8 trends that will shape Southeast Asian e-commerce in 2019 – Part 2

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US$102 billion. That’s the estimated value for Southeast Asian ecommerce in 2025. Google and Temasek’s economy of Southeast Asia report confirmed the growing confidence among investors in the region. Startups raised US$9.1 billion in the first half of last year – almost as much as throughout the whole of 2017.

5. Brands are using direct-to-consumer strategies to acquire consumer data

In 2014, it was estimated that 89 percent of companies would compete mostly on the customer experience front. The direct-to-consumer (DTC) approach is also becoming more important for brands as it allows them to gain insights into their end users and their needs.

One rising trend is e-commerce subscription. From a consumer perspective, subscription offers a convenient, personalized, and often cheaper way to buy what they need. But for brands, it’s a subtle method to create customer loyalty.

One brand adopting this strategy in the region is Nescafe Dolce Gusto, which offers free coffee machines in exchange for a minimum of a 12-month subscription. Besides witnessing sales growth, it also noticed that consumers continued to purchase from the brand despite dropping out of the subscription plan.

“A subscription strategy is not just a long-term consumption enabler but also a consumer acquisition channel for the whole brand,” says Bhuree Ackarapolpanich, brand director and digital expert at Nescafe Dolce Gusto.

Mandy Arbilo, regional director of project management at aCommerce, said e-sampling is also a popular strategy that brands use to evaluate the demand, especially in ecommerce. While normal sampling techniques used by offline retailers are expensive, e-sampling saves brands up to 40 percent and also provides essential customer data.

As DTC becomes widely adopted, consumers will see brands coming up with attractive gimmicks using digital tools to gain insights and entice consumers to spend more on their brands.

6. Regulation of ecommerce across the region will finally happen in 2019

E-commerce in Southeast Asia has remained largely unregulated. As the industry grows, it is only a matter of time until governments step in to tax this fast-growing segment and level the playing field for foreign companies to offer digital services and goods locally.

News about the e-commerce tax has been floating around since the beginning of last year, but nothing concrete has actually materialized.

A couple of months ago, economic ministers from the ASEAN signed an agreement to facilitate cross-border e-commerce transactions within the region. However, while nothing has been written in stone, predictions abound concerning the impact of e-commerce tax on imported goods into the region.

In Indonesia and Thailand, e-commerce tax is predicted to bolster the growth of social commerce because, unlike marketplaces, they are uncontrolled.

“If tax regulations restrict e-commerce platforms, making selling in Bukalapak complicated, there will be an exodus of people who prefer selling on Instagram and Facebook. These platforms are uncontrolled and not chase for the tax because they sell through the back door,” said Muhamad Fajrin Rasyid, co-founder and chief financial officer at Bukalapak.

Singapore might also see a decrease in cross-border shopping as prices increase with the introduction of Goods and Service Tax (GST) on e-commerce goods and services from overseas. Currently, 89 percent of all cross-border transactions in Asia Pacific are conducted by Singaporeans.

A snapshot of the state of e-commerce tax regulations across six major Southeast Asian markets

Another high-potential e-commerce market, India has introduced new e-marketplace laws that prohibit marketplace “owners” to sell products on their own marketplace through vendor entities where they have an equity interest. The country has also banned deals with sellers that grant marketplaces exclusivity rights to products.

Could we see such laws in Southeast Asia? Regardless of such moves, brands will have very little influence on how new tax policies take root. But it behooves them to anticipate similar rulings and adjust online strategy accordingly to mitigate the impact from a possible shift in customer behavior.

The ASEAN agreement will encourage more local entrepreneurs to create new products and venture online to access a larger and more diverse market. Brands will now need to be nimble and innovative to adapt to local nuances and preferences.

7. Grab and Go-Jek are challenging logistics providers to capture ecommerce and online food delivery

With Go-Jek’s recent efforts to expand into Southeast Asia, the competition between the Indonesian startup and its rival Grab will only get fiercer. Go-Jek has successfully carved its existence in Vietnam, Singapore, and Thailand last year alone. And Dacsee, Grab’s competitor in Malaysia, has also announced its plan to expand to Thailand.

But Go-Jek and Grab are not just racing to be the best ride-hailing providers. Instead, they’re aiming to become something much bigger: super apps. Go-Jek has secured US$1 billion funding from Google, Tencent, and JD as part of its plan to raise US$2 billion for this venture. Meanwhile, Grab recently nabbed US$200 million investment from Thailand’s Central Group, boosting its valuation to US$11 billion to date.

2019 will see these two competitors steer towards the same goal for food and ecommerce delivery. Google and Temasek reported that the online food-delivery business grew 73 percent CAGR in 2018. By 2025, they predict that the online food-delivery growth will be at 36 percent CAGR, with online transport at only 23 percent.

The market size of the ride-hailing industry in Southeast Asia, according to Google and Temasek’s e-Conomy SEA 2018 Report.

Same-day delivery providers will also see more competition in 2019. The impact of Grab and Go-Jek on market vibes will definitely raise the bar for the logistics and delivery sectors.

8. Brands and retailers will double down on omnichannel

The omnichannel shopping experience is not a new concept, but companies do have diverse interpretations for it.

Online retail behemoths, such as Amazon and Alibaba, are moving into physical retail. The main reason why Alibaba ventured out of online space reflects its determination to solve core problems of the shopping experience, such as scattered operations and lack of payment transparency.

JD pipped Alibaba for once by opening the first unmanned convenience store in the region in Jakarta to leverage its enormous database and offer brands insights, such as the best products to stock and advertise. Through its joint venture with Central Group in Thailand, JD Central is also planning a similar launch in the country by 2020.

Inside JD.ID X Martin Indonesia. It is JD’s first unmanned store outside of China, a demonstration of the company’s mission to implement RaaS. / Photo credit: Food Navigator Asia

Pure-play eCommerce retailers and brands recognized drawbacks in online marketing channels, with fragmented infrastructure and a limited pool of shoppers. Promoting offline is then an attractive option to push sales growth.

Elsewhere in Southeast Asia, companies are slowly but surely adopting this strategy across all categories. E-commerce fashion players like Thailand’s Pomelo and Singapore’s Love Bonito have opened physical stores in their respective countries.

In 2018, Pomelo opened five new outlets, moving away from Bangkok’s prime shopping areas and into central business districts and residential areas. Meanwhile, Love Bonito has 17 retail outlets spread across Singapore, Malaysia, Indonesia, and Cambodia.

“Data can tell you what’s selling, but being on the ground tells you why something is not selling and what the customer is looking for,” Rachel Lim, co-founder of Love Bonito, told Peak Magazine.

Visiting shopping malls is a popular social activity in Southeast Asia – a trend that’s not set to disappear anytime soon. Brands should take advantage of a dual presence in the online and physical worlds.

Le Hoang (Source: Techinasia)

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