When you consider that over 80% of eCommerce businesses fail, you realize the enormity of the undertaking when starting an online shopping business.
However, the industry continues to grow as the rewards seem to outweigh the risks. According to a recent study, the Gross Merchandise Value (GMV) for eCommerce in Southeast Asia was $10 billion in 2017, up from $5.5 billion in 2015. This is an aggressive 41% Compound Annual Growth Rate (CAGR)
However, good news aside, we want to highlight some of the struggles that eCommerce entrepreneurs have in the region. If they are able to overcome these obstacles they have a clear path to the finish line.
Technology issues
The appeal of eCommerce often stems from not having to manage physical business premises. However, technology issues can be just as frustrating.
Basic Issues: E-commerce stores constantly have to deal with day to day tech problems.
- Website speed
- Maintaining server and support
- Database limitations
- Data privacy, security issues, among many more
Technical difficulties are not just a huge annoyance. The slightest technical problem with your site can see you lose scores of potential long-term customers before they have even given your business a fair chance.
This is why e-commerce entrepreneurs should carefully select and sample their service providers. Hosting service and support has to be first grade.
Lack of integration: eCommerce operations utilise multiple data management systems, spanning different departments. Integration can be tough and quite complex.
Streamlining the entire system is key to building a successful eCommerce business.
Customer acquisition
The sales funnel for eCommerce is just as complex as its technology.
Attracting the Customers: Getting the attention of potential customers is different and very challenging for eCommerce stores. Prospects are not going to stumble upon the store by chance while walking along the street or in a shopping mall.
There is also a lot of competition online, so that makes it a very crowded space. Investing in a good digital marketing strategy is essential.
Conversion: Current conversion rates range from 1% to 3% for most eCommerce stores. So the traffic you need to bring in needs to be significant enough for the 1% to 3% to actually produce real revenue.
Retaining Customers: With customers fleeing at the slightest technical or logistical annoyance, eCommerce entrepreneurs must invest in building customer loyalty.
Security concerns
Security is a huge concern for most online shopping sites. It is obvious that eCommerce businesses want to provide their customers with a safe and secure shopping experience.
What makes this more pressing is the lax attitude towards security that exists in the region.
Customer service
About 78% of consumers will abandon a transaction because of poor customer service, which means there needs to be significant investment in improving this department and staying ahead of the curve.
One of the most critical issues most eCommerce startups face is lack of personalised service. This is where e-commerce businesses may be at a disadvantage. They lack the face-to-face contact on which physical stores thrive.
Even though it can be pricey, having a real person speak to your customers is necessary.
Logistics and delivery
Both local and cross-border logistics can be a nightmare with duties, taxes, regulations and other issues that arise from different laws in each market. However, this isn’t the only issue for eCommerce entrepreneurs.
Legal issues: Selling and shipping items across various countries can make it tricky to deal with:
- The complex government regulations on items entering cross borders
- Currency and conversion issues can lead to losses on already thin margins
- The accounting and tax management of a “stateless income”
Localisation and globalisation: Selling to an international or regional market expands your customer base but also creates the hassle and complexity of having to localize products to different markets.
eCommerce stores shipping to international destinations have to find the balance, continually, between localizing and globalizing their products to meet the needs of an international customer.
Logistics: Shipping can be a huge problem and area of dissatisfaction for both business and consumer. eCommerce businesses lose billions of dollars each year to shipping returns.
The issue arises from online shopping having significantly higher item return rates of 30-40%, as compared to 10% return rates of physical stores.
Shipping costs and wait times can also deter customers from ordering from online. The on-demand economy is an issue for many consumers.
Conclusion
eCommerce is a lucrative and extremely exciting industry, however, it is highly competitive. The issues that exist within the complex Southeast Asian market make eCommerce even harder to scale.
But looking at the entrance of Amazon and Alibaba, through its acquisition of Lazada, it is likely to become the next great international battleground.
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