCS West Learns from Asia ecommerce: Signaling Trust & Authenticity The Challenge The Crocs site was not fully localized for the Asian consumer s expectation of security, trust and rich content storytelling. The Solution Crocs ecommerce team, based in Singapore and responsible for its portfolio of Asia-Pacific transactional websites, added security and trust signals to the homepage footer and inline on product detail pages. They also added rich content on Crocs footwear technology on product detail pages. (See Korean site at right.) The Results Since implementation last year, Crocs Australia, Singapore and Korea have seen increases in key business drivers, most importantly their conversion rate. The positive impact of these efforts in Asia has spurred the Crocs North America team to make similar changes to the storytelling approach on sites serving the US, Canada, the UK and Germany with more to come. Security & Trust Signals on Crocs Korea Site Footer Security & Trust Signals on Crocs Australia Site Footer Rich Content on a Crocs Korea Product Page Highlighting Footwear Technology 12 Source: Riding the digital retail wave in China, Bain and Co.,

10 There is a lot of pressure from Tmall to participate you can opt in or choose not to participate. Most choose to participate [and] plan a promotion to make something out of the minuscule margin. Yet many don t participate because it is an event that erodes the brand. GM of ecommerce, Asia Pacific Consumer Electronics Brand 10

11 CHAPTER 2 Balancing Channel Options: To Marketplace or Not to Marketplace? Executives Weigh in on ecommerce Maturity and Channel Options Whether it s China, Japan or South Korea, building and growing brand awareness and sales requires local expertise. Partners can play an especially important role when brands don t have an existing local retail footprint. Our conversations spoke in depth to challenges related to hiring local ecommerce expertise and to managing in-market partners while at the same time balancing local market dynamics with global brand objectives. To address this issue, some brands supplement with expatriate ecommerce talent, who have gained market expertise working with a range of partners including in-country agencies, system integrators, ecommerce platform providers and/or fulfillment and operations partners. 13 Executives contributing to this paper stressed that important differences exist in this regard across APAC s top three markets. In China, It is Time to Get Strategic As Chinese consumers become comfortable buying online, they are seeking richer, more authentic interactions with preferred global brands. Brands are responding by viewing the China ecommerce opportunity more strategically. Not surprisingly, the majority of our conversations with APAC ecommerce executives revolved around market entry and development approaches for China. Over the past five years, these executives have pursued a wide array of strategies such as international shipping, marketplaces, working with distributors, and building content and direct to consumer sites. For a growing number of retailers and brands, the experimental period of market entry is ending in China. Our interviews found that brands are starting to take more ownership of and responsibility for their China business. Internally, executives are beginning to scrutinize growth and performance indicators more closely. One executive told us that, Until six months ago, China was pretty much hands-off except for the senior team and the team in China, which [operated] as its own business unit and was accountable directly to the CEO. China s Balancing Act: To Tmall or Not to Tmall? As retail brands pay more attention to key performance indicators and explore deeper investments in content and D2C sites to spur sustainable long-term growth, they are finding that marketplaces are a reasonable starting point but should not be the endpoint of a comprehensive local ecommerce strategy. As brands explore their channel options, To Tmall or not to Tmall? is a question many brands large and small, known and unknown continue to ask. It s clear that many brands starting to transact online in Asia choose Tmall as one of their sales channels, but it also has some limitations. As a result, some brands choose to forego Tmall entirely. The Tmall environment is transactional and more of a one size fits all. Over time, as consumers mature in their online shopping behaviors, they will start to look for a better experience. GM of ecommerce, Asia Pacific Consumer Electronics 13 Source: No Sale, Brands Tell Alibaba s Tmall, Wall Street Journal, March 25,

