4 Taiwan E-Commerce Trends Emerging from the COVID Pandemic
And how they will shape the next decade of online retail
COVID Gave Taiwan E-Commerce a Much Needed Shake
As in most of the world, COVID sent e-commerce penetration in Taiwan to the stratosphere. Taiwan was an early e-commerce adopter, but most of the local players had hardly changed for a decade. A major COVID outbreak in May and lockdown style restrictions for close to four months forced the industry to innovate, resulting in bumper revenues.
According to data from the Ministry of Economic Affairs, in 2021, the e-commerce market in Taiwan was valued at over NT$430billion(around US$15 billion), representing 24.5% annual growth over the previous year.
In this article, we look at four of the key e-commerce trends that emerged from this period and how they are likely to develop in 2022 and onwards.
Opinions in this article come from an interview with Taiwan e-commerce guru, 林克威. Thank you so much Mr. Lin for giving me your precious time,
1. COVID Forced Brands to Merge Online and Offline Experiences
Brick-and-mortar retail took a hammering due to the pandemic. This led to previously reticent retailers shedding conservative mindsets and finally welcoming digital transformation.
For the first time, e-commerce enabler, Shopline, found that the number of brands opting for OMO models(Online to Offline or Offline to Online) Shopline, found that the number of brands opting for OMO models(Online to Offline or Offline to Online) for the first time grew by 88% in 2021. Their efforts brought bountiful rewards as well: online sales from physical retailers totaled NT$120 billion in 2021, close to a 40% increase from 2020.
Department stores, usually considered old-fashioned and already suffering from flagging sales, enjoyed significant success from pandemic buoyed online endeavors in 2021. In a statement for Wealth Magazine, Department store chain SOGO claimed SOGO claimed in a statement for Wealth Magazine that their e-commerce sales in 2021 were several multitudes higher than the previous year, thanks to a COVID OMO action plan policy that included sales generated from their self-operated e-commerce channels, live-commerce streaming, and contactless sales.
2022 and Onwards: More Hollistic Experiences that Impact All Stages of the Customer Journey
To match changing consumer behavior, brands and retailers in Taiwan will need to consider the wider customer journey. For larger purchases, it’s common for consumers to begin gathering information online, before visiting a physical store to interact with the product, before again making the final purchase online. So as we are seeing, brands and retailers will need to shape both their online and offline experiences to match the new retail normal.
We can expect physical stores to become more like experience centers, for consumers to learn and interact with the product. Similarly, more interactive online content will be developed for those at the information-gathering stage of a purchase.
As in China, brands will try to map this process by strengthening their connection with the consumer. To do this, brands and retailers will be more active in collecting users’ LINE accounts or offering benefits to those that hand them over.
2. Social-Commerce to Soar in Next Five Years, Especially For Over-50’s
The COVID pandemic brought a tectonic shift to “Social Commerce” models in Taiwan. Social Commerce refers to blending the lines between social media communities and online shopping. Consumers can perform all the functions of e-commerce, such as product discovery, putting items in the shopping cart, and completing orders, within the social media platform.
This is already commonplace in China, with early adoption possible due to advances in mobile payments and logistics across the straits, accounting for the US $363 billion in purchases there in 2021. The leading social commerce case in China is of course WeChat and the ecosystem of mini-programs and e-commerce functionality built around the leading chat platform.
Taiwan is perfectly primed for this mode of E-Commerce, as the use of social media for community functionality is particularly high. Consumers already look to online communities and social media, for advice on what to buy. For example, there are many highly influential Facebook groups where mothers seek advice on what to buy for baby products, and these are often more powerful than traditional advertising and marketing channels for that sector.
Industry data highlights that social media is already driving e-commerce sales. According to data from influencer analysis platform, KOL Radar, the number of posts from KOL on social media that mentioned leading e-commerce platform Shopee, had 6.6 times the impressions of regular posts.
The convenience-store chain, Family Mart, has successfully operated a LINE-based social commerce initiative. Store managers of individual Family Mart stores collect contact details of regular customers by QR code and then send special offers to the community LINE group, who can easily make purchases to be picked up in-store. It said that many people have a closer relationship with the manager of their local convenience store than their community leader, so they have a lot of trust and influence
2022 and Onwards: WeChatizaton of LINE Ecosystem
Social commerce will be one of the most prominent growth areas in Taiwanese e-commerce over the next few years. Taiwanese consumers already often look to friends or opinion leaders on social media for advice on what to buy, and now the friction points between making the final purchase will be removed.
Peer-to-Peer(P2P) e-commerce has the most potential, especially among older consumers who are used to seeking advice from friends. The pandemic has stimulated online buying behaviors in the over 50’s, who have a significant chunk of the real spending power in Taiwan, and are mostly untapped.
