Starting an Online Business in Singapore Part 2: Industry Overview

This article is part 2 of GuideMeSingapore’s five-part guide on starting an online business in Singapore and provides an overview of the e-commerce industry. A disclaimer: please note that this is neither a comprehensive compilation of all relevant information on this topic nor professional advice; it is merely a high-level overview of the e-commerce industry in Singapore.

The evolution of the Internet and powerful online technology has given way to a new area of commerce known as electronic commerce or e-commerce. E-commerce simply means doing business electronically. In other words, commercial activities are performed online such as buying and selling goods online, electronic funds transfer, and direct consumer marketing.

With a large percentage of the population having access to Internet at home and on the go, consumers are opting to shop online rather than going the conventional way to ‘brick and mortar’ shops. Today, e-commerce is proving to be a fast growing industry in Singapore with many aspiring entrepreneurs launching their business on the Internet.

E-commerce Industry in Singapore – Facts and Figures

Here are some useful statistics about the size and nature of Singapore’s e-commerce landscape:

• Emall.sg, an online shopping mall that lists Singapore online merchants in its shopping directory, is reported to have listed more than 4,000 Singapore-based online businesses including blog shops, coupon deal sites, grocery stores and education portals.
• LiveJournal, the world’s first blogging and social media platform, reported in December 2011 that it had 1.2 million Singaporean users and over 50,000 blogshops, generating more than US$72 million worth of transactions in Singapore in 2011.
• Blogshops is an extremely popular trend in Singapore and is considered the preferred channel for entrepreneurs to kick-start their business ventures. A blogshop is a blog that sells products. The reasons for its popularity is that a) it is easy to setup, and b) the cost of setting up the blog is minimal and in some cases even free. Customers who shop at blogshops usually make their payments using Internet banking funds transfer, paypal or ATM funds transfer.
• LiveJournal estimates that only 1 in 10 Singapore blogshops earns more than S$2,000 a month while 80% of them earn S$500 or less per month.
• A survey conducted by LiveJournal in 2011 shows that on an average, Singapore blogshops conduct eight transactions a month. Close to S$8million worth of items are sold on LiveJournal blogshops every month.
• Statistics derived from the Asia Pacific Digital Marketing Yearbook 2009 confirms that 80% of Singaporeans have shopped online and that they are among the highest online spenders in Asia.
• According to a MasterCard survey in 2011, nearly 2 in 3 Singaporeans access the Internet to shop online.
• According to a 2011 Nielsen survey, of the 85% of Singaporeans who frequented social media websites, 69% used it to connect and engage with brands and companies.
  The 2010 Singapore e-commerce survey commissioned by the e-commerce Alliance of Singapore reveals that most SMEs consider Singapore’s overall level of e-commerce to be good and understand the importance of conducting e-commerce in this market. More than half of the surveyed SMEs said that e-commerce accounts for 10% of their overall revenue. 53% of the surveyed business are using .sg domains. Majority of the SMEs are price sensitive when it comes to building and enhancing their websites. Search engines, emails, and classifieds were the top online marketing channels. 60% of the participants spend less than S$5,000 a year in online advertising. Less than 20% of the participants use B2B platforms such as alibaba or buysingapore.
• In 2011, The Asian Exporters Index claimed that Singapore-based exporters registered the second largest sales among Southeast Asian countries after Thailand. Their items are mostly sold on eBay’s US, UK, Australia and Germany websites, with purchases from Brazil among the fastest growing. The main items that Singapore exporters deal in are jewelry, gems and watches, clothing and accessories, business items for industrial and office use, toys, and computers.
• A 2011 news report states that Singapore consumers spent S$1.1billion on online shopping in 2010. Of this amount, S$420 million was spent on domestic online websites and accounted for 38% of shoppers’ total online purchases. Shopping on Singapore websites was cited to be more convenient owing to easy Internet bank transfers as compared to shopping on overseas websites which comes with concerns such as exchange rates. Another factor was that local websites tend to cater to Singaporeans’ tastes and preferences.
• The 2011 Global Consumer Survey frοm MEF unveils that 84% of Singaporeans (who were included in the survey) hаd already used their phone devices tο еіthеr research οr bυу goods online. 40% of the goods purchased via the mobile phone were digital goods. 15% οf consumers bought electronic goods via their mobile phones.

What Sells Online in Singapore

The most common items that e-retailers sell online include the following:

• Computer hardware and software;
• Consumer electronics (cameras, scanners, printers, wireless devices, etc.);
• Office supplies;
• Books;
• Toys and games;
• Music;
• Health and beauty products; and
• Apparel and fashion accessories.

According to the Asian Exporters’ Index released by e-bay in 2011, Singapore e-bay sellers provide a significant supply of watches to the global market. After jewellery, gems and watches, its remaining top categories are clothing and accessories, business items (office and industrial), toys and computers.

The most commonly sold items on Singapore blogshops are clothing and accessories. Toys, cosmetics, and health supplements are also popular product categories among Singapore online sellers and shoppers.

Success Factors for E-commerce Businesses in Singapore

The following factors are critical success factors for any e-commerce business both in Singapore and globally:

• Niche products: Niche or speciality items are what stand out in the Internet. These include international products that are not readily available in the local market; products that cater to certain hobbyists or communities; or products that are unique only to the regional market.
• Flexible payment methods: Most online shoppers are looking for flexible payment modes rather than PayPal or credit card only payments mechanisms. Internet bank transfer is the most convenient way of making online payments in Singapore and is the commonly accepted mode of payment among most Singapore blogshops. An MEF Global Consumer Survey in 2011 also confirms that mobile banking is common in Singapore with one-fifth of the surveyed respondents claiming that they pay their bills online.
• Secure electronic transactions: Having a TrustSg mark on your e-commerce site helps build customer confidence in e-commerce transactions in Singapore especially in the area of privacy and security. The TrustSg mark communicates that you are a trustworthy e-commerce operator in Singapore. It signifies that you are compliant with Singapore’s stringent code of conduct for online businesses. The code covers the area of disclosure, privacy, best business practices, security, etc.
• Inventory control: You must neither have too much inventory (as it locks up your capital) and nor must you have too little stock (as you will end up with delayed shipments and disappointed customers). Most blogshops in Singapore gain popularity by word of mouth and it is critical to get good customer feedback. You must therefore ensure that you are able to scale up your inventory as required.
• Quick and reliable logistics services: According to an e-bay spokesperson, Singapore sellers on eBay are highly regarded for combining good quality products at great value. Offering quick and reliable logistics services is definitely viewed positively by overseas customers. Earlier this year, e-Bay and SingPost announced the launch of ePAC, a new shipping service for eBay Singapore sellers that offers enhanced international tracking and faster delivery times of within six to eight working days for lightweight goods under 2kg from Singapore to the United States. A reliable and affordable delivery solution will only serve to drive online sales further.

Singapore is a country with limited resources. However, it is a stable and convenient trading hub located at the heart of Southeast Asia. Today, Singapore boasts of having the highest level of Internet penetration and the highest frequency of Internet access in the Southeast Asian region. Therefore, it is a very suitable market for entrepreneurs who are exploring online ventures. To learn more about setting up an e-commerce business in Singapore, refer to the following other articles in our five-part guide:

• Starting an Online Business in Singapore – Step-by-Step Guide
• Starting an Online Business in Singapore – Regulatory Regime
• Starting an Online Business in Singapore – Taxation
• Starting an Online Business in Singapore – Funding and Financial Assistance