2016 E-commerce predictions for Southeast Asia

In Southeast Asia, the retail e-commerce market is a small one. For Sheji Ho, chief marketing officer, aCommerce, the rise in e-commerce in the region is not a matter of “if,” but “when.”

Among the top e-commerce markets are China, the U.S., the U.K., Japan, South Korea and Scandinavia. Ho expects Southeast Asia to surpass most of those markets, becoming the third-largest in the world.

“I think 2016 is going to be the tipping point for e-commerce in Southeast Asia,” says Ho. “As a consequence, we’ll see one or two key players becoming leaders in the market, especially in the B2C space because it’s a winner take all game.”

According to an AT Kearney report, Lifting the Barriers to E-commerce in ASEAN, online sales for Malaysia, Thailand, the Philippines, Indonesia and Vietnam made up less than 1 percent of total retail sales in 2014. By comparison, Europe represented 7.8 percent of sales; China, 7.2 percent; and the United States, 5.8 percent.

Ho expects Southeast Asia to reach between 10 percent and 12 percent by 2020. What does all this mean for e-commerce in this region? This is what brand marketers in Thailand had to say.

Differentiation

Gone are the days where big brands come in and do e-commerce as a check box, said Harprem Doowa, chief executive officer, Moxy.

Doowa predicts more brands will enter the Thai e-commerce market in the coming years, and those already doing it will start evolving their strategies. It means brands will need to shift toward more niche stories and larger points of differentiation to compete with each other.

E-commerce as a whole will also begin to shift beyond retail and into other sectors, including services such as financial technology.

“We have to be the Lamborghinis, the Ferraris, and in order to do that, we will really have to pick a niche,” said Doowa. “That doesn’t mean competing with Lazada, but to really focus on very specific groups of customers.”

For Moxy, for example, that niche target is the professional business woman. Therefore, the types of products used on the website, the content, the colors, the banners, the language used, the messaging, the marketing, and PR activity is all geared toward that particular consumer to ensure the brand remains at the forefront of the target consumer’s mind.

Consumer insights and customer behavior

Keeping tabs on changes in customer behavior should also be a priority, said Tanutda Vacharaphol, vice president, e-business, King Power. She said Generations Y and X in Thailand have been engaging a lot more with technology lately.

“They are changing the way they shop and are going online to do it, they are saving time and thinking more wisely about price, and they know how to spend money,” said Vacharaphol.

Mobile first, mobile responsive, mobile apps

Emerging markets in Asia are moving to mobile-first and mobile-only, but in Thailand, the majority of online sales are still being made on desktop: as much as 70 percent, according to the panel. Therefore, while a responsive mobile strategy is imperative and investments into mobile apps should be considered, desktop should not be neglected.

As much as 70 to 80 percent of Moxy’s online traffic, for example, is done on mobile. However, as little as 20 percent of transactions are made through that channel.

“Browsing on mobile is very high. People do their research on the move, they check the prices, they check competitor prices, they do it while they are shopping offline to see what they can find online,” said Doowa. “But there is still something about buying on a computer, seeing the big picture, the deal, and placing your credit card information through your desktop because desktop still has the perception of being safer than a mobile phone.”

Fragmented market

Unlike China and the U.S. whose e-commerce sectors are dominated by Taobao, JD.com and Amazon, the market in Southeast Asia remains fragmented. Instead of trying to compete with big players like Lazada, which is in six markets, retailers can be using it to test the waters, Vacharaphol said.

“Everything is an opportunity to me,” she continued. “If, for example, we want to enter the market in Indonesia, we can use them to try it out for our house brands.”

Online-to-offline, offline-to-online and omnichannel

Should brands in Thailand still be investing in bricks and mortar stores, or moving to an online presence only?

Nitthakorn Wongwan, senior marketing manager, e-business, Central Marketing Group, said it wasn’t about choosing online over offline because they are complementary.

CMG’s offline stores are open from 10 a.m. to 10 p.m., but the online channel allows consumers to buy anytime and anywhere. Consumers may also see a product online but come into the physical store to buy it offline.

In Southeast Asia, it’s still really important for consumers to see the same messaging offline as well as online, said Doowa.

“It builds that second layer of trust. They know that this store is physical, it’s real, and they are not just emptying their money and that we are going to run away with it,” he said.

Digital transformation

Another challenge facing the industry in Southeast Asia is how many brand managers are still not used to selling online, and many businesses still not having the processes or policies in place to do it.

For example, Moxy has one of the largest pet sections on its website in Thailand, but two of the country’s biggest pet brands don’t have policies in place to sell products online.

“Even though we still sell a million baht worth of their product a month, we have to buy it from third-party sellers offline. So sometimes it’s necessary for us to open a small offline store to get access to those goods,” said Doowa.

CMG’s Wongman added that e-commerce has changed the whole system. However, not everyone understands the nuances just yet.

“We are going for the future, so you have to have knowledge of e-commerce, and we have to educate everyone – not just the brand manager, but every staff member working for a department that works with the e-commerce channel,” said Wongwan.

Payment systems

Credit cards have a low penetration rate in Thailand. As a result, the majority of the country’s e-commerce payments (up to 70 percent) are still made as cash on delivery (COD).

“You might think people buying a coffee machine can afford it, but a lot of the issue is about trust. People want to see the product. They don’t trust that if they don’t like the product, they can return it, and I think people are just afraid that something might happen,” said Grzegorz Florków, business manager, NESCAFÉ Dolce Gusto.

Mobile payment solutions will start with the communication players like Line and Facebook, which already have that consumer trust, he said.

“There is a huge potential for the mobile players, the communication players, the instant messaging players. If someone cracks it, they will be billionaires,” said Florków.

Conclusion

Everything is moving so fast that we can expect to see more retailers going into e-commerce within the next year. And those who aren’t already doing it will be playing catch up. In order to stand out, brands will need clever points of differentiation, and should also consider partnerships with the bigger players such as Lazada and Zalora.

Having e-commerce responsive mobile and desktop websites will be imperative for all brands in this region. Omnichannel retailing will give offline retail a boost, too.

The big nut to crack, however, will be online payments. Until then, brands in this region need to offer consumers a wide range of options from cash on delivery to click and collect.