What does the ASEAN e-commerce agreement mean for brands, consumers and the region?
A few days ago, on the sidelines of the 33rd ASEAN Summit in Singapore, the Economic Ministers of the delegate countries signed the ASEAN Agreement on e-Commerce.
The agreement deals with the most important aspects of e-commerce policies. The member countries committed to implementing domestic regulatory frameworks, to being transparent, to cooperating on tech, infrastructure and logistics, education, consumer protection, legal safeguards, banking, payment, transaction and trading systems and data regulation on usage and flow. While at the same time also committing to being technology neutral to ensure that businesses in each market were free and able to make tech choices that best fit the open market and their needs.
This important agreement is something that brands, consumers and everyone in between should celebrate. This is the first such agreement and it will undoubtedly spur further growth of online sales across the region. Globally, cross-border sales are set to reach 627bn by 2022. Asia Pacific is expected to be the largest contributor in terms of this growth.
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Brands, whether selling direct to consumer (DTC) or through a marketplace stand to benefit greatly from this new development and the resulting consumption growth. Consumers get access to a wider range of products for a wider range of sources. Not to mention better prices in a more competitive marketplace. While there will be a wider range of products from markets to purchase from, it is worth noting that an ASEAN agreement may not quell the desire for goods from the US or European market that are hard to get but are popular online purchase categories with Asian consumers. Price and availability of products are generally the main reasons cited for cross-border purchases.
This ASEAN agreement will spur more local entrepreneurs to create new products and to venture online to access a larger and more diverse market. Brands will now need to be nimble and innovative to adapt to local nuances and preferences. The open market will also allow small and home businesses to reach a broader consumer segment across the region and this will bring growth at an individual entrepreneur level too. Where a product is made, no longer limits where the product can be sold.
At a product level, the influx of local brands from across geographical boundaries will force larger international brands, especially in the CPG or personal care categories to be price competitive and dynamic to avoid a loss of market share. On the flip side, these local brands will need to ensure product quality competitiveness to gain market share. This dichotomy will improve the quality of industry output across the board.
Cross-border purchasing habits are not new in this region. Singaporeans contribute to 89% of all cross-border transactions in APAC (though this is a big percentage of a small total). This new agreement between the nations will further propel these growth rates as worries about fraudulent transactions or about product quality subside. To this end, marketplaces will have to work harder and faster to ensure they have the right frameworks, tracking and tools in places to avoid abuse, fraud and fakes. Building trust and credibility will have to be a priority. This acceleration and need for reliability, security and trust will drive innovation using blockchain technologies and digital payments for a larger percentage of the transactions. The agreement also puts in place online dispute resolution mechanisms to facilitate e-commerce claims and consumer disputes, giving more people the confidence to shop online safely.
Small and medium-sized supply chain and logistics vendors that focus on local distribution will also stand to benefit, through geographic expansion and the ability to offer upgraded or new services. They will be able to scale and improve either by themselves or through partnerships. This will create a more robust and dependable distribution network across the region that will, in turn, make goods cheaper and better - both online and offline.
An important part of the agreement concerns data and the movement of data across borders making it possible for brands to use customer data to deliver real personalization and value to consumers. ASEAN has specifically put in place safeguards to better protect consumer and personal data. With these regulations in place, the ability for a brand to access, gather and use consensual first-party data directly across geographies is invaluable – both to the brand and to the consumer. Data mobility also brings with it the ability to track and report more accurately and in real time so that marketing effectiveness and impact across the region can be measured and optimized in real time.
All told, the signing of this agreement is a big step forward. It is world-leading in its openness and in its desire to deliver tangible value to the citizenry in each of the ASEAN countries. There really is something for everyone. Consumers will get better value and have more security. Businesses will grow and find new markets and new opportunities. The need for governance and control of law is satisfied, economies will get stronger and the whole region will flourish. This rising tide will truly lift all boats.
Nimesh Desai is chief operating officer of South East Asia and head of e-commerce, Wunderman.