Most parents will buy rattles and dolls for their children from a very young age up until the child hits his/her mid-teens – with just the types of toys purchased changing as the child grows older.
The potential of the global toys & games industry is heavily influenced by demographic trends such as the number of households and birth rate. There’s also a seasonal variation in the types of toys & games currently popular around the world; depending on blockbuster action flicks, emerging WWE stars, and fashion trends.
Thailand’s demographics in particular hint at a widening market for the toys & games industry. The natural birth rate in 2017 was about 240,000 – this refers to the number of births in a year subtracted from the number of deaths – representing a population growth rate of about 0.4%.
Population growth rates peaked in the 1970s at about 3% but aggressive public awareness campaigns by Thai authorities have brought this figure down substantially.
At the same time, annual household income more than doubled from $1,089 in 1999 to $3,276 in 2015. Thai families might not be growing as quickly as before but they definitely have more to spend.
Higher disposable income also means the sale of toys & games isn’t restricted to children only. Older consumers are forecasted to impact sales too, especially in categories like action figures and accessories.
According to Euromonitor, the value of Thailand’s toys & games industry was estimated to be worth US$376 million in terms of sales volume in 2015. The same report forecasts sales to increase to US$541 million by 2020, or by an average of 9% a year.
That’s a sizeable chunk that brands like Hasbro and Mattel should be eyeing carefully, especially as internet retail is predicted to grab a larger piece of the pie in the coming years, making it critical to double down on mobile/web acquisition channels.
Where do Thai consumers buy toys?
ecommerceIQ initiated a survey to understand online consumer purchase habits for toys & games in Thailand. There were over 300 participants spread across the country.
What was interesting to find was the availability of offline retail wasn’t a bottleneck to transacting online. Only 2.9% of respondents said they ignore online channels because of malls or shopping centers.
The largest inhibiting factor for online purchases is the prevalent lack of trust.
Thai people feel either the pictures online are either heavily photoshopped or they’re usually disappointed when receiving the product after purchasing.
Top reasons why customers don’t shop online for toys in Thailand. Source: ecommerceIQ
But not all is lost. Survey respondents in the 18-24 & 25-34 age category were, on average, 43% likely to indulge in online purchases for toys and games. Those were the two youngest tiers surveyed and it is likely as they grow older they’ll carry these preferences with them.
If online channels optimize the overall buying experience, it’s plausible that the proclivity towards web shopping will increase when it comes time for them to buy toys for their children.
Another encouraging trend that forecasts enhanced ecommerce market share in the future is the amount that users spend online. People with higher basket sizes are more likely to shop online. The largest segment actually spends north of $100/order.
And what toys are people in Thailand purchasing exactly? The survey shows Nerf guns are wildly popular for online purchases along with board games like Monopoly and Transformers action figures.
The overall survey results are consistent with Euromonitor’s analysis of the toys & games industry in Thailand that says the popularity of internet shopping is expected to continue its trajectory of rapid growth, fueled by younger shoppers.
40.1% of this category were secured by web channels in 2015, as compared to 13% in 2010 (although this does include video games, which our survey results excluded).
Euromonitor also makes another prediction: traditional toys and games distributors are expected to expand their internet retailing options over the coming years as more users flock towards this medium.
How can toy brands take advantage?
It’s not enough to list your products on a marketplace and engage in paid campaigns every now and then. Users don’t trust online advertisements; they’re eager to purchase but the one thing holding them back is the nagging uncertainty that the product won’t match expectations.
Often they’ll visit an offline store to see the product up close and personal before purchasing. Little wonder why influencer marketing is becoming so important in a brands’ marketing mix.
Influencer marketing platform MuseFind says 92% of consumers trust an influencer more than an advertisement. And with adblockers flooding browsers, it’s likely that your target consumer simply won’t even view your advertisement, no matter how much money you pour into the campaign.
In Southeast Asia, brands can take a cue from China’s bold forays into live streaming. Quartz predicts this is now a U$5 billion industry with once ordinary citizens catapulted into superstardom simply by broadcasting their lives for the world to see. Such online influencers routinely recommend products they use and their audiences follow suit. Evocative marketing is becoming the new normal.
Other than live streaming, product reviews by YouTube stars is another channel that potential shoppers gravitate towards. An unboxing video can help lower the trust barrier significantly as users know what to expect inside the package.
Some juvenile YouTube stars have racked up millions of subscribers on their page with their videos routinely garnering 10 million+ views.
Children need to feel they’re on the same wavelength as their peers, so if it’s ‘cool’ to buy a new toy then they’ll pester their parents until they get their hands on it.
And what’s cool is what’s trending on the internet.
https://ecommerceiq.asia/wp-content/uploads/2018/02/hasbro.jpg455800Pathttp://ecommerceiq.asia/wp-content/uploads/2022/01/EIQ-LOGO332x55px.pngPat2018-02-28 14:00:412018-03-09 17:08:59Analyzing the Thai Online Toys & Games Industry
Pinduoduo, or PDD, is a social commerce app founded by Colin Huang, an ex-Google engineer, in September 2015. Only a couple of years old, PDD has become the fastest growing ecommerce company in China. It raised $100 million in 2017, is backed by China’s Banyan Capital and Tencent, and valued at a whopping $1.5 billion.
