Over US$25 billion in gross merchandise volume was settled within 24 hours through Alibaba's online retail marketplaces on this year's "Ali-double-11" (Nov) global e-shopping festival. Another leading e-commerce platform, JD.COM, reported $19 billion of online orders the same day.
Asia is benefiting more than any other region in the world since cross-border e-commerce has introduced new dynamics to international trade. Global retail e-commerce sales have grown faster than traditional retail sales since 2014.
E-commerce in many Asian markets will see double-digit growth in the next five to 10 years. India, Indonesia and Malaysia are among the fastest-growing retail e-commerce markets at growth rates of over 20% per year. E-commerce in China is growing at an annual rate of around 17%.
From 2015 to 2021, the region's total e-commerce market revenue will likely increase from around $320 billion to more than $900 billion.
The Chinese market will contribute over 90% of this growth. China's share in the global e-commerce market looks set to rise from about 30% in 2015 to nearly 40% in 2021; while India and the 10 Asean member states will likely increase their combined share of the global market from 2.5% to 4%.
With such growth trends, Asia is likely to be the global epicentre of e-commerce by 2025.
What is driving this intense growth?
First, adaptiveness. Economic digitalisation is a worldwide phenomenon. The information revolution is associated with the emergence of new market conditions and dynamics in a global business environment. To some extent, the region's adaptiveness to global economic digitalisation comes from its capacity in technology adoption and incremental innovation.
On one hand, the deep involvement in global value chains opens the window for developing Asia to access the latest technologies and also facilitates their learning. And at the same time, Asian countries' capacity for incremental innovation allows them to benefit from second-mover advantages to grow faster and even leapfrog to the front of the market -- the popular use of e-payments in China and the success of the Alibaba group are typical examples.
In Asean, facilitation of the growth of e-commerce is one of the six main areas covered by the E-Asean Framework Agreement, whilst at the national level, developing a digital economy and e-commerce have already been part of most Asian countries' national strategies and action plans.
Second, market gravitation. Despite the new features of a digital economy, the development of e-commerce is still influenced by traditional conditions for economic development such as market size, trade facilitation, investment freedom, and so on.
Asia covers almost half of the world's population, nearly 30% of the world's gross domestic product and 40% of world trade. In terms of age distribution, 70% of the population in Asean is between 15 and 64 years old, representing a large market on the consumer side and a major labour force on the producer side. By 2015, more than 1.2 billion people, or about half the households in the region, already had access to the internet.
A population connected to the internet not only represents consumers linked to the e-commerce market but also suggests those who may have higher purchasing power in society. In the case of Asean, internet connectivity is widespread in Singapore and Malaysia, and plays an important role in their economies. Nearly 90% of households in Singapore are internet users.
In 2012, the internet-related economy accounted for 4.1% of Malaysia's national gross domestic product. Even the less-developed CLMV countries -- namely Cambodia, Laos, Myanmar and Vietnam -- are quickly catching up. The proportion of internet users in Vietnam increased from 1.3% to 52.7% between 2001 and 2015 whereas, the number of internet users grew by 34.7% in Cambodia and 32.4% in Myanmar per year.
Third, readiness. E-commerce development needs support from technology, market, and government policy. A country's readiness to support a digital economy will determine the level of success of businesses involved in e-commerce.
Information communication technology drives the development of e-commerce by expanding the volume and capacity of online communication, especially the use of fibre-optic cables and commercial satellites. Moreover, physical infrastructure that provides stable and fast internet connections is a precondition for e-commerce development.
In particular, many emerging Asian countries have made great progress in developing mobile broadband. Almost 80% of Chinese users and two-thirds of users in Asean use a smartphone to access the internet. The least developed economies of Asean (Cambodia, Laos, Myanmar and Vietnam) have among the highest growth rate of mobile subscriptions. Specifically, the compounded annual growth rate ranges from 36% in Cambodia to 70% in Myanmar. Indian smartphone penetration rate is projected to increase from 58% in 2015 to 745 in 2021.
All these data provide a compelling foundation to endorse e-commerce development.
A most urgent task is to build a region-wide e-commerce enabling environment, for which market mechanisms should take the lead, but the role of policy intervention should not be neglected. For instance, e-commerce value chains depend upon both the physical world and virtual cyberspace. Governments' involvement is needed to set up rules, regulations and legislation for both the physical and virtual parts of the market to ensure the security and stability of e-commerce growth.
In addition to a country's national efforts, progress towards regional integration has provided policymakers extra channels to promote e-commerce development via deeper market integration and cooperation, especially in regulation harmonisation and service liberalisation.
Typically, when thinking of long-term e-commerce success, human capital and innovation is the key. It not only requires more and better education and training, but also region-wide service liberalisation to improve mobility and diffuse knowledge.
The region's potential for e-commerce development has increasingly drawn policy attention. Asian countries have been putting more inter-governmental effort to enhance cross border collaboration. The ongoing Regional Comprehensive Economic Partnership (RCEP) negotiations, between the 10 Asean countries and their six partners -- Australia, China, India, Japan, South Korea and New Zealand, include extensive discussion on e-commerce and the related issues, including consumer protections, data localisation, intellectual property rights, cyber security, and many others.
It is not too ambitious to foresee a chapter of e-commerce/digital trade in the final agreement of RCEP that is comparable to the one in the Trans-Pacific Partnership agreement. Even so, it will still need Asian countries' persistent efforts.
Lurong Chen is an economist at the Jakarta-based Economic Research Institute for Asean and East Asia (ERIA).