Asian E-Tailers More Cost Efficient at Marketing: McKinsey

05 December 2000

E-commerce sites based in Asia are the world’s most cost-efficient in marketing terms, according to a survey by McKinsey & Co of more than fifty sites based in the region.

Following interviews with executives of each site McKinsey concluded that Asian marketers are more effective in attracting and retaining customers than their opposite numbers in the US and Europe. However, the quest for profitability appears to be no more assured than their occidental opposites: as with Western sites, the door to profitability is likely to hinge on whether they are successful in targeting a niche market or combining clicks with bricks.

Asian business-to-consumer sites spend an average of ten US cents a month in marketing expenses to attract a visitor, compared with $1.50 in Europe and $2.30 in America. Their customers also are more likely to buy again, than US and European shoppers.

The report attributes Asia’s lower costs and customer attrition rates to more cautious marketing spending plus intensive direct marketing to existing customers. McKinsey believes that the relatively late start made by Asian e-tailers has allowed them to learn from the mistakes made by western sites.

The majority of Asia’s profitable business-to-consumer sites have focused on a particular market segment, according to Mike Sherman, senior marketing specialist at McKinsey: "These sites have a clear idea of who their target customers are … [and as a result] have been able to keep their spending and operating costs down because of targeted advertising and focused operations.”

Specialization is also a key factor in attaining profitability, enabling e-tailers to charge premium prices and generate higher revenue per user than broader-based online retailers.

A bricks-and-mortar retail presence is another important element in successful e-tailing, with such sites using offline brands to attract online customers. This also reduces operating costs and hikes profitability. ‘Clicks-and-mortar’ sites on average achieve six to eight times the visitor/customer conversion rate than dotcom-only sites.

McKinsey also furnishes the following statistics [currency US dollars]:

Marketing per visitor per month:
Asia $0.10 / Europe $1.50 / USA $2.30

Transactions per consumer per month:
Asia 1.5 / Europe 1.5 / USA 1.3 /

Average spending per consumer transaction:
Asia $40 / Europe $79 / USA $66

Customers who return to site:
Asia 30% / Europe 18% / USA 28%

Conversion rate of visitors into shoppers:
Asia 0.8% / Europe 2.5% / USA 2.3%

News source: Wall Street Journal