Expanding into Asia-Pacific: How to Avoid Potential Pitfalls

Gaining a foothold in the tricky markets of Asia-Pacific is a difficult proposition. You’ll need specialised knowledge about the region, the particular characteristics that define the region’s countries, and an understanding of its consumers. Audrey Ottevanger, Head of APAC at ECOMMPAY, is here to help.

Despite comprising about 30% of Earth’s total land area, Asia-Pacific is home to 60% of the world’s population. Its 11 countries are responsible for 20% of global GDP. What’s more, they’re thoroughly wired in, responsible for half of ecommerce’s global turnover. It’s also a rapidly expanding market, with experts predicting that its share of global ecommerce will rocket up to about $3 trillion in 2021. That’s a recipe that can’t help but pique the interest of European and American technology companies. Consider, that with so many western companies trying to break into the Asian market, the volume of foreign investment in the Thai economy alone shot up by 53% in the first half of 2018, while the Philippines saw its own figures increase six times over. Those kinds of figures are familiar stories to several countries in the region as foreign investment and interest continues to pour in.

The thing is, bringing a western mindset and business practises to your approach in Asia-Pacific rarely works out. It doesn’t matter how brilliant your team is, trying to handle your business in Bangkok the same way you handle a business in Leicester isn’t going to produce much of a result besides disappointment. The sheer volume of regional idiosyncrasies makes foreign entry into the markets of Asia-Pacific a real challenge for foreign businesses. What idiosyncrasies are they? Well, let’s figure them out.

How does Asia shop?

Asian-Pacific markets are deeply fragmented, and it’s that which sets them apart from so many other regions. Things which might indicate one thing in a western market indicate nothing of the sort in Asia. Take internet penetration, for example: Japan has an internet penetration level of an incredible 94%, but is only in third place in terms of global web users, behind Indonesia and China (whose net penetration levels hover around 50%).

Asia-Pacific is also deeply smartphone-bound: most of its net users are browsing on handheld devices rather than bulky old PCs and their derivatives, with 80% of users in China only accessing the internet through their smartphones. There are always exceptions, of course, Japan, the Philippines and Vietnam are all a bit more likely to surf on a PC, owing to the unique peculiarities of their national situations. Vietnam and the Philippines lag behind the rest of phone-happy Asia, and Japan’s population has an average age of 46 years old, not exactly the age bracket for iPhone fanaticism.

What else? Asia-Pacific is an omnichannel paradise. Instead of restricting themselves to single systems, Asian consumers like to research on phones, pay on PCs, and collect in person. It’s the way users are, well, used to, and it’s the way that seems most reliable to them. In fact, data on Indonesian ecommerce shows that the conversion rate of Indonesian online stores is an incredible 200% higher when they’re accessed from a PC even though nearly three quarters of their traffic is from mobile devices.

And finally, businesses in Asia-Pacific can’t afford to ignore public opinion. The influence of social media and messaging services is enormous, with up to 60% of Thai users looking up their future purchases on Facebook Messenger, Line, and Kaidee, while Chinese users are rigorous about looking up reviews of the items they want before they ever get to a checkout page. 34% of Chinese internet users say positive reviews are an important criterion for them when it comes to purchasing decisions, while a full three quarters of them make sure to leave feedback about their online purchases.

Paper? Plastic? Neither?

Asia-Pacific is still largely cash-dominated, especially in the emerging economies. So many Asian consumers don’t have bank accounts that the continued popularity of old-fashioned cash is practically inevitable. Nevertheless, the popularity of electronic payment methods grows from year to year.

While European countries can boast that 98% of their populations utilise bank services, bank users in Asia-Pacific equated to about 73% of the population in 2017, which leaves a lot of people unbanked in a region with such a huge population. In particular, Vietnam, the Philippines, and Indonesia are still massively cash-dominated: 90% of their transactions are still made in cash. It may not last, though: regional governments are actively trying to promote the use of banking services and it’s forecasted that bank coverage will only increase as the years wear on.

The banks have to compete with fairly popular e-wallet and alternative payment methods, though. China in particular has become dominated by payment apps like Alipay and WeChat Pay, which are by far the most popular way to pay for goods online, and which make up 54% and 40% of the market respectively.

Still, that’s far from universal, and the ascendance of traditional banking systems seems fairly certain at this point. Japan and Malaysia both make major use of card payments and online banking, while contactless payments are growing in popularity across the region.

How do goods get from A to B in Asia-Pacific?

In a region as varied in infrastructure and geography as Asia-Pacific, logistics can get complicated. The efficiency of delivery services is largely dependent on the obstacles delivery services have to face. Delivery services in the Philippines, for example, have to contend with the fact that the country is spread out over 7000 islands, making logistics an arduous endeavour. Nevertheless, the development of infrastructure in the country means ecommerce is expected to double in value over the next 2 years.

On the other hand, Thailand occupies a fairly solid position logistically. The World Bank rates it 45th in the world in terms of logistics and infrastructure, and the country’s ecommerce is expected to grow from $3 and a half billion to nearly $7 billion by 2021.

Logistical difficulties mean a lot of Asian ecommerce ventures run into issues of customer trust. Potential purchasers simply don’t think their item will ever turn up. In response, many sellers have instituted a system whereby the buyer’s money is put safely in escrow, and only released when a successful delivery is confirmed.

So, what else is there?

Crucial to success in your expansion to Asia-Pacific is the understanding the ins and outs of local legislation. Overcoming the innumerable bureaucratic hurdles that trying to establish a business entails is a mammoth task almost across the region.

Another issue is how ephemeral a lot of trends in Asia-Pacific can be. From bicycle rental to craft beer, what’s fashionable one day is old news the next, and any business aiming to capitalise on this or that trend is liable to find the market dried up by the time they finally get there.

A familiarity with the local culture is another key ingredient for long term success.  Organising your business’ structure in a way that doesn’t go against the cultural grain of your new region is essential to friction-free business, and knowledge of local etiquette is an obvious necessity for talking with partners.

Understanding and integrating local preferred payment methods should be one of the first stops on the way to establishing your new branch.  The way to do this efficiently is to work with a single partner that can handle various payment types, rather than going to a new partner for every single payment method you want to accept. Remember that Asian payment service providers tend to provide a more basic level of integration with banks and popular payment methods than their European counterparts.

But at least one thing is universal: you need to provide a speedy, comfortable, and convenient experience for your customers if you have hopes of successfully expanding your business into Asia-Pacific. The dream is a payment experience that can be completed with one click, tap, or swipe, and it’s necessary to bear that in mind as you design the layout and process of your payment journey.

If you have any questions or comments, please do not hesitate to contact Audrey directly.