Hong Kong, which was once seen as lagging behind in the e-commerce boom with only 4% of overall retail spending in 2019 conducted online, is now catching up fast, as a result of the city lockdown.
While the Covid-19 pandemic has hit retailers hard with an estimated 36.1% decline in the value of retail sales year on year, more retailers have started turning to digital platforms to sell their products.
For example Boutir, a social mobile commerce solutions provider, which helps vendors to establish and run their online stores, has been experiencing a surge of business in recent months. The platform’s paid subscribers rose from 2,000 in January to 5,000 in March and their volume of transactions had doubled.
“The Covid-19 pandemic still lingers but it has already accelerated the growth of e-commerce as if like a decade,” said Eric Ng, the founder of Boutir.
He added that the combination of the lockdown and internet technologies have unleashed latent consumer demand, allowing retailers to achieve growth despite the unfavorable market conditions.
The situation in Hong Kong is in line with global trends. In the United States, according to Adobe’s Digital Economy Index (DEI), shoppers spent more than US$153 billion online in April and May, 7% higher than the $142.5 billion spent online during the 2019 holiday season in November and December.
But Ng noted that the level of business growth differs across products. Citing his platform’s analytics, the majority of retailers who benefit from the ‘new normal’ are selling physical products in a business-to-consumer (B2C) model. Only a few service providers could leverage digital platforms and benefit from the lockdown to achieve growth.
Digital transformation
In the face of the new market reality, “digital transformation” is now being touted as a game-changer, which pushes retailers to rethink how they can incorporate online technologies into their business operations.
Recognizing this demand, the Innovation and Technology Commission and Hong Kong Productivity Council have introduced the Distance Business Program (D-Biz Program), giving each enterprise up to HK$300,000 ($38,708) in grant enterprises to adopt IT solutions for developing distance business.
While the D-Biz Program has been criticized for not handing out the grant fully, Boutir’s Ng cautioned that businesses should not rely on taxpayers’ money for their digital transformation.
“A lot of government-funded support is poured into helping start-ups to digitalize such as the D-Biz Program,” he said. “However, the focus should be more on educating them on how to run a viable e-commerce business.”
To test if there is a market for a product, user analytics is key, he said. “Forget about views, likes, shares and those social media metrics. For retailers, the only real signal from the market is consumers’ purchase. The beauty of the internet is that one can always test the waters and adjust the strategies without being tied to high physical fixed costs.”
Regional outlook
Until a vaccine for the coronavirus is found, the world’s new normal defined by social distancing measures is here to stay. The question is which markets will recover faster than others and what businesses can do now to capture the first-mover advantage when the global economy rebounds.
For solution platform providers like Boutir, Ng said his company is betting on the Asean countries. With a regional office in Malaysia, Boutir announced a partnership with online marketing solutions provider iClick in the hope of penetrating other Southeast Asian markets such as Thailand. Now only 10% of Boutir’s paid subscribers are from the region.
While the global economic outlook remains gloomy this year, the International Monetary Fund said emerging Asian economies are the only region with anticipated GDP growth – albeit by a mere 1% – in 2020. The Economist Intelligence Unit estimated that the Asean region can see $1 trillion added to its GDP by 2025.
Despite promising figures, Ng reckoned “the Asean economies remain fragmented and lacking a consistent regulatory framework for cross-border transactions,” highlighting the need to take the local specifics of each individual market into consideration before expanding to the region.