With its uniquely young population, the lack of big-box retail and unmatched digital adoption rates, Southeast Asia’s e-commerce market is growing much faster than the global rate.
A report by Google and Singapore investment company Temasek forecasts that the e-commerce market in Southeast Asia will grow from $5.5 billion in 2015 (0.8 percent of the total retail market) to US$87.8 billion in 2025 (6.4 percent of the total).
According to the report, Singapore’s e-commerce market was valued at $1 billion in 2015, with online shopping making up 2.1 percent of retail sales. By 2025, Singapore’s e-commerce market is expected to make up 6.7 percent of all retail sales, at a value of $87.8 billion.
Unique characteristics, unique challenges
While digital adoption in Southeast Asia is exceptionally high, the industry has some unique characteristics and faces some unique challenges.
Southeast Asia’s later uptake of digital technology means that e-commerce ventures in the region have the luxury to learn from others’ mistakes made in mature e-commerce markets like the US and China.
What we are seeing is a compressed timeframe of e-commerce business model development, with the established evolution from classified sites like Craigslist through C2C (eBay, Taobao), B2C (Amazon, JD.com), B2B2C (Amazon, Tmall, Lazada) to Brand.com (Estee Lauder, Nike) happening faster and in many cases, simultaneously.
This pattern is very much influenced by consumer preferences and online behavior. The region is a unique e-commerce market. Consumers here are leapfrogging technologies. Outside of tier-one cities, many have bypassed PCs, accessing digital platforms primarily through mobile phones.
In Thailand for example, 85 percent of consumers not living in major metropolitan hubs use mobile devices for their online purchases.
While in mature e-commerce markets desktop C2C still plays a pivotal role, Southeast Asia’s leapfrogging towards mobile is disrupting traditional, desktop-first marketplaces. Mobile-only C2C marketplaces like Carousell and Garena-backed Shopee are making aggressive moves against their older desktop counterparts like Tarad in Thailand and Tokopedia in Indonesia.
Kicking the tyres on social media
As a result of this fragmentation, shoppers are more likely to head first to search engines when looking for products as opposed to checking company websites. They show little loyalty to retailers and shop via social media. More than 80 percent of Southeast Asia’s digital consumers use social media such as Instagram to research and review products.
Since sales via social media comprise up to 30 percent of all transactions, companies are rapidly expanding their services to attract consumers. The message to retailers is that the game changer will be the use of data to build real relationships with customers.
Capture the data – then interpret it
Beyond ease of purchase and the ability to consult the opinion of other consumers, e-commerce has revolutionized the way information about a retail customer’s journey to purchase is captured.
Today, such information is captured on a more individual basis. E-commerce enables retailers to know what particular customers looked for, how they reached the site, what they bought, and even associated and abandoned purchases.
Reconstructing the customer’s journey was difficult when the sole purchasing channel was the physical store and the only traceable element the purchase. At best, the customer was only identified at the checkout, which militated against personalized recommendations.
Thanks to a better understanding of the journey to purchase, e-commerce has made it possible to better understand customer behaviour and react in real time. Distributors have considered applying these concepts across all sales channels – stores, call centers, etc. So, retailers today are challenged with fully understanding the customer journey across each one, while benefitting from greater accuracy.
This is not easy. Depending on the channel chosen by the customer, the knowledge obtained by the seller is not the same: as we know, while at the checkout, the customer will only be recognized if they own a loyalty card or have already visited the store. But, in the latter case, it will be extremely complex to make the link with past purchases.
Similarly, a website may enable the collection of data on the intention to buy but it is extremely difficult to correlate these events with the purchasing transactions if they are not made online and in the same session. The stakes are high, given that 78 percent of consumers now do their research online prior to making a purchase .
Talend suggests that one solution is to integrate sensors into the elements that constitute a customer’s purchasing journey, then analyze and cross-reference this data to extract information from it.
Some of our customers are already engaged in this process. It all usually begins with a detailed analysis of the customer’s online journey, to collect information on intent, cross-reference it at an aggregated level with actual purchases, at the catchment area level, for example, to determine correlations and refine segmentations.
Then, this information is cross-referenced for a second time with transactional data from the physical stores and the website, which enables us to map the customer’s journey from intention to buy to the purchase or beyond. Thirdly, it’s a matter of developing a recommendation system in real time throughout the customer’s journey to drive increased sales and greater loyalty.
Value-added services
The main future challenge facing distributors lies in the value-added services that they may be able to provide to customers, to accompany their products or service offering. Consumers have learned to be wary of digital technology. More than ever, they will only be inclined to share information on their intentions and their profiles if their trust has been gained and they can perceive the benefit in it.
How do you create this trust? Via value-added services: when consumers see that their interests are being considered, they do not feel constrained or trapped by a commercial logic that is beyond them.
Amazon, with its “1-Click” ordering, has shown the way. In other sectors, such as the taxi industry, newcomers have gone even further, revolutionizing the customer’s journey by utilizing digital technology, from searching for a service to payment through a range of innovative services that make the customer’s life easier, such as the automated capture of expense forms.
In a world in which advertising and tracking are increasingly present, data analysis carried out with the sole aim of commercial transformation is doomed to failure, as it is based on an imbalance between the benefits offered to the customer and those gained by the supplier. Until now, personalization in retail has tended to limit itself to marketing and measure itself in conversion rates, except for distributors, who have increasingly relied on customer loyalty.
Multichannel is not the invention of the distributors but a reaction to consumers’ wishes. Think about it, even Amazon is going to start opening physical stores. Why? Because it has fully understood that a key element was missing in its bid to become better acquainted with its customers’ journey, while responding more effectively to their wishes.