Southeast Asia is a uniquely dynamic retail landscape

SEA eCommerce Landscape

The retail market in South East Asia is unique compared to the retail landscape in Western nations. Despite their proximity to each other, retail businesses in SEA nations face vastly different challenges. Region-specific cultures, wildly diverse customer preferences, infrastructure and logistic challenges have made SEA a hostile market for retail players to thrive and scale.

This natural moat has proved advantageous to local players to have a head start in the retail market since they are familiar with the cultural and social nuances of the region. However, aided by massive budgets and tech prowess, Chinese tech giants Alibaba and Tencent have been making steady inroads into the market by investing heavily in local players like Lazada.

SEA Chinese

Alibaba-backed Lazada was successful in overthrowing several local players in Thailand, Philippines and Vietnam. So far, the only market where Lazada faced stiff competition is Indonesia where B2B2C players Matahari Mall and Blibli were able to fend off the juggernaut thanks to their deep-pocketed investors and local expertise.

A Curious Case of ‘Same but Different’

Despite the cultural and geographical differences, there are commonalities across the Southeast Asian markets. For example, distrust of online payment, burgeoning middle-class and rapid mobile penetration (41% percent of the Vietnamese population has access to 3G) and an affinity for social commerce (as per this Bain report, 80% of digital consumers use social media or messaging apps to research products and connect with sellers)

These factors, coupled with intense competition amongst sellers have the set the stage for Southeast Asia to be a $200 billion internet economy by 2020.

The State of Affairs: Ecommerce in Southeast Asia

The e-commerce market in Southeast Asia is still in a nascent stage, primarily due to fragmented logistic networks and weak digital payment adoptions. In fact, despite e-commerce being a $4 billion market, it contributes only 4% to the retail sales in Southeast Asia.

However, the market holds immense potential and with e-commerce tipped to grow from $5.5 billion in 2015 to $87.8 billion by 2025 according to this Google-Temasek report.

The primary reason for this is rapid internet penetration, with Indonesia leading the pack at a staggering 87% share of mobile traffic. According to the Google-Temasek report, the number of internet users in Southeast Asia will witness unprecedented growth from the current 330 million to 480 million in the next two years. The other reasons include a cumulative population of more than 600 million and a rapidly increasing middle class.

Should we then start writing obituaries for brick & mortar stores?

As the region preps for a massive ecommerce boost, there is (justifiable) apprehensions amongst brick and mortar retailers. However, we’ve seen the scenario playing out in mature markets like US, Europe and even in developing markets like India & China. eCommerce was predicted to be a hurricane that will sweep across retail markets leaving a trail of obliterated brick and mortar stores in its wake.

For the better, or worse, that has not been the case; rather smart retailers on both sides ventured into opposing turfs and adopted each other’s strong points.

The appeal of e-commerce lies in its convenience. You click a couple of buttons and the order gets delivered to your home. However, physical stores come with their own share of advantages : the touch and feel aspect, quicker delivery, trust factor, human interaction and cash-based transactions (this is especially critical in a digital payment averse market like Southeast Asia).

Based on brand and customer behaviours, Southeast Asia is likely to follow a similar market trend. And, we are already witnessing several omnichannel focussed moves like the launch of pop-shops by Thai online fast fashion label Pomelo, the opening of brick-and-mortar stores by Berrybenka (Indonesia) Naiise (Singapore); and the acquisition of Zalora by the Central Group.

However, the message is loud and clear for retailers in Southeast Asia – to win the next wave of retail entails mixing the best of both worlds with a generous smattering of AI to offer an intuitive, connected and personalized shopping experience across stores, mobile apps, websites and social networks.

Why Omnichannel is the way forward for SE Asian retailers

Omnichannel retail follows the principle that it’s harder to make things look easy. While customers are getting used to fast, easy and seamless experiences, retailers are finding it harder than ever before to enable these experiences.

Asian customers are increasingly becoming omnichannel in their outlook. In fact, 90% of Indonesian consumers prefers to use multiple channels while making a purchase.  This new-age customers expect a seamless and connected experience across multiple channels and brand touchpoints (social, website, app, in store etc) and they are not afraid to skip brands that don’t provide this seamless experience.

To put it simply, omnichannel commerce works, and it has been proven in multiple markets across the world.  According to the study, 73% of the customers in the US use multiple channels during their purchase journeys.

The 5D Framework for Omnichannel Success in Southeast Asia

5D Omnichannel

Here’s what SE Asia retailers should get right at each step of their omnichannel journey :

Acquire Smart

  • Optimized Media-Mix – Channel chosen based on customer preference and affinity to respond
  • Contextual Engagement – Dynamic event based marketing & customer engagement with personalized customer lifecycle
  • Omnichannel Approach – 360° view on customer and ROI from each channel by merging all data sources

Delight the Customer

  • Simple User Journey – Frictionless,  highly responsive & connected experience across channels
  • Personalized Interactions – Personalized views, recommendations, & interactions across all transaction channels (Integrated CRM)
  • Seamless Experience – Transparent & smooth fulfillment, channel continuity, & proactive satisfaction check

Measure & Optimize

  • Conversion Tracking –  Real Time tracking complemented with proactive actions to improve performance
  • User Experience Tracking – Use of advanced tracking mechanisms  like heatmaps, customer journey and clicks conversion, traffic source segmentation etc
  • Business Tracking – Data-driven culture with analytics driving operational as well as  business decisions

Flexible Technology and Operational Systems

  • Dynamic & Scalable  – Highly flexible system with minimal up-time, stable APIs
  • Integrated Data – Unified view of all data, across channels, looping in all stakeholders
  • Integrated Processes – Internal teams in synch on real-time basis, with pro-active red flagging of failures and delays

Omnichannel Ready Organization

  • Resource Alignment – Dedicated resources, and long term investment and strategy in place
  • Objective Alignment – Channel wise commerce  goals derived from business objectives, with periodic governance for health check
  • Cross Functional Alignment – Vendors are fully aligned and managed on planned basis
A. Jain
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