Hacking Growth through E-Commerce in East Asia

Accounting for over 41% of global online sales, East Asia holds key significance as a region reshaping retail e-commerce. China, Japan and South Korea are the largest and most important retail e-commerce markets in the region. Because success in these markets is key for regional and global retailers eager to grow their online sales, studying successful e-commerce strategies from these countries can provide the insights for retailers looking to win in East Asia and beyond.

China, Japan and South Korea lead e-commerce in Asia Pacific

East Asia is the centre of gravity of the retail e-commerce sector in Asia Pacific. In 2023, the region accounted for 89% of Asia Pacific’s retail e-commerce sales. China remains the leading market in East Asia followed by South Korea and Japan, all three of which have thriving digital economies.

East Asia is expected to retain its dominance within the Asia Pacific e-commerce space, as it is projected to continue to account for 85% of the region's retail e-commerce sales in 2028

^{Source: Euromonitor International}

Emerging retailers and brands hack growth through e-commerce

Despite a mature retail e-commerce landscape in the region, emerging retailers and brands have found opportunities to disrupt the market with differentiated strategies.

Douyin Marketplace in China and @Cosme in Japan are notable emerging retailers in the health and beauty space, which is a well-established component of the e-commerce industry within the region. These platforms have outpaced overall market growth given the new business models. Take the example of Douyin Marketplace, the e-commerce portal embedded into Douyin, the popular ByteDance-owned social media platform that acts as the Chinese equivalent of TikTok. Douyin Marketplace has shown strong sales growth, driven by the popularity of the well-established social media platform in which it sits, and it has emerged as a truly successful e-commerce marketplace with a strong livestreaming component. Its sales growth is also supported by effective collaboration with brands and the utilisation of Douyin’s extensive network of creators.

As e-commerce provides small brands with access to a broad audience, presenting opportunities for product discovery and brand awareness, the channel’s disruptive potential has been increasingly embraced by small brands in the region. Players like Nuo Fan, a chocolate confectionery brand in China, and Greek Day, a yoghurt brand in South Korea, have successfully disrupted their respective categories by leveraging e-commerce and social commerce strategies. Nuo Fan recorded online sales growth of 7% in China during 2023, when total online chocolate confectionery sales declined by 4%. Similarly, Greek Day posted e-commerce sales growth of 26% in South Korea despite total online sales of yoghurt declining by 4% in 2023.

A low Digital Dominance Index score suggests untapped opportunities in China

To effectively spot such disruptive opportunities, Euromonitor International introduced the Digital Dominance Index, which tracks the competitive landscape in e-commerce across fmcg categories by comparing brand ranking across the total retail space and the e-commerce space in select countries. This helps to identify those areas where leading industry players dominate and those areas where disruptors have the greatest potential to thrive. Companies can use the index to reflect on their own positioning in the market and then strategise a path forward based on the nature of the competitive e-commerce landscape.

When comparing the Digital Dominance Index between the three countries, South Korea and Japan display higher scores than China across multiple sectors, each having an average score of 5.8.

China shows disparities among industries, highlighting the intensified competition in the online space with a lower Digital Dominance Index score of 5.1

^{Source: Euromonitor Passport E-commerce, May 2024}

For small emerging brands, low digital dominance presents a significant opportunity for growth. By effectively increasing their online exposure and building customer loyalty through diverse digital strategies, these brands can gain share and become leading players in the e-commerce space.

Chinese players can use this to their advantage. Leading Chinese beauty and personal care brand, Proya, effectively leverages its partnership with various e-commerce players. This features establishing strong campaigns on Alibaba-owned online marketplace Tmall during promotional sales periods. The brand experienced average e-commerce sales growth of over 80% on Tmall during the 11.11 (Singles’ Day) and June 18 shopping festivals held during 2022 and 2023.

Finding e-commerce success in East Asia and beyond

East Asia’s developing e-commerce space shows that while e-commerce penetration, the competitive environment, and future online sales potential differs by industry, successful businesses of all types are looking for differentiated strategies by seeking a deeper view of the retail e-commerce landscape and the interplay of retailers and brands within it.

Looking beyond East Asia, emerging but sizeable Asian economies like Indonesia and India are poised for unprecedented e-commerce sales growth. When market leaders explore geographical expansion into these emerging markets, drawing insights from the successful digital strategies seen in East Asia and then tailoring them to fit local tastes can help provide a pathway to long-term growth.

Learn more about e-commerce in our report, Unlocking E-Commerce in Asia and Beyond: Lessons from China, Japan and South Korea.