Embracing the Ecommerce Revolution in Asia and the Pacific

Jong Woo KangPrincipal Economist

Economic Research and Regional Cooperation Department

Asian Development Bank

Key messages▪ E-commerce revolution in Asia and the Pacific presents

vast economic potential

▪ E-commerce market in the region remains highly

heterogeneous in (i) economic factors and conditions, (ii)

legal and institutional environment and (iii) social

acceptance

▪ The emergence of new technologies will shape the e-

commerce landscape

▪ Developing a viable e-commerce ecosystem requires a

holistic approach and concerted efforts by all stakeholders

▪ Complex border procedures and regulatory burdens need

easing to foster cross-border e-commerce

2

Evolution of E-commerce in Asia and the Pacific

3

Coverage of E-Commerce

4

E-commerce—Purchases and sales of products (e.g.,

physical goods, digital products and services) conducted over computer

networks

—Comprises B2C, B2B, C2C, and B2G

B2B + B2C

—B2B and B2C are the two leading segments in terms of

size and relevance

—Data source of global estimate is available at

UNCTAD (2017a)

Internet Retail

—Subset of B2C e-commerce that excludes items such as

auctions and online reservations

—Data sources include EMarketer and Euromonitor

International

B2B = business-to-business, B2C = business-to-consumer, B2G = business-to-government, C2C = consumer-to-consumer,

UNCTAD = United Nations Conference on Trade and Development.

Sources: Ecommerce Foundation (2016a), eMarketer (2017b), Euromonitor International (2018), and UNCTAD (2015).

Asia is at the Forefront

5

GDP = gross domestic product.

Note: Business-to-Consumer (B2C) e-commerce covers any contract for the sale of goods and/or services, fully

or partially concluded by a technique for distance communication. Values refer to the total of goods and

services sold through B2C transactions as a percentage of GDP.

Source: Ecommerce Foundation (2016).

0.7

0.8

2.6

3.1

4.5

0 1 2 3 4 5

Middle East and North Africa

Latin America

Europe

North America

Asia andthe Pacific

Global E-commerce

(% of GDP)

Regional E-commerce, 2015

(% of GDP)

1.3

1.6

2.0

2.4

3.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2011 2012 2013 2014 2015

E-Commerce Readiness Score—Selected Asian Economies, 2017

6

Rank Economy Score Rank Economy Score

5 Republic of Korea 95.5 78 Armenia 47.0

8 Japan 93.6 115 Cambodia 29.0

10 New Zealand 93.0 117 Kyrgyz Republic 29.0

14 Australia 92.0 120 Pakistan 24.0

16 Hong Kong, China 91.0 123 Myanmar 23.0

Note: The e-commerce readiness score refers to the United Nations Conference on Trade and Development Business-to-

Consumer Readiness Index score, and is comprised of four indicators, namely percent of internet users, number of secure

servers, financial account penetration, and postal reliability score, measuring the readiness of an economy to engage e-

commerce. The index covers 144 economies as of 2017.

Source: UNTAD 2017b. UNCTAD B2C E-commerce Index.http://unctad.org/en/PublicationsLibrary/tn_unctad_ict4d09_en.pdf

Cross-border Business-to-Consumer E-Commerce Market Forecast by Region ($ billion)

7

CAGR = compounded annual growth rate.

Note: Figures may not add up to ‘total’ due to rounding.

Source: AliResearch and Accenture (2015). Global Cross-Border E-commerce Market 2020. http://unctad.org/meetings/

en/Presentation/dtl_eweek2016_AlibabaResearch_ en.pdf

Economy 2014 2015 2016 2017 2018 2019 2020CAGR

2014-

2020

Asia and the Pacific 71 99 144 218 299 381 476 37%

Latin America 6 10 15 25 37 47 53 44%

Mid-Eastern Europe

and Central Asia13 17 22 28 34 40 45 23%

Middle East and Africa 5 8 10 14 18 22 26 32%

North America 67 82 98 115 133 153 177 18%

Western Europe 73 92 112 131 156 184 217 2%

Total 235 308 401 530 675 826 994 27%

Analytical Framework

8

Factors Affecting the Development of e-marketplace

9

ICT = information and communications technology.

Source: ADB compilation based on Kshetri (2007a, 2018a), North (1996), Parto (2005), Scott (1995, 2001), and World Bank (2016a).

