Understanding unique economic environments and local customs of doing business in Asia
Published: 08 May 2008
TDS Asia 2008 Special
Online consumer behaviour in Asia is characterised by differences in the level of macro economic development, telecommunications infrastructure, availability of payment methods, as well as presence of online players that drive growth in the local online space.
About the world's most populous continent, it is stated that language issues are not the predominate factor. Rather local economies, their maturation and intricacies really determine market entry.
Agreeing with the same, Ernst Hemmer, Regional Director - Asia Pacific, Octopustravel by Travelport says, "Although catering to different language environments is essential, and is in fact a given, the key to successful market entry in Asia is thorough understanding of and adequately responding to unique economic environments and local customs of doing business. Without adapting to local market practices, it is impossible to develop a successful distribution strategy in Asia."
"The first step about distribution in Asia is to avoid approaching Asia as a region. Many global businesses make the mistake of treating Asia similar as the US or Europe, in terms of commercial approach, resources allocation, and physical coverage. Asia is not a region, but rather a diverse grouping of countries with very distinct cultures, traditions, and business environments. A `global for global' approach is not as successful as a `local for local' approach. The first step therefore, is for international businesses to understand these differences between Asia markets, and then plan on prioritising individual market penetration and applying a country unique distribution strategy," Hemmer told EyeforTravel.com's Ritesh Gupta.
In an interview, Hemmer spoke about making commerce offerings relevant for a diverse Asian marketplace, direct online distribution localisation strategy and much more. Excerpts:
Ritesh Gupta: What do you think is key in making e-commerce offerings relevant for a diverse Asian marketplace?
Ernst Hemmer: There are a few key requirements in becoming relevant in the online space in Asian markets, including localisation of storefronts with offerings that appeal to local consumers, displaying products in local languages and currencies, online and offline payment methods, but none of those is as key as building meaningful offline personal relationships with business partners.
Developing local relationships in Asian markets that will last, requires physical presence (sales, marketing, customer service), and that requires a commitment to make investment in a local market. In several Asian markets, such investments need to be considered as strategic investments, with the objective of becoming successful in the long term, because there will not be any short term return on investment.
Ritesh Gupta: What do you recommend for implementing a direct online distribution localisation strategy? For example, in China, IHG found simplifying the reservation process and required information (as Chinese users do not always value the internet as convenient) to be the major considerations in shaping IHG's website as part of localisation strategy?
Ernst Hemmer: The success of a local online distribution strategy is based on the extent to which online players are willing to adapt their offline business processes. More than in any other market in the world, Asian consumers require local and personal interaction with businesses before transactions can materialize. Being in a `browse online, book offline' e-commerce environment, it is essential for any online business to cater the customer service process to local consumers requirements and to ensure that a customer has the opportunity to engage in face to face contact or at least has the ability to communicate with a fellow countryman over the phone.
But it does not end there, as localising a process like customer service will mean different approaches in the way services are highlighted and explained. This ranges from very thorough, detailed and individualized service levels in e.g. Japan and Korea, to much more quick conversion oriented strategies in e.g. Singapore and Australia.
Ritesh Gupta: Do you think we need to understand that travelers are not a LCC customer or a traditional customer, but rather the modern traveler who mixes and matches based upon the requirements for that journey and their perception of the value of the product on offer. In this context, how do you think airlines in Asia need to approach their distribution going forward?
Ernst Hemmer: Effective airline distribution in Asia is based on understanding the travel trends in local markets, and especially, the propensity of local channel shift and how to capture that potential. It is important to understand that there are huge untapped travel segments in Asian markets, and that those segments need to be developed to grow to maturity, rather than exploited for their perceived ROI. LCCs understand this potential very well, and are a key driver in developing some of those untapped consumer segments in Asia to economic maturity levels. For traditional airlines to tap into those developing segments requires not only an adaptation of (online) distribution strategy, but also a new and different approach in product branding.
It would not be fair, however, to relate Asia market opportunities for LCCs and traditional airlines to distribution strategy and customer segmentation alone. The airline industry in Asia is still a very regulated and controlled environment, where the success of any airline's market penetration is largely determined by air traffic rights and airport slots policies by local governments and flag carriers.
Ritesh Gupta: Asia includes the fastest growing mobile markets in the world. China, India and Indonesia added nearly 150 million new mobile subscribers in 2006. To what extent travel suppliers and intermediaries are receptive to mobile as a channel for information and booking? What new trends have you seen in this arena?
Ernst Hemmer: In Asia, a mobile phone is the highest ranking personal asset on consumers' purchase lists. Much more than a PC, a TV, or a music player, a mobile phone is the first material expression of personal achievement and success. This is especially so among low income segments. The fastest and easiest way to reach consumers in Asia therefore is via mobile phone interaction. However, the mobile channel has not yet come to maturity level in Asia, and will not offer the same conversion potential as in the US or Europe, because many of the Asian mobile users still lack the pre-mobile Internet comfort zone that the US and Western Europe consumers find themselves in.
Unlike in the US and Europe where m-commerce has developed naturally out of e-commerce, Asian consumers are still going through the maturing stages of e-commerce, and therefore the opportunities of m-Commerce with Asian consumers will need to first earn a level of confidence and trust with e-business in general, before Asian consumers will widely respond to this channel.
Ritesh Gupta: What according to you have major developments in the online travel business in Asia in the last six months or so? How have these impacted or shaped up business opportunities for your organisation?
Ernst Hemmer: The growth of the online business has accelerated in several Asian markets in the past 6 to 12 months, particularly in India and China, fueled by an increasing appearance and activity of new and existing players.
Suppliers are becoming much more active in the online space by implementing targeted online direct strategies, and there are many new intermediaries as well as existing intermediaries making their mark on the local online space by significantly enhancing their offerings. This includes many new local players (not only new international players), taking advantage of new technologies and new payment solutions.
Solutions providers are co-driving this supply- and intermediary growth by offering new products that are both localised as well as tailored and secure. Both suppliers and distributors therefore, now have more opportunities than ever before to shape the Asian online space to reach the growing and untapped consumer segments. Whether they will be successful in doing so, depends largely on the recognition of and willingness to adapt to local circumstances and practices.
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