Online sales for the retailers ranked in Internet Retailer’s Asia 500 more than tripled from 2013 to 2017, providing ample proof of the explosive growth of online shopping in the region.

In 2017, the 500 leading retailers in the region racked up $270.6 billion in web sales, a 27.6% increase from 2016. That was slightly above the 27.2% compound annual growth rate for the Asia 500 from 2013-2017.

As impressive as that growth is, no picture of the Asia e-retail market would be complete without including China’s Alibaba Group Holding Ltd., whose big China shopping portals accounted for about $750 billion in online sales in 2017. Alibaba isn’t the merchant of record for any of those sales—the millions of merchants who sell on the wide-open Taobao bazaar and the more exclusive Tmall marketplace own all the merchandise sold on Alibaba websites—which is why Alibaba is not ranked in the Asia 500. Alibaba’s Taobao and Tmall, however, hold the No. 1 and No. 2 spots on the Internet Retailer Online Marketplaces rankings of the world’s largest ecommerce marketplaces.

Already dominant in China, Alibaba is beginning to make its presence felt in other parts of the region, notably Southeast Asia, where it’s acquired a majority stake in Indonesian marketplace Lazada and a minority position in Lazada competitor Tokopedia.

Even without counting Alibaba, Chinese retailers dominate the Asia 500. They account for 222 of the 500 companies ranked by 2017 online sales, and the $191.6 billion in online sales they generated in 2017 represented 70.8% of Asia 500 sales.

Leading the way was Alibaba’s chief rival, JD.com Inc., the No. 1 retailer in the Asia 500. JD.com grew its 2017 online sales 42.0% to $52.8 billion.

Smartphones play a big role

Japan has the second-largest number of retailers in the Asia 500, 101, and their collective ecommerce revenue increased 14.5% in 2017, a slow growth rate by Asia standards that reflects the relative maturity of the Japanese market. In Japan, 93.3% of the population uses the internet and 74% of online consumers shop on the web, according to Export.gov, a trade-promotion service of the U.S. Department of Commerce.

The 32 Asia 500 retailers based in South Korea grew their web sales a much larger 25.6% in 2017. The high penetration of smartphones in South Korea accounts for a nearly universal internet penetration rate of 99.2% of households, according to Export.gov, which also estimates South Korea consumers purchased $42 billion worth of goods via their mobile phones in 2017 versus only $27 billion using personal computers.

The role of mobile is even more dramatic in Southeast Asia, where the number of consumers connected to the internet grew to more than 350 million in 2018 in Indonesia, Malaysia, the Philippines, Thailand and Vietnam, according to an annual report by Google and Singapore-based investment firm Temasek Holdings. That was 90 million more than used the web in 2015, the report says. And it adds: “With more than 90% of Southeast Asians connecting to the internet primarily through their smartphones, this is one of the most mobile-first internet regions globally.”

In China, too, consumers most often make online purchases via their mobile phones. For example, Alibaba reported that 90% of the $25.4 billion in purchases during its annual Singles Day shopping extravaganza on Nov. 11, 2017, came from mobile devices.

Amazon and Walmart clash

After Chinese firms, it is U.S. companies that account for the largest share of Asia 500 sales, with 39 retailers registering $43.2 billion in online sales in the region in 2017.

U.S. ecommerce giant Amazon.com Inc. is a major player in the Asia-Pacific region, operating retail websites in China, Japan, India and Australia. So, too, is Walmart Inc., which owns about a 12% stake in JD.com and gained a firm foothold in India in May 2018 with its $16 billion acquisition of Flipkart, the online marketplace that is the leading competitor to Amazon in that country.

Both Amazon and Walmart face new challenges in India following new government restrictions on what foreign retailers can sell online in India. They already were banned from selling non-India products, which the U.S. companies got around by operating marketplaces that sell merchandise from Indian retailers. But the new regulations bar foreign companies from selling goods from companies with which they have exclusive deals and in which they are major stakeholders. That will particularly hurt Amazon and Flipkart’s smartphone sales as both had exclusive arrangements with mobile device makers.

Sales by category

Companies classified by Internet Retailer as mass merchants—that is, they sell a wide variety of goods—dominate the Asia 500, accounting for 46.6% of the online sales in 2017 of the 500 ranked retailers. Included in the mass merchant category are JD.com and Amazon, as well as big Chinese retail chains Suning and Gome.

Mass merchants also lead in growth, increasing their online sales in 2017 by 35.0% year over year, followed by housewares and home furnishings retailers at 27.4% and apparel and accessories merchants at 24.5%.

The fastest-growing Asia 500 merchant by 2017 web sales was AprilSkin, a South Korean cosmetics brand, followed by Japan’s Plamoya, which makes toy figurines based on popular anime characters.
Even in highly penetrated ecommerce markets like Japan and South Korea, the region’s largely smartphone-wielding consumers are happy to embrace online brands that offer appealing products.