By Abhijeet Vijayvergiya | Southeast Asia (SEA) is a unique marketplace, with a different retail landscape in every country of the region. Despite geographical proximity, the cultural and economic differences are vivid with diverse customer preferences and levels of infrastructure development, making SEA a challenging market for retail players to thrive and scale.
A better understanding of cultural and social nuances has given local players a headstart in the retail market. 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.
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.
Within such a varied environment, there still are few commonalities across the Southeast Asian markets. For example, the distrust of online payment, burgeoning middle-class, rapid mobile penetration and affinity for social commerce. According to a Bain report, 80% of digital consumers use social media or messaging apps to research products and connect with sellers.
The ecommerce market in SEA is still in a nascent stage, primarily due to fragmented logistic networks and low digital payment adoption. In fact, ecommerce only contributes to 4% to the retail sales in SEA. However, the market holds immense potential with ecommerce tipped to reach US$87.8 billion by 2025 according to a 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 out of SEA.
Should we start writing obituaries for brick and mortar?
As the region preps for a massive ecommerce boost, there are justifiable apprehensions amongst brick and mortar retailers. However, we’ve seen the scenario playing out in mature markets like U.S., Europe and even in developing markets like India and 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 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 ecommerce 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, which is especially critical in a digital payment shy market like SEA.
Based on brand and customer behaviors, SEA is likely to follow a similar market trend, and we are already witnessing several omnichannel-focused moves like the launch of pop-up 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 SEA: 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.
That being said, omnichannel is a complex strategy and needs a long-term commitment from brands, which makes people them if it is really worth the effort. The answer is that if you are still thinking about it, you are already late. Omnichannel is an approach that consumers expect from every reputed brand today. It impacts various sections of business and creates opportunity for up-selling and cross-selling. Some noteworthy advantages of the strategy include:
Enhanced Consumer Perception
SEA is a region with a large segment of digital natives and digital dependents. This tech-savvy generation is heavily reliant on mobile phones for communication and commerce. Retailers who are seen as laggards by this generation will find themselves out of the race real quick.
Higher Sales
A booming ecommerce market offers plenty of opportunities for brick and mortar retailers to tap into new revenue channels. Apart from direct ecommerce sales, retailers should also consider social commerce, mcommerce and affiliate channels.
Effective Data Collection
Tracking consumer behaviour across channels allows retailers to get a clearer and more complete view of the customer. Armed with this information, retailers can target customers with the right offers at the right time to increase conversion and purchase frequency. Smart retailers can also optimize their campaigns to accrue higher engagements based on audience persona and behavior.
Increased ROI from Marketing Campaigns
The higher influx of data flowing into the system from multiple channels allows marketers to run targeted and personalized campaigns. There are dual advantages to this strategy: higher conversion rates and easy tracking of spends. Digital channels also give marketers the luxury of testing the waters with a smaller marketing budget before opening the floodgates with massive investments.
The Future of Omnichannel Commerce
While it might seem very unlikely in the present context, we predict that in the not so distant future, the term ‘omnichannel’ is likely to be redundant and could be replaced with ‘channeless commerce’ or ‘omniverse’.
The basic premise remains the same: a customer experiences a seamless experience across channels. However, where it deviates from omnichannel is the ‘concurrency’, i.e., a customer doesn’t move from channel to channel, rather experiences multiple channels all at the same time. The rise of AI, VR and AR will have a major role in this development, where customers can experience a virtual store sitting at their desk or or explore a virtual showroom from their living rooms.
About the Author
Abhijeet Vijayvergiya is the Vice President and Business Head for India and South East Asia at Capillary Technologies. Being one of the key leaders at Capillary, Abhijeet has assisted the company in rapidly growing its footprint across the Indian retail market with significant customer wins and helped establish Capillary as an emerging market leader in the omni-channel customer engagement and commerce space.
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