E-Commerce has come a long way since its inception in 1972, when two students at MIT and Stanford used the 3 year old ARPANET network to transact over a small bag of marijuana.
Shoot forward 45 years and the industry has evolved to a near $2 trillion dollar global market with products from houses and cars to groceries and clothes sold on a second by second basis. In Southeast Asia alone over 250 million people have made at least one purchase online.
Global E-Commerce Trends
Despite the fact that e-commerce has become so ubiquitous (even North Korea has access to online shopping) there remain fundamental differences in global approaches to online selling.
In mature markets, especially the US and in Western Europe, a mixture of legacy systems and consumer expectation means that the pace of change has been relatively measured in the post-dot-com bubble era.
The two kings of B2C and C2C online commerce in the West, Amazon and eBay respectively, were both children of the pre-2000 internet age, and whilst especially Amazon has become an undoubted king of innovation the majority of transactions would be fundamentally recognisable to the stoner students in 1972.
In emerging markets however we can see that unique challenges are pushing e-commerce entrepreneurs to come up with technology driven solutions that can ensure the efficient functioning of online selling.
From devices to platforms to payment methods, we’ve seen some interesting, practically driven innovation that, for a market like Vietnam, is essential to harness in order for e-commerce to reach its full potential.
The most obvious example of this is mobile commerce. Mobile is the undisputed gateway to the next wave of e-commerce consumers.
The prevalence of budget smartphones from manufacturers like Xiaomi and Lenovo have given 38.3% of Vietnam’s population access to full internet services, often for the very first time.
A combination of GDP growth of 6.68% and the affordability of mobility across the country has provided a whole generation of new consumers with mobile first shopping for the very first time.
This rise of mobile has meant that many e-commerce companies have started not web-first but mobile-first. Whilst for many this might seem like a minor difference, in reality it demands a fundamentally different approach to how products are displayed, offered and sold.
The customer journey on mobile has to be simplified in order to account for smaller displays and demonstrably shorter attention spans. Products should be displayed in a visual, multimedia fashion for maximum impact. The checkout process should be shortened.
What this means is that consumers who shop for the first time on the mobile device are less likely to have enjoyable experiences on traditional web based e-commerce sites like Amazon, which could be seen by a mobile-first consumer as clunky and overwhelming.
The second technological trend is social media, and especially social commerce. The success of Facebook’s efforts to offer complimentary access their platform in emerging markets through free basics, as well as cultural trends that encourage the use of social media (Makati City in the Philippines is officially the global selfie capital) has ensured that Southeast Asia has amongst the highest penetration of social media usage anywhere in the world.
The success of social has meant that in Vietnam alone, 39 million people are interacting with friends, brands and celebrities on a near daily basis. This provides a remarkable platform for both digital marketing, with 46% of Vietnamese businesses in a recent survey claiming social was a highly effective channel, and also for direct selling of products.
For marketing we have seen innovative uses of both paid and organic activities across social networks, but also a real understanding of the value of celebrity endorsement. This so called Halo Effect has provided remarkable followings from especially young consumers, who see their idols using specific products and want to do likewise. The beauty industry has been especially impacted by this trend, with Vietnamese vloggers Changmakup and Michelle Phan drawing in over 4 million likes together on Facebook alone.
In terms of direct selling, social commerce in Southeast Asia accounted for some 30% of total sales in 2016, some $4.2 billion out of the total $16 billion spend.
This was made up of both traditional B2C selling, facilitated in part by features like Facebook’s “buy now” button, but almost more importantly as a platform for C2C sales.
Whilst the value of this segment is difficult to measure, what it does is provide anyone with the opportunity to buy and sell as they wish in a fundamentally social way.
This marketplace model supersedes the eBay approach which comparatively feels cold and impersonal in a culture that favours human contact.
Finally in payments, we’ve seen the real challenge of the continued favourability of cash in countries like Vietnam provide a major hurdle to effective e-commerce uptake.
Accepting cash payments is a fundamental challenge to merchants due to issues ranging from fraud to processing costs.
Nevertheless, in a country with just 1.9% credit card penetration and only a quarter with any form of debit card, making traditional payments online in Vietnam is not a sustainable option either.
This has led to a wave of fintech inspired innovation to provide all with the benefits of digital payments without the need to overcome hurdles like the possession of a formal credit score.
The leaders in this space have been those who have managed to tap into the widespread use of mobile devices to develop fully accessible payment services.
Startups such as 1Pay, MoMo, Vimo and more have enabled consumers in Vietnam to make payments through options like harnessing pre-paid phone credit for online payments, or through enabling customers to go to select convenience stores to pay.
They say that necessity is the mother of invention, and there really is no better example of this proverb in action than in the early stages of e-commerce growth that is ongoing in countries like Vietnam.
By starting with the needs of the customer first, savvy e-commerce entrepreneurs have proven able to overcome hurdles and provide truly valuable and accessible commerce platforms.
International e-commerce giants and solution providers alike should all be aware that, should they look to move into markets like Vietnam, they will be dealing with consumers fundamentally different in need and expectation than those found in more development parts of the world.
If however they are able to identify and tap into these local dynamics, there are huge market opportunities waiting to be claimed.
Assessing and adapting to local market dynamics is set to be a key theme at the upcoming Seamless Vietnam conference, running 6th-7th September in HCMC. For more details and to get involved in the show check out the event website here.