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I recently attended the 6th Asia E-commerce conference, held in Kuala Lumpur on 25 May 2016. The one-day event brought together digital marketing experts, logistics solution providers and business leaders from across the e-commerce value chain, to discuss and share about the latest developments of e-commerce in Asia, its challenges and opportunities for retail businesses. Key topics touched by presenters include the Southeast Asian market, a changing retail landscape, the emergence of social commerce and importance of mobile.
It is well-known that Southeast Asia holds tremendous e-commerce opportunity due to the sheer size of its population. Yet at the same time, there are a lot of obstacles to doing business in the region. Paul Srivorakul, Group CEO of aCommerce and Kai Kux, Managing Director of Asia Venture Group, both acknowledged this fact in their presentations. Markets like Thailand, Philippines, Indonesia, and Vietnam are plagued with inherent challenges like complicated custom clearance, fragmented marketplace eco-system, inefficient last mile delivery, poor transport and technology infrastructure, along with a large share of unbanked population. Overcoming these issues is what makes it hard for internet retailers to penetrate these markets.
Mr. Srivorakul then talked about the significance of ASEAN Economic Community (AEC), which was established in 2015 by ASEAN countries to create a free market for trade in goods and services. He believes that AEC will bring about huge potential to Southeast Asian countries by attracting a large number of foreign direct investments. These foreign companies require the help of local partners to grow and that is when we will see more partnerships, mergers and acquisitions happening in the region.
E-commerce has been changing the retail status quo. It is interesting to note from Mr. Srivorakul that “brands are becoming retailers and retailers are creating brands.” Manufacturers are figuring out how to own the end-customer and e-commerce has allowed them to do so by selling direct to consumers. Benefits for brands to become retailers themselves are the ownership of customer data and maximized profits from elimination of the middlemen. At the other end of the spectrum, retailers and marketplaces are coming up with their own brands to seek further growth. (Amazon, for example, sells its own clothing and electronic accessories). They are in good position to do so with existing ownership of the end-customer, access to brands’ data and the manufacturing supply chain.
As e-commerce continues to grow, what can store-based retailers do to survive in the current retail climate? Courts Asia’s Chief Executive Officer for New Markets, Allard Sjollema, shared several useful tips. Many experts have advised on improving the in-store experience to stand out from competition. However, in Allard’s words, “superior in-store experience requires higher margin”, that is to say it is not for everyone; what works for a luxury goods retailer may not apply to a neighborhood supermarket. Retailers may consider winning on proprietary products or product innovation. Courts, in this aspect, has come up with its in-house credit facility under the name of “Courts Flexi Plan” to attract low-income customers whom neither have sufficient cash for upfront payment nor qualify for a credit term with the banks.
Retailers have to be aware that they are no longer competing among themselves. Instagram and Facebook have become major marketplaces in Southeast Asia where many small businesses sell their products to consumers via an Instagram account or Facebook page. Things have gone a step further recently with companies like Google, Facebook and LINE rolling out ‘Buy Buttons’ that allow consumers to purchase products directly while browsing their platforms. Retailers are concerned that Google will turn into a giant marketplace eventually, escalating competition on the e-commerce front.
According to Alban Villani, commercial director of Criteo, mobile currently accounts for 47% of retail e-commerce transactions in Southeast Asia. As mobile takes importance in the region, it is worthy to note that apps have become dominant over mobile browsers with 52% of retail mobile transactions taking place via the former. Users tend to view four times as many products on apps compared to mobile browsers. Per transaction, they also spend more on apps than mobile browsers and desktop.
However, usage and retention pose as the biggest challenges as an app mostly loses its entire user base within a few months. Retargeting was presented as a viable solution to help businesses win back bounced traffic by showing relevant ads from your brand on other websites. When targeting online customers, brands should consider a cross-device approach as it is common for a final transaction to occur on another device than the one where the click was made. Facebook’s client partner Ng Yau Chuan echoed the same view in his presentation by highlighting that mobile contribution to the final sale is often under-valued as many transactions completed via desktop are initially led by advertisements on the mobile. Thus, a successful retargeting strategy should ideally encompass all devices for maximum reach.