Li Mei Foong
Mar 24, 2015

Bricks and clicks, best e-commerce mix

Virtual stores are making an unexpected appearance in shopping malls.

Online fashion retailer Zalora is building a real-world presence
Online fashion retailer Zalora is building a real-world presence

Southeast Asia is poised to explode, but no one can afford to run away — not when the anticipated boom is the region’s ecommerce market. 

Currently just 0.2 per cent of retail sales in Southeast Asia are done online, but a 2014 UBS report predicts the market to balloon five-fold in the next five years. 

And if Asean online shopping reaches a similar level as in China and the US, of about 8 per cent, that could be worth US$35 billion, according to the UBS report. 

Internet penetration in Asean is predicted to jump from its current 32 per cent to 48 per cent in three years, and firms are placing big bets on the boom. Within the last year alone, Alibaba invested US$249 million in Southeast Asian ecommerce logistics network, Singpost. SoftBank and Sequoia Capital also bought a US$100 million stake in Indonesian online marketplace Tokopedia. Singapore-based online grocery-delivery service, RedMart announced that a group of investors, including Facebook co-founder Eduardo Saverin, had injected US$23 million. 

However, it is widely assumed that bricks-and-mortar businesses will have trouble maintaining their position when ecommerce hits full force. Shoppers in Southeast Asia are already making 41 trips to online shops for every single visit to traditional retailers, the UBS report said.

Marc Einstein, industry principal of ICT practice in Asia-Pacific at Frost & Sullivan, believes that bricks-and-mortar shops will continue provide something online retailing cannot — consumer experience. Few buy wedding rings online, for example, because they want to look at them, try them on and enjoy warm advice from the salesperson. “There will always be a future for bricks-and-mortar, but it’s going to be more of a hybrid,” says Einstein.

While traditional businesses are coding their dot-com platforms, online retailers are setting up physical stores. Zalora, the region’s online fashion retailing giant, has opened offline shops in Singapore, Jakarta and Penang. Shoppers can now flip through, touch and try on selected clothing lines, and pay for their selections via the Zalora website using tablets in the shops. The items are then delivered to the buyers’ homes.

To Zalora Malaysia managing director Giulio Xiloyannis, thriving online is “not about killing offline”, but about integration. Hot and unpredictable weather in Southeast Asia mean even online shoppers still head to the malls to hang out.

“So we thought, why not buy online at the mall?” says Xiloyannis. 

Jonathan Briggs, academic director (Singapore) of Hyper Island, commends online marketplaces by the region’s key players such as Rakuten, Lazada and Zalora for providing a platform for small entrepreneurs. However, he finds that they lack what Taobao in China offers — a space for entrepreneurs to explain their products’ uniqueness and establish their brands.

“It is important for small businesses to find marketplaces where they can really tell more of the brand’s story, and build their brands,” Briggs says. 

Establishing an online identity is just one part of the battle. Xiloyannis says that for 90 per cent of Zalora’s new customers, the site is their first experience of ecommerce. Converting them to the concept is a challenge in itself.

“Southeast Asia has a lot of potential, for sure, but you need to sweat for that potential,” says Xiloyannis. 


EXPERT OPINION Attracting the wireless generation to click ‘buy’

Ben Legg, CEO, Adknowledge

The tried-and-trusted way to attract new customers online is search marketing—both through paid ads and search engine optimisation. However, search engine competition and prices are very high, so advertisers are increasingly looking at other platforms to use in acquiring customers.

As consumers spend massive amounts of time on Facebook and Twitter, it is no surprise that advertisers are trying to acquire customers there. In general, though, we find that trying to drive social media users to get their credit card out instantly is tricky, as they are not in a ‘shopping mood’.

However, getting them to download a mobile app, submit their email and/or become a subscriber to a new service is very possible. The economics also work well—the cost to acquire a customer is almost always lower than their predicted lifetime value.

I was meeting business executives in Asia-Pacific last month. Many asked about the ‘next big thing’ for APAC digital advertising. The answer is clear to me: digital video. Eyeballs are abandoning fixed-time TV, stuffed as it is with badly targeted ads. Ambitious marketers are already trying to carve out 20 to 30 per cent of their TV budget to spend on digital video advertising on YouTube, Facebook and elsewhere.

Winning in ecommerce is not only about becoming one of the top players in terms of customer numbers and revenue, but also about offering an overall digital experience.

Offline companies can’t dabble in digital presence as a sideline. They need to compete to win, or accept a slow and inevitable decline.

 

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