12 One executive explained why Tmall can be an obvious channel for brands entering China. The reality is that Tmall has the traffic. And the cheapest way to get the traffic is to open a Tmall store. However, we heard from several executives that Tmall favors brands who discount heavily, rewarding them with enhanced visibility on the marketplace in return. For this reason, The Wall Street Journal reports that sellers like San Francisco-based Benefit Cosmetics and Japanese fashion-brand aggregator Zozotown have shunned Tmall, saying that steep discounting and cutthroat competition on the site undercut their business. 14 One interviewee stressed that market development strategies and tactics need to be flexible. Tmall may be the easiest way to start out, but it is getting more and more expensive to get Tmall traffic. We are also seeing some slowing of the growth we went from 100% growth in traffic to 17% in the last year so the tactics have to change. One executive discussed how he chose to open a store on Tmall but decided not to discount. Instead, he used creative marketing tactics like competitions and contests to drive traffic and get the brand noticed. Another reminded us that Alibaba owns the customer relationship and prevents retailers from driving traffic off their marketplace to engage customers directly. He recommended that brands look for opportunities to engage customers directly, such as inserting coupons into packages. Simply put, we find that ecommerce executives in China need to balance the good with the bad of Tmall and weigh the impact on the brand when formulating their ecommerce channel strategy. Japan: Sophistication and Similarities to the West Offer D2C Opportunities Overall, our community told us that as target customers, the Japanese are more mature and likely to look for official sites. As discussed in Chapter 2, since the Japanese consumer is farther along the ecommerce adoption curve than the rest of APAC, a digital commerce strategy centered on D2C ecommerce may be appropriate. Our interviews suggest that leaders see Japan as less of a test bed for digital commerce and more as an established market that requires senior level focus and executive champions. Talent is available, but may be hard to find. Japan is very mature and requires expertise, so pay for the best talent you can get in that country, advised one thought leader that only sells direct. We have an incredible ecommerce director that isn t afraid to execute, will ask the right questions and drives success. VP of ecommerce, Global Footwear Brand Another executive highlighted that widespread use of credit cards in Japan helps Western brands establish digital success in Japan. Others say that although the scale and volume of ecommerce in Japan is much lower than in China, the sophistication of the retail landscape offers great omni-channel opportunities. 14 Source: Digital IQ Index Beauty: Korea, L2 Inc., September 25, Source: Digital IQ Index : Japan & Korea Luxury, L2 Inc., January 23, 2015, p Source: Succeeding in tomorrow s global fashion market, McKinsey and Co., September,

13 Korea: A Fragmented Digital Retail Scene Gears Up for Growth Korea offers a mix of opportunities for brands entering and investing in growth. The Korean online retail market is highly fragmented; no single retailer or marketplace has dominated. Gmarket has the largest share and owns 13% of the Korean market, followed by Auction, which has 9% of the market. 15 Online shopping malls (such as Lotte) are very popular because they provide offline and online loyalty programs and also issue their own credit cards. Unlike Japan, D2C sites are not as prevalent in South Korea. According to L2, Japanese fashion and cosmetics shoppers are three times more likely to find their favorite brands selling direct via an ecommerce site than are Korean shoppers. 16 So it s no surprise that executives tell us that finding experienced ecommerce leaders in Korea can be far more challenging than in Japan. Yet, we found that attention and strategic focus by global retail brands on Korea is growing. Spotlight on Singles Day: Balancing Sales Volume with Margins Singles Day, a Chinese holiday in November that celebrates people who are single, has become the largest online shopping day in the world. The day encapsulates many of the key trends driving opportunities in China and throughout Asia. Obviously, the brand exposure gained from the flood of Singles Day shoppers on Tmall on November 11 is an undeniable value-add. So too is the revenue generated, especially if a seller can move a lot of distressed inventory. To discount or not to discount is not the question; the only question is how deeply. Promotions, pricing confusion and inconsistent merchandise can negatively impact a brand s image and confuse the message a brand wants to convey. For this reason, some brands are starting to say no, to both Tmall and its Singles Day promotions. Singles Day also highlights many of the challenges foreign brands encounter as they try to grow sales, with the biggest challenge being the margin impact. Some speak to how Singles Day can feel like the best of times and the worst of times. The advance planning necessary to generate online sales on November 11 requires a lot of company resources and the marketing costs are high. 13

14 CHAPTER 3 As Markets Evolve, Consumers Embrace Direct Relationships with Brands Study the past if you would define the future. The ecommerce Adoption Path Shoppers in different countries tend to follow a similar ecommerce product adoption path (as the Forrester chart below illustrates). This path explains why new online shoppers like many Chinese consumers in the last five years rely on marketplaces for easyto-compare commodities like consumer electronics, books and media. Countries tend to follow a similar ecommerce adoption path 1 Connecting and Entertaining , Social networks 2 ebusiness Basics Online banking, Travel Confucius Source: Forrester Research, The Evolution Of Global ecommerce Markets, March 28, 2014 As their digital sophistication grows, we ve seen the tastes of Asian consumers, most notably Japanese and wealthy Chinese shoppers, evolve towards more subjective online purchases of fashion and beauty products and more differentiated shopping experiences. This evolution also explains why marketplace shoppers are more price sensitive; willing to tolerate only slight differences in pricing for commodity and comparable goods. It suggests that profit margins can be much healthier on D2C sites where richer content, storytelling and product assortments differentiate brands. In return, shoppers 3 Comparable Goods Online sales of consumer technology products, books/media 4 Subjective Purchases Online sales of apparel, grocery, beauty are willing to pay a premium for the assurance of authenticity and quality. 17 As ecommerce Becomes More Strategic, Resources and Investment Shift to D2C Site Operations History holds lessons learned for brands exploring APAC opportunities, especially those in China. When ebay and Amazon introduced online shopping to Western consumers, the original product offerings were collectibles, closeouts and books; products that were a good match for consumers new to the Internet and cautious about the security of providing credit cards to unknown, unseen sellers. As ecommerce in the US boomed at the turn of the twentieth century, adventurous brands saw Amazon s marketplaces as an online version of mass merchandise department stores. Retailers and brands also saw the promise of D2C ecommerce sites as profitable sales channels providing consumers with broader selections. In the years since, ecommerce has become a strategic, highly customer-centric investment and is increasingly the hub of omnichannel retail operations. In China, we have seen a similar dynamic at play over the last ten years. Alibaba s great marketplace, Tmall, has evolved along the paths blazed by ebay and Amazon, providing a business-to-consumer platform that enables merchants and brands to sell direct to consumers. Juggling Global Brand Issues with Local Needs One knock against online marketplaces has always been the loss of brand control. As brands get more strategic in China, they are looking to gain control 17 Source: Cat-And-Mouse Game : Alibaba Exec on Fake Transactions, Wall Street Journal, March 3,

