Digital Asia

Asian consumers are leading the way in digital living, turning their smartphones into an international travel companion. The travel and retail industries are responding to these Globe Shoppers’ changing demands with innovative solutions and agile tools.

Connected consumers

Due to the nature of technological development in the APAC region, many Asian consumers were first connected to the internet via their smartphones, and their pocket-sized devices are now relied upon for everything from communications and entertainment to banking, gifting, shopping and research. Bain & Company estimates that 300 million consumers in key Southeast Asian nations (Singapore, Malaysia, Thailand, Indonesia, Philippines, and Vietnam) have a smartphone, while 48 times as many people are connected to the internet via mobile, compared to fixed broadband. Meanwhile, 20% of China’s online population relies solely on mobile, compared with only 5% in the US.

Connected spenders are prevalent throughout Asia, thanks to the smart solutions offered by regional apps such as Japan’s LINE (50 million users) and China’s WeChat social media services (900 million users) and Alibaba’s ecommerce platform (500 million users). Research by Nielsen suggests that the world’s mobile “connected spenders” will account for half of global consumption, or USD260 trillion, by 2025.

Living digital

When Asian consumers are so confident and connected to their mobile devices, it’s no wonder they lead the world in using smartphones for shopping. According to Nielsen, Asia-Pacific has the highest rates of mobile purchasing, with 50% of online consumers in China, 49% in India, 47% in South Korea and 46% of those in Vietnam reporting that they purchased a product or service via their mobile device in the past six months. These nationalities also lead the way with mobile app purchases - 50% of people in China, 48% in South Korea, 47% in India and 43% in Vietnam - have made purchases using an app. As Jeff Price, Managing Director of Southeast Asia at Experian, comments, “Asia is in the midst of a great digital revolution, with an explosion of smart devices, social media interactions and e-commerce transactions. The beneficiary of this interconnectivity is clearly the digital consumer, but also businesses serving them”. On Taobao, Alibaba’s e-commerce marketplace, the proportion of sales via mobile devices rose from 51% in 2014 to 62% in 2015, reaching 68% on Singles Day 2015. Boston Consulting Group forecasts that mobile will account for 74% of all digital sales in China by 2020.


Shop as you go

One of the key areas of development in Asia is the growth of digital payments, which far exceeds usage of the technology in other parts of the world. China, in particular, has an advanced and competitive market for mobile payments, with leaders WeChat Pay and AliPay accounting for over 90% of China’s mobile wallet market, worth a reported USD5.5 trillion a year. WeChat’s digital payment service (600 million users) has evolved from its wide-ranging social media platform, which is used for everything from messaging to news, entertainment and online shopping – and now functions as a mobile wallet. AliPay (500 million users) is part of Alibaba’s e-commerce platform, making it easier for users to buy from its online services, and now in-store, using QR codes. According to research from the UN, the two companies are estimated to have processed almost USD3 trillion in 2016, with Alipay leading at USD1.7 trillion, ahead of WeChat Pay’s USD1.2 trillion.

These third-party platforms are fast replacing cash and credit cards in China, according to analysts. “Consumers in China have greater confidence in the security of third-party payments compared to their counterparts in the West”, says Jessie Qian, Head of Consumer Markets, KPMG China. “Furthermore, credit cards have not been readily available for some Chinese consumers, so third-party mechanisms are becoming an alternative way of making payments in a convenient and secure environment”.

China clearly leads the way in mobile payments, the technology is becoming more widespread across the region, with plans to roll out the facility to Japanese  and Malaysian consumers next. The use of digital wallets among young Malaysian consumers has increased from 15% to 20% between the first and second halves of 2016. New payment methods are a hot topic across Asia Pacific, with the subject topping 83% of social media conversations in APAC nations, according to Mastercard research. “Technology is making the promise and the potential of a less-cash life a reality for more people every day,” said Marcy Cohen, vice president of digital communications at Mastercard.


