Strong Future Ahead for Asian Technology Brands
Asian technology brands continue to dominate local markets, filling the void due to slow Western brand roll-outs and the region's linguistics and graphics challenges.
The 25 billion US dollar initial public offering (IPO) of the Chinese e-commerce giant Alibaba in September 2014 indirectly led to a greater focus on other Asian technology "start-ups." Many of these local Asian brands (see adjacent chart), mostly unknown to the West, are equivalent to established Silicon Valley brands and market leaders. This rapidly emerging Asian technology industry is light-years away from the old Asian unbranded, low cost and manufacturing model.
Emerging Asian Brands Versus Silicon Valley Brands
(Credit Suisse Emerging Consumer Survey)
|Silicon Valley brand||Emerging Asian brand|
Naver (South Korea)
|Online retail||Amazon||Alibaba (China)
|Online discount clothing retail||Asos||Vipshop (China)|
|Social networking||Tencent (China)
|Professional networking||Ushi (China)|
|Video sharing||YouTube||Tudou (China)|
|Online retail||eBay||Taobao (China)|
|Text messaging||What's App/ Facebook Messenger||Line (Indonesia)
WeChat (Tencent China)
|Online payments||PayPal||Alipay (Alibaba China)|
|Online travel booking||Priceline.com||Ctrip (China)|
|Online real estaet portal||Zillow/Trulia||SouFun (China)|
Asian Technology Brands Have Reached the Next Phase
The Asian technology industry has turned to a new phase in terms of consumer capture, brand differentiation and is potentially also moving into higher return businesses. In some cases, concerns over intellectual property infringements and patent protection have limited the risk appetite among Western technology companies to build out their businesses in Asia. Different languages and alphabets, have also created considerable barriers to rolling out Western business models. This issue has given Asian entrepreneurs the incentive to develop localized versions of Silicon Valley type companies that build on different cultural preferences. The South Korean online search engine Naver, the Chinese online travel booking service Ctrip and the Chinese online professional network Ushi are good examples. The high usage of mobiles for e-commerce (for additional information see article "Many e-Commerce Opportunities Ahead in Emerging Markets") and the different IT infrastructures used in parts of Asia have also lead to the development of strong local Asian brands. The IT platform of the Indian social networking service and online retailer, Nimbuzz, has for example been built for the lower bandwidth environment found in (large parts of) India.
Baidu Remains the Main Chinese Search Engine, Far Ahead of Google
The rapid adoption of mobile e-commerce by Asian consumers and the development of successful portals, both business-to-consumer (B2C) and business-to-business (B2B), appear to limit the market share possibilities for English language-based technology companies even further. The Emerging Consumer Survey 2015 published by Credit Suisse demonstrates this. In the search engine category, the only Western brands named by the respondents in the study are Google and Yahoo!. The Chinese-language search engine Baidu is the clear market leader in China when it comes to the use of search engines for purchases, and its market share is on the rise. Google's market share for the same type of searches never managed to break the 10 percent threshold in China between 2010 and 2013, and has been steadily declining during this period.
Alipay, China's Dominating Online Payment Provider
The clear and increasing market dominance of Alipay for online payments in China continues, the survey also shows. The symbiotic relationship that exists between Alipay and Alibaba – mirroring the relationship between PayPal and eBay in Western markets – has promoted this supremacy. More than 60 percent of online purchases were settled through Alipay in 2014, compared to just below 50 percent in 2010. This market dominance has enabled Alipay to push out analog payment methods such as the traditional cash on delivery, credit cards, bank debit cards or other digital payment systems such as China UnionPay. The main difference to PayPal is that Alipay was developed in-house in the early 2000', rather than being an acquisition.
Winning Chinese and Indian Brands?
The survey shows that there is an increased demand for social networking, travel bookings, online purchases and game app usages in China, while instant messaging and mobile/online banking posts slower growth. These trends suggest that the likes of Alibaba, Alipay, Baidu, Ctrip will continue to do well in China. Other Chinese brands likely to benefit are the online discount clothing retailer Vipshop, the social networking sites Renren and Tencent. Slightly different user patterns and growth drivers are discerned in India. One key difference is gambling, which is legal in India (see adjacent figure). In India Internet usage sees superior growth in travel bookings, mobile/online banking and online retail. Leading Indian online retail brands include Flipkart.com, Snapdeal, Jabong and Myntra. The market leader, however, remains the US online giant's Indian subsidiary Amazon.in.
Some Brands Fail When Trying to Emulate Western Model
There is considerable data in the Emerging Consumer Survey underpinning the likely continued success of Asian tech and retail brands, but exceptions do exist. A good example is the Chinese sportswear brand Li Ning, a competitor of Adidas and Nike. The company did not manage to keep its position in its local market. Li Ning's sales dropped by nearly 40 percent between 2010 and 2013 and its profit has turned into a loss over the same period. Li Ning's share price has as result dived to a tenth of its April 2010 all-time high. The issue here appears to be strategic – the Chinese sports manufacturer priced its products too close to that of the aspirational Western brands. The traditional Asian model to drive growth and market share from its Western competitors by exploiting labor cost advantages and undercutting on price was not been followed by Li Ning. The company thus seems to have fallen in between the aspirational Western sportswear brands and much cheaper domestic competitors such as Anta and X Step.