15 Tmall and Taobao shoppers are very price sensitive and are often different from the ones entering our stores. We need more consistency in terms of pricing and brand messaging and how we differentiate our brand in terms of the product offering. Head of ecommerce in China Global Footwear Brand 15

16 over their digital operations. At the same time, they are trying to balance global brand objectives with the need for leadership from in-country partners who understand local markets. Our study finds this dynamic is growing in China. Some companies investing more in their direct-toconsumer operations are revisiting relationships with Tmall Partners ( TPs ), firms that provide marketing services and operational support for the Tmall storefronts. For many brands, Tmall partners have been an invaluable, albeit expensive way to get up and running in that marketplace. Yet some brands overly rely on their TP. One executive we interviewed offered a word of caution for brands that depend solely on a TP to manage and develop all the ecommerce-related partner relationships, Don t get addicted to your TP and take results at face value. Take the time to understand what is driving sales, so you can learn from it. We also heard how the high sales commission TPs seek can cut deeply into retailers margins and hurt the bottom line. Another executive ramping up D2C operations emphasized the importance of knowing the broader partner ecosystem. Building direct relationships with local marketing and operational experts is necessary to attract traffic, capture orders and deliver the goods. Working with a roster of local partners helps brands better understand the market, more cost-effectively connect with Chinese consumers and more effectively communicate their brand message. Understanding the customer journey is key. One executive explained how the evolution of the Chinese shopper is driving home the importance of controlling and differentiating the brand. This underscores a key point from our research; namely that the APAC customer s view of your brand will determine whether they look for you on marketplaces, go directly to your content or D2C ecommerce site(s) or engage via mobile and social sites. Because shoppers are at different points in their respective digital shopping journey in Japan, Korea and China, the equity of your brand and the digital sales channels in which your brand invests its resources will differ. Although opinions vary, our interviews found that as shoppers tastes evolve, Tmall and D2C can complement one another nicely, if approached strategically with well-defined and wellcommunicated brand objectives. What Do the Past and Present Tell us about the Future of ecommerce in China? ecommerce has become highly valuable to retail brands in a relatively short period of time. Over the past decade, brands have focused on owning their customer and have invested heavily in building digitally-enabled omni-channel experiences. Amazon continues to gain market share in North America and Western European markets, although corporate profits remain elusive. Newly public, Alibaba and its Taobao marketplace face scrutiny. Many claim that much of Taobao s merchandise is counterfeit or grey market goods. Fake reviews and inflated orders, in part to boost search visibility, have regulators questioning the integrity of seller practices. 18 Although Tmall remains a very important ecommerce force in China, some brands offer mixed reviews of their success on Tmall. Meanwhile, confusion grows about how much traffic Alibaba will drive to brands Tmall and Tmall Global storefronts. At the same time, Tencent, JD.com and growing consumer demand for Western and Asian brands D2C sites exert growing competitive pressure. The future isn t clear for any ecommerce leaders operating in Asia, especially those in China. ecommerce is still evolving, history has shown that walled gardens inevitably fall and that some of Alibaba s walls have already begun to crumble. They look to Japan, where the region s more mature online shoppers show a preference for Western brand sites and D2C ecommerce sites, as a model

17 Direct-to-Consumer Has Arrived for Asia Pacific ecommerce What is clear is that shoppers in Japan, Korea, China and the rest of APAC are incredibly important to the future of global retail. Their quest for authentic goods, cultural context, rich content and a more engaging shopping experience suggests that the gap between East and West is quickly narrowing. Increasingly, we see mobile and social practitioners learning from the East. As the APAC customer journey is evolving rapidly, brands looking to grow in China, Korea or Japan, especially those wishing to reap the rewards of sustainable long-term growth, should not wait to begin building the foundation of a direct-to-consumer ecommerce operation. Leading brands are already establishing beachheads across strategic APAC markets today to build brand equity and engage with a new generation of consumers. While they may not yet have blazed a clear path for those who will follow, their insights will be invaluable as brands look for market knowledge with which to formulate their strategy which channels to pursue, resource needs to consider, and pitfalls to avoid. Every brand s journey will be unique but the future has never looked more promising for ecommerce in Asia. 17

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