LINE is likely to be the key platform for social commerce, which has 92% regular use among those aged 50-65, who are devoted to the app. Expect the continued WeChatization of LINE in the next few years, meaning full e-commerce functionality and the blending of chat, content, and retail.
Like WeChat, you can also expect retail mini-apps to be built within the LINE ecosystem. Also anticipated will be Micro-Stores(微店) and niche smaller groups for friends and those of shared interest, which will also push products.
3. Live-Commerce Became Mainstream in 2021 and is Here to Stay
Live-Commerce, meaning Livestream e-commerce, has had a presence in Taiwan since 2016, and while not as developed as in China, it is making ground at a rapid pace. The main players in Taiwan are Shopee, LINE, and Facebook.
The previous friction point for live-commerce in Taiwan was the time it took to make transactions. Previously if shoppers were interested in a product, they would wait to the end of the stream to decide to buy.
In 2021, Shopee introduced the ‘+1’ function, which meant that transactions could be made mid-stream, just at a press of a single button. This fostered impulse buying behavior and gave Shopee Live(their live streaming unit) a 70% increase in order numbers in 2021, compared with 2020, and a 160% increase in the number of live-commerce merchants. LINE also released ‘+1’ in September of 2021 for their top 100 sellers, with a mass rollout planned for March this year.
2020 and Onwards: Battle Between Social Platforms and E-Tailers for Live-Commerce Revenues
2021 was the year that live-commerce reached mass acceptance in Taiwan and you can expect it to be responsible for a greater share of retail revenue in the following decade. According to MIC survey data, 26.4% of Taiwanese are willing to purchase an item for a live-stream, an increase of 4.4% from 2020.
Anticipate local players in Taiwan, such as PCHome and momo to also roll out +1 live-commerce functionality this year. However, Facebook and social media platforms are likely to enjoy the most success, as they usually do not charge a commission from sellers, making them more enticing for small-scale merchants.
Also, expect brands to try to circumvent paying fees to e-commerce platforms by trying to Livestream from their official brand channels or own e-commerce apps. Popular KOL in Taiwan will be able to profit from this trend through live-commerce streams like in China.
4. Hyper-Convenience: Platforms in Data-Driven Arms Race to Reduce Delivery Times
Taiwanese crave convenience and the Taiwan e-commerce ecosystem is primed for convenience like nowhere else in the world. Already the over 11,000 convenience stores on the island act as mini local warehouses and platforms like PCHome have been offering 24 hour delivery times for over a decade. As e-commerce revenues skyrocketed during the pandemic, major platforms have been entangled in a race to capture spending by reducing delivery times.
To compete with PCHome, momo opened 20 regional warehouses in 2019, and a plan to offer 3-hour delivery across the whole island. They opened another 10 last year to meet increased COVID-driven demand.
Shopee also unveiled its ‘Store-to-Store’ strategy in mid-2021, under which it opened over 400 Shopee physical stores in just over half a year. In these stores, sellers and consumers can easily send and receive goods. For sellers, having dedicated drop-off points makes it a lot quicker and easier to send orders, compared with a normal busy convenience store.
For convenience stores, e-commerce collection is a secondary revenue stream, so they have less inclination to invest in speeding up the logistics process. ‘Store-to-Store’ gives Shopee full control of logistics and the opportunity to iron out inefficiencies and reduce delivery times.
Shopee’s ‘Store-to-Store’ initiative has been considerably boosted through a blockbuster partnership with convenience store chain, OK Mart in March 2022, which is shaking up Taiwan e-commerce. All 830 OK Mart stores will now become Shopee distribution centers, taking the nationwide total to over 1,000. Deliveries to any of these centers will cost NT$19, less than a third of the price of sending to Family Mart of 7-11(Both NT$60). Shopee has already done similar deals with SimpleMart and coffee chain, 85°C, and wants to expand more partnerships with another retailer, to increase their total number of locations to over 3,000, by the end of 2022.
2022 and Onwards: Data Science will Bring Average 1-1.5 Hour Delivery Times
Delivery times will plummet to averages of 1-1.5 hours for marquee products, and this will be achieved by applying data science. In densely-populated northern Taiwan, expect more local mini-warehouses, rather than the large logistics centers. This shortens the actual distance of "goods to person".
Logistics data will fuel predictive algorithms that will make sure these warehouses are stocked with just enough items to make quick deliveries and match the demand for that specific location. Data analysis will also be leveraged to help to calculate the best arrangement between pickup points and warehousing and then achieve the fastest delivery results with the least resources.
If anyone would like to collaborate or looking for insights on the Taiwan market or consumers, reach out to me at axeymatt@hotmail.com