As of Feb 21, 2018, PDD ranks #3 overall in the Chinese iTunes app store ranking for free apps, after popular apps like Tik Tok (Douyin) and WeChat, and ahead of other shopping apps like Taobao. PDD went from 100 million yuan ($16 million) GMV a month in early 2016 to 4 billion yuan ($630 million) GMV a month by 2017, putting it in fourth place behind Alibaba, JD and Vipshop.
How does Pinduoduo work?
Users can download the PDD app or access it within WeChat. Like any ecommerce platform, PDD offers products across a wide range of categories from food to fashion. However, unlike Tmall and JD, PDD incentivizes users with discounts to invite friends to buy in groups.
For example, one container of Similac Advance Infant Formula Powder costs 59 yuan if you buy alone but only 35.5 yuan if you can get one other person to buy it too. In the screenshot below, a total of 1,822 pairs have “group-purchased” this item already.
In addition to group discounts, PDD also incentivizes customer acquisition. Getting users to follow the PDD WeChat Official Account, install the app, and sign up via WeChat login will earn them free products.
PDD also offers cash red envelopes worth 5-20 yuan to users for each friend they get to download the app and register. The entire system is then gamified through a public leaderboard.
Wait, is this new? Didn’t Groupon invent social commerce?
Groupon did arguably pioneer the group buying concept. In its early days, a certain number of users had to sign up for the same deal in order for everyone to receive the voucher. But unlike PDD, there wasn’t a direct incentive; users had to sit back and wait for anonymous users to tip the scale.
This mechanism was quickly abandoned to scale faster with minimum thresholds that acted more like gimmicks.
Groupon was labeled “social commerce” at first but in its later years, lost its social aspect.
Source: wiredtech on Flickr.com
Let’s take a step back and look at the definition of social commerce, according to ConversionXl:
“Social commerce is defined as the ability to make a product purchase from a third-party company within the native social media experience.”
Groupon emerged in the pre-mobile age of 2008 when most consumers still transacted via desktop, especially in the company’s US home market. Back then, less than 1% of ecommerce transactions were via mobile acquisition channels.
In addition, the company’s main distribution channel was email newsletters, a slow and high-friction medium and payments weren’t seamless either as users relied on a credit card or PayPal.
Now looking at 2016 in China – PDD’s first full year in operation – WeChat is the country’s dominant “super app” and leading medium to socialize online with 889 million Monthly Active Users (MAUs) by year end.
71% of ecommerce now takes place on mobile, creating a flattering backdrop for the rapid rise of PDD, which started out as an app on WeChat.
Paying for products on PDD is also remarkably easy because the app makes it automatic. After the first payment, users can opt for one-click payment via WeChat Pay that don’t require passwords.
Desktop usage, clunky email newsletters, and credit card payments limited Groupon’s true social commerce potential. Where Groupon failed, PDD is succeeding because of an ecosystem of mobile-first users and WeChat’s features that make it a super app.
Will PDD come to Southeast Asia?
Why not? Southeast Asia ecommerce is already being carved up by Alibaba and Tencent. Lazada and Tokopedia, two companies owned and invested in by Alibaba, dominate the B2C and C2C space on one end and Tencent-invested JD, Shopee, and Go-Jek are on the other end.
With Southeast Asia’s horizontal ecommerce market being consolidated into a few properties like Lazada, Tokopedia, JD and Shopee, there isn’t as much opportunity in the space as before.
New ecommerce players have to focus on dominating a specific, vertical category or provide a competitive advantage through means other than outspending peers in advertising and/or coupon subsidies.
This is where a model like PDD fits snuggly.
It also helps that one of PDD’s biggest investors is Tencent, which already has its eyes set on the rapidly growing Southeast Asian market.
Will the PDD business model work in Southeast Asia?
To determine if the PDD model would work in the region, we need to identify the criteria that were conducive to its success in China:
1. Lack of distribution channels / expensive distribution channels
If you strip away all the hype, PDD’s competitive advantage is in its customer acquisition strategy. Instead of relying on expensive channels like display advertising or paid search (e.g. Baidu ads), PDD is paying its users to get more users. For example, CPCs alone on Baidu can range from 5 to 25 yuan. Note these are clicks, not even users acquired.
Southeast Asia (excl. Singapore and Malaysia) is very similar to China in terms of lack of channels, due to a similar “no-tail” ecosystem. Whereas entrepreneurs in China had to pick their poison between Baidu, Sina and Sohu back in the day, startups in emerging Southeast Asia are limited to Facebook Ads, Google Search, and portals like Detik in Indonesia and Sanook in Thailand.
Early entrants like Lazada took advantage of low cost-per-clicks (CPCs) back in 2013 but given the raging ecommerce “bloodbath”, online ad CPCs have gone through the roof.