● Affordability and access to ICTs ● Bandwidth availability ● Availability of online payment

options● Delivery infrastructures ● Economies of scale

Economic Social Acceptance and Awareness

Firm level● Confidence, risk aversion, and

inertia● Awareness, knowledge and

understanding of e-commerce opportunities

Consumer level● Awareness and knowledge of

e-commerce benefits● General and computer

literacy● English proficiency● Trust in e-commerce

vendors and postal services● Perception of foreign

products/vendorsEnvironmental

readiness for e-commerce

E-marketplace development

Legal and Institutional

Normative institutions● Importance of personal

relationships in business● Roles played by industry bodies

and trade/professional associations

Economic Legal and Institutional

Social Acceptance and Awareness

Regulative institutions● Legislative measures related to

e-commerce● Measures making e-commerce

affordable and accessible● Policy initiatives that directly

facilitate e-commerce activities● Public-private partnership

programs

Economic environment that affects accessibility and viability of e-commerce activities

Internalized norms that affect e-commerce-related behaviors of individuals and organizational decision-makers

Social and political environment that plays roles in the evolution of the legitimacy of e-commerce-related activities

Legitimacy to participate in e-commerce

Individual readiness

for e-commerce

Current Status and Challenges

10

ICT Infrastructure

11

020406080

100120140160

Fixed-telephone

subscriptions

Mobile-cellular

telephonesubscriptions

Active mobile-broadband

subscriptions

Fixedbroadband

subscriptions

Householdswith a

computer

Householdswith internet

access at home

Individualsusing theinternet

Africa Arab states Asia and the Pacific CIS Europe The Americas

Source: International Telecommunication Union. Statistics. https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx

Mobile and Fixed Broadband Speed—Central and West Asia, South Asia, and Southeast Asia,

as of December 2017 (megabits per second, download)

Key ICT Indicators by Region, 2016 (per 100 inhabitants)

Source: Speedtest. Speedtest Global Index December 2017. http://www.speedtest.net/global-index

0

40

80

120

160

200

0

10

20

30

40

50

ARM AZE GEO KAZ KGZ TAJ AFG BAN IND MLD NEP PAK SRI BRU CAM INO LAO MAL MYA PHI SIN THA VIE

Mobile broadband for Asia Ex-SIN (left) Fixed broadband for Asia Ex-SIN (left)

Mobile broadband global average (left) Fixed broadband global average (left)

SIN mobile broadband (right) SIN Fixed broadband (right)

| Central Asia | South Asia

|

Southeast Asia |

E-Payment

12

0

10

20

30

40

50

60

70

80

90

100

Credit card penetration

Debit card penetration

Economy Year % share

Bangladesh 2016 75.0

China, People’s

Rep. of

2009

2014

70.0

30.0

India 2017 67.0

Indonesia February

2017 65.3

Pakistan 2017 80.0 / 95.0

Thailand 2014 70.0

Philippines 2017 80.0

Viet Nam 2015 80.0

COD Transactions as Percentage of

Total Online TransactionsCredit and Debit Card Penetration—

Southeast Asia, 2016 (% of adults)

Sources: Aziz (2017b); Briefing (2014); Chadha (2017a); Domingo

(2017); Houghton (2015); Rahman (2016); Sakawee (2014); Shaffi

(2017); The Economist (2017a).Source: BBVA Research (2017) and de Luna-Martínez (2016).

Delivery Infrastructure

13

0 20 40 60 80 100

Tonga

Mongolia

Lao PDR

Philippines

Maldives

Malaysia

Sri Lanka

Uzbekistan

Japan

Population with Access to Home Mail Delivery—

Selected Asian Economies, 2015 (% of population)

Source: Universal Postal Union. http://www.upu.int/en/ressources/statistiques-postales/resultats-2015.html

Legislation

Status of E-commerce Legislation—Asia and the Pacific,

as of December 2017 (Number of economies)

Legislation exists Draft legislation No legislation No data

35

35

5

16

2

2

28

22

2

159

35

1

12

b. Consumer

protection

c. Privacy and

data protection d. Cybercrimea. Electronic

transactions

Sources: various international and local sources

14

Uneven Opportunities: Gender Gap

15

Gender Gap in Internet Access—Selected Asian Economies

(% of males minus % of females)

-2 2 6 10 14 18 22

New Zealand (2012)Australia (2015)

Cambodia (2015)Thailand (2016)

Kazakhstan (2016)Singapore (2015)

Armenia (2015)Bangladesh (2013)

Malaysia (2016)Hong Kong, China (2015)

Japan (2015)Indonesia (2016)

Republic of Korea (2016)Azerbaijan (2016)

Pakistan (2016)Brunei Darussalam (2016)

Source: International Telecommunication Union. Gender ICT statistics. http://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx

Key Opportunities

16

Economic Benefits and Costs of Using E-commerce

17

Benefits Costs

• Boosts efficiency and increases gross

domestic product

• Allows economies to increase

participation in global value chains

• Increases labor productivity and

supports job creation,

entrepreneurship, innovation, and

creativity

• Leads to energy savings and lower

carbon emissions

• Advances inclusive growth (benefitting

developing economies, rural areas,

women and the elderly, among others)

