Going direct to the world’s online shoppers
February 2, 2016 12:02 PM
More than ever, manufacturers can tap into the needs of consumers around the globe, unrestricted by much of the friction that traditionally exists between supply and demand. Consider this—if you were a small manufacturer operating out of Indonesia just ten years ago, how would you have gotten your product out on the broader, global market? You would have been forced to build a distribution network, reliant on the reach of retailers, and restricted to demand-side selling, waiting for consumers to drive the growth and adoption of your export. Now, whether you’re a big enterprise or a small business, you’ve got access to the largest selection of online marketplaces the world has ever seen.
The local effect
Southeast Asia has seen an explosion in online sales, with the Lazada marketplace reaching consumers in Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam, each with localized platforms. On average, these countries saw e-commerce volumes grow by nearly 180% year on year. Africa is another new player in this space, with companies like Jumia servicing consumers in eleven different countries, including Egypt, Morocco, and Kenya. Latin America has also seen a huge growth in e-commerce, with marketplaces such as Linio and MercadoLibre spreading their wings into eight different markets. Incredibly, most of this e-commerce development has occurred in the short space of three years, with Lazada, Jumia, and Linio opening in 2012. Each of the above regions continues to show growth, with more localized platforms opening up on a continual basis.
These marketplaces owe their success to their ability to tap into the genius of Amazon’s business model, which made Amazon THE shopping destination for all that a consumer may want to buy. Rather than investing in an expansive inventory, these firms focus on logistics and payment processing, while utilizing their expanding network of third-party sellers to offer an unprecedented variety of products. Consumers may get the impression that they’re buying a product from a domestic merchant, but in reality, these local marketplaces are connecting buyers with sellers from all over the world.
Going global: A new realm of winners
As a result, a new realm of winners has been created—companies that understand that there are direct paths to export which can drive growth for their firm, and improve economies by plugging into the global market. Sellers are now judged on the quality of their product and their pricing, not their size or access to distributers. The gap between creation and market is shrinking. The more resourceful, resilient and innovative you are, the fewer impediments there are to success.
We see this trend everywhere. I was in Bangladesh a year ago, and a seller was discussing his first landmark year, when he made about 100,000 Taka. This is a man who had a strong product and a solid business plan, yet because expanding into the global marketplace was a logistical nightmare, making the equivalent of $1,300 annually was seen as a major accomplishment. Today, due to increased connectivity and the expansion of marketplaces like Amazon and Alibaba, a much wider horizon has opened up for sellers in emerging markets.
Numbers don’t lie
This opening of markets is clear from the incredible trends that we’re seeing today. From the largest perspective, e-commerce is growing much faster than traditional retail. Within this trend, marketplaces outpace e-commerce storefronts, third-party sellers on marketplaces outpace inventory sales, and the growth of cross-border sellers outpace domestic sellers. In 2015, the average year-over-year growth of cross-border e-commerce out of Asia was over 200%; China, where cross-border selling is most mature, continues to be the market leader and experienced volume growth of 230% last year. Other geographies are also booming, with South Korea experiencing tremendous growth over the last two years—nearing 900% in 2014, and 500% in 2015. Malaysia, Vietnam and the Philippines are also ones to watch out for. While these aren’t surprising trends, the speed with which the world has ‘gone global’ is absolutely staggering.
Growing pains and the road ahead
Interestingly, I believe this marketplace phenomenon is a counter-trend that could eventually negatively impact traditional cross-border e-commerce sales. If every country has a marketplace which assembles into its platform third-party sellers that used to only be available through direct offshore merchants, then the consumer dynamic will change. E-commerce and offshore manufacturing will continue to grow, but the balance between consumers going directly offshore or staying onshore while getting offshore merchandise will continue to shift. Marketplaces and sellers are both seeing the benefits of this type of expansion; it’s no wonder the percentage of sellers that was selling on multiple marketplaces almost doubled from 2014 to 2015. If a marketplace can find the right partners to help them navigate the world of cross-border activity and if sellers can get the right balance between selection, price, and delivery, then the potential for profit and growth on the road ahead is boundless.
Payoneer provides a cross-border payments platform to online marketplaces and sellers.