Going global

While digital wallets rule at home, many Asian consumers are unable to use their preferred services when travelling abroad. According to research by Kapronasia and CANCAN, 67% of Chinese consumers have used mobile payments for some overseas transactions, but only for 3% to 30% of their transactions. 21% said they haven’t used WeChat Pay or AliPay abroad because they didn’t know they could. Few key shopping destinations offer the service, with Harrods, Selfridges (London) and Galeries Lafayette (Paris) only adding the service last year, but research suggests it can help encourage consumers to make a purchase. “What we have found from the survey is that Chinese customers tend to close the sale more quickly when they know that they can pay with mobile,” said Candice Koo, the Managing Director of CANCAN.

The increasing prevalence of new services are making spending overseas easier for Frequent Globe Shoppers. Defined as Tax Free Shoppers that made more than three trips in the last 24 months, this group accounts for almost one third (30%) of Tax Free transactions, despite only representing 8.4% of total Globe Shoppers. Making an average of 4.14 trips over the last two years, ensuring that this group’s payment needs are catered to will be an increasingly important focus for retailers going forward.

For these Frequent Globe Shoppers, keeping track of their refund status is crucial. Earlier this year, Global Blue launched Mobile Customer Care (MCC), a digital application guiding Globe Shoppers throughout their Tax Free Shopping journey. Transaction-triggered notifications are sent to their smartphone containing a link to the website where they can track the status of their refund and be informed about the next required action. Other value-added tools include refund reminders options and local airport guides.


Tech travel

But there’s more to Asian consumers’ digital demands than just payment. Digital-savvy Millennials dominate Asia’s travel population, accounting for 35% of the USD600 billion that Asians spend on international travel every year. Millennials alone are expected to spend USD340 billionn on international travel by 2020, and they expect to use digital services throughout their trips.

Many Asian consumers use digital services to research and book their travel, as well as to inspire their shopping excursions and arrange special trips and events. According to eMarketer, digital travel sales in China - from hotels to flights to activities – are predicted to grow 28% to hit USD113 billion in 2017. China Internet Network Information Center reports that 53% of Chinese tourists used mobile apps to book their trips online, while young and affluent consumers look to WeChat for inspiration and information when planning the activities and shopping for their trips. But they’re not necessarily loyal to one platform – they may get inspired on WeChat, but go to sites like Mafengwo, Qunar or Qiongyou for deeper research on their destination, before buying flights and accommodation via Meituan, Sougou or Ctrip. At their destination, they might go back to WeChat for shopping or sightseeing ideas, and to share their experience via WeChat moments.

For Asian travellers, digital services are just as vital at destination as at home, especially for independent travellers - spurring innovation in the hotel industry. Marriott Hotels have created a WeChat concierge service, as well as a mobile loyalty app and Alipay options. “As Chinese travellers continue to take their travel aspirations further, we need to grow with them and understand what they want, and how we can meet their needs,” said Peggy Fang Roe, chief sales and marketing officer, Asia-Pacific for Marriott International.


Digital futures

For the tech-savvy Asian consumer, digital products and services are essential for the future. New technologies suggest exciting possibilities for Globe Shoppers in Asia, and beyond. Many Chinese consumers already expect a cashless society in the next 10 years, so, where can tech go next? Smart services will be key, like Troika, the friendly customer service robot recently introduced at Seoul’s Incheon International Airport. Cashier-less stores like BingoBox could meet the convenience needs of the digital consumer: customers can enter the store and pay for goods using their WeChat accounts. Not to be outdone, Alipay is testing a cashier-less café, accessed using an Alibaba Taobao account.

APAC customers are also enthusiastic about future technologies that boost security. A Mastercard survey found that 45% of consumers in the region are interested in biometric authentication to offer advanced security, and as an alternative to passwords and PIN numbers. South Korean retail giant Lotte is already testing the idea with Hand Pay, which scans shoppers' palms to authenticate purchases.

While some of these innovations may seem futuristic, digital development is moving at a rapid pace in the region, and digital consumers are demanding smart, seamless services wherever they go. Brands that fail to offer innovative and useful solutions could be left behind by Asia’s connected consumers.