• Requires social and physical capital

investment

• Could lead to transfer pricing and

erosion of tax revenue

• Potential to widen economic disparity

• Potential to distort competition

Source: ADB compilation based on Anvari and Norouzi (2016); Bram and Gorton (2017); Ca’ Zorzi (2000); Carnegie Melon University (2009);

Cockfield et al. (2013); Hinojosa (2017); Mueller and Shoenmaker (2007); Organisation for Economic Co-operation and Development, United

Nations Conference for Trade and Development (UNCTAD), and World Trade Organization (2016); Palsson, Pattersson, and Hiselius (2017);

Savrul and Kılıç (2011); UNCTAD (2015, 2017b); and World Bank (2003, 2016b).

Enhancing Inclusiveness

18

▪ Rapid growth in internet and mobile phone access

▪ Developments in e-payment

▪ Improving logistics-related technologies and infrastructure

to benefit the disadvantaged

▪ Improved access to e-commerce-enabling technologies in

developing countries and LDCs

▪ Improved access to advanced e-commerce-enabling

technologies for SMEs

Emerging Technologies affecting the E-Commerce Landscape

19

Big Data Use in the People’s Republic of China to Boost Customer

Retention and Spending

Collect data:

● Online shoppers

● Available products

● Purchasing habits of online shoppers

Use data:

● Identify customer groups

● Use machine learning to decide on product lines and promotions

Increase customer retention and spending:

● Segment customer groups

● Target offerings

Source: ADB based on Wang (2016)

1.3

0.60.4

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2004 2006 2008 2010 2012 2014 2016E 2018E 2020E

Average Sensor Cost for the Internet of Things—Global ($ per unit)

Source: BI Intelligence (2014)

20

Technology Examples of use Benefits of combining with 5G

IoT IoT can improve consumer experience, track

inventory in real-time and manage more

effectively (e.g., JD.com)

5G's faster data-transmission will make it easier to

transfer data created by IoT devices.

AI AI-enabled apps—such as Amazon and

Google assistant—can order products online,

track orders and perform other e-commerce

activities.

5G's faster data-transmission will allow quicker

access to additional information and help the AI

better understand the environment and context.

Blockchain Blockchain-based smart contracts can be

used by online vendors to automate order

fulfillment.

Blockchains have been used in supply chain

management systems and B2B e‐commerce

(e.g. the PRC’s JD.com).

5G can help feed information (e.g., from IoT

devices) required for a smart contract more

efficiently.

It can also provide better security.

AR/VR AR enabled apps allow a potential customer

to place real products in a virtually setting to

provide clear visualization of product use

(e.g., Lego and IKEA).

5G network’s higher bandwidth, reduced latency

and greater uniformity (mobile connection’s

consistency across locations) allows transmission

of complex worlds and sophisticated inputs that

require processing of huge amounts of data.

Emerging Technologies affecting the E-Commerce Landscape

Source: ADB compilation based on Dave (2017), Harbet (2018), IDG (2018), and Xiao (2017).

Way Forward

21

22

To unlock the potential of digital trade and e-commerce,

it is imperative to take on the following measures:

Institute legal,

regulatory and

institutional reforms

Intensify regional

efforts to modernize

and harmonize

regulations

Enhance affordability

of and access to ICT

E-commerce boosts efficiency, enhances market access for

businesses and consumers, and generates spillover effects

Improve logistics and

delivery infrastructure

Broaden the e-

payment availability

and options

Fostering Cross-Border E-Commerce

23

▪ Global cross-border B2C e-commerce to grow at 27% from

2014 to 2020 to reach almost $1 trillion.

▪ Various efforts underway to reduce complex border crossing

procedures and regulatory burdens

- National Single Window (NSW)—a one stop-shop to speed up customs

clearances

- Automated System for Customs Data (ASYCUDA) system developed by

UNCTAD

- new Framework Agreement on the Facilitation of Cross-Border Paperless

Trade in Asia and the Pacific

- international customs rules for cross-border e-commerce being developed

by WCO

▪ Securing tax revenues while minimizing taxation costs are

crucial

Creating a Virtuous Cycle in E-marketplace Development

24

Source: ADB compilation based on Albers‐Miller (1999), Ang et al. (2001), Levi (1998), and Zucker (1986).

Consumers

Engage in ethical and responsible

actions

Government agencies and

trade associations

Create institution-based trust

Supplement government roleE-commerce vendors

and businesses

Create trust

• Characteristic-based trust

• Process-based trust

Innovate

Social Willingness

to Participate in

The E-marketplace

Thank you!

25