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In 2017, China’s online retail penetration was 20 per cent and its CAGR (13-17) was 33 per cent. In comparison, the US achieved an online retail penetration rate of 12 per cent in 2017 and a CAGR (13-17) of only 11 percent. Most dramatic is India, which had a CAGR (13-17) of 53 percent, highlighting the rapid growth seen in the market.
Market conditions have allowed for swifter digital penetration than any other region worldwide and have led to the creation of ecosystems for retailer and consumer ease, revealed Bain & Company’s latest Asia retail report titled Future of Retail: Ecosystem Retail in Asia.
According to the report, retail ecosystems comprise vast communities of consumers, retailers and partners that are rapidly reshaping the retail landscape. Alibaba and Tencent lead the best-known Asian ecosystems; however this phenomenon is not limited to China.
Ecosystems deliver a very sticky consumer proposition by combining services like e-commerce, chat, streaming, gaming or payments in a single platform or app, which is becoming almost universally adopted by shoppers, according to the report.
A large customer base is incredibly attractive to retailers as a channel to a critical mass of customers. But more importantly, the ecosystem also provides retailers with access to hard-to-replicate capabilities, such as last mile fulfilment, data analytics and cloud services, through their platforms. Increasingly, these ecosystems are deploying their capabilities into bricks and mortar retailers as well as online, meaning they can exert significant influence over the retail sector.
"What we’re seeing is the emergence of scale open retail ecosystem platforms across the Asia Pacific region, that offer retailers a compelling alternative to building and scaling their own capabilities," said report author Melanie Sanders, Bain & Company partner. "The scale of these ecosystems means that we are seeing a battle emerge between ecosystem platforms in key markets, with the potential for a winner-takes-all situation."
However, the extent and pace of ecosystem development will not be uniform across geographic markets. The report has outlined ten market factors, which has explained why ecosystems have developed so rapidly for some Asian countries, including social factors such as urban density and age structure through to retail market conditions such as the scale/maturity of physical retailers in the country.
"The emergence of retail ecosystems is raising a new set of choices for retailers about how to participate in this new retail landscape. The emergence of these ecosystems presents huge opportunities for those playing to win in these markets, but at the same time has the potential to completely change the rules of the game and may mean a loss of control," the report said.
"Retailers face a confronting set of choices around how to respond the rise of retail ecosystems. At the heart of the decision will be whether the retailer has the capabilities, capital and customer franchise to compete against an ecosystem," said Jonathan Cheng, report author and principal at Bain & Company.
As digitisation of the retail sector continues to expand in Asian and global markets, ecosystems will continue to evolve based on the needs of both the consumers and retailers, the report added. (RR)
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