Having saturated online channels, Lazada started exploring offline advertising channels like TV and out-of-home media.
Others like Pomelo Fashion tapped into physical stores as a more cost-efficient way to acquire users and simplify last-mile logistics.
PDD social and viral customer acquisition strategies could work quite well.
2. High mobile commerce penetration
The majority of ecommerce transactions in China now take place on mobile. In 2016, 71% of ecommerce GMV was on mobile. In the US, this number was only 20% in 2016.
In Southeast Asia, companies like Lazada and Shopee today see over 65% of their orders coming from mobile (with 21.6% using both mobile and desktop to shop), according to a recent survey by ecommerceIQ.
Needless to say, high mobile penetration in Southeast Asia along with high mobile ecommerce usage will provide a fertile ground for a business model like PDD to gain traction here.
3. Frictionless mobile payments
One of the drivers of PDD’s success is its seamless payments through WeChat Pay.
This will be a challenge for PDD in Southeast Asia as only Singapore and Malaysia are credit card dominated whereas the rest of the region is mainly a cash-on-delivery market.
Despite efforts to come up with a universal mobile payment standard, no one has succeeded as of today. Efforts like Sea’s AirPay, Ascend’s True Pay, and LINE Pay have hit a wall due to lack of distribution, lack of use case, and a plethora of other issues.
Right now, most eyes are on Go-Jek’s Go-Pay, which has a massive distribution channel by leveraging Go-Jek’s 40 million install base and 10 million Weekly Active Users (WAUs). In addition, and more importantly, Go-Jek addresses emerging Southeast Asia’s unique lack of both credit card and bank account penetration — users are able to top up their Go-Pay accounts by handing cash to Go-Jek drivers that essentially act like mobile ATM deposit machines.
While still a poor-man’s WeChat Pay, Go-Pay offers hope for business models like that of PDD to thrive in Southeast Asia.
4. Attachment to popular social platform
Without the WeChat ecosystem, PDD wouldn’t have been the company it is today. Being embedded in WeChat, PDD was able to quickly get massive distribution by tapping into the potential 889 million MAUs of WeChat.
In Southeast Asia, Facebook, Instagram, WhatsApp, and LINE are highly popular, however, none are considered super apps that offer seamless integration.
The closest to WeChat in Southeast Asia would probably be Indonesia’s Go-Jek.
While Go-Jek hasn’t entered ecommerce yet (it’s positioned only as a services marketplace and offers delivery for partners through its GO-MART product), it wouldn’t be surprising if PDD decided to leverage the Go-Jek platform, given the similarities to WeChat in China. Like PDD, Go-Jek also counts Tencent as an investor.
With an estimated third of ecommerce in markets like Thailand happening on Facebook, Instagram and LINE, the user behavior of buying through social channels already exists.
If you browse through PDD, you’ll notice that most of the products sold bear similarities to many of those sold on Taobao. In other words, a lot of “mass” and non-branded products. PDD thrives in China because of easy access to a supply of these products manufactured locally.
However, in Southeast Asia, these kind of products (typically sold on social media and C2C platforms) are imported from China, which leaves less margin for PDD to play with in terms of discounts and customer acquisition.
To sum up, emerging Southeast Asia meets several of the criteria behind PDD’s success in China but poses some unique challenges:
What will happen next?
In the analysis, we’ve identified some of the drivers of PDD’s rapid rise in China and also their presence in emerging Southeast Asian markets at an earlier stage.
Given this opportunity, we can expect the following scenarios to play out over the next few months and years:
1. Local and Chinese entrepreneurs will launch PDD clones across the region
Ever since opening up to the world in the 80s, we can describe China having gone through the following three stages, with the third one still progressing as we speak:
1. Made-in-China (1980-2000)
China perceived as manufacturing base for (often cheap, low-quality) export products
2. Copy-to-China (2000-2015)
Chinese entrepreneurs, some foreign educated, bring back models that worked in the US, e.g. Search (Google -> Baidu), Portals (Yahoo -> Sina, Sohu)
3. Copy-from-China (2015-2030)
Birth of unique Chinese Internet business models (e.g. bike-sharing, payments, live streaming, social commerce, O2O). Increasing media focus on Chinese tech innovation and locals outside of China looking for Chinese models to copy
We are witnessing stage 3 happening right here in Southeast Asia. Below is a Thai post on Facebook looking to recruit staff to work on what looks like a PDD clone:
It doesn’t have to be local talent copying PDD from China to Southeast Asia. With the influx of Alibaba, Tencent and JD into the region, there are plenty of Chinese employees who’ll be noticing the similarities between Southeast Asia today and China, and jump on new opportunities.
2. PDD will enter Indonesia through Go-Jek (helped by common investor Tencent)
If PDD were to follow Alibaba and Tencent’s steps and enter Southeast Asia, we expect them to join forces with Go-Jek. By embedding itself inside Go-Jek, PDD is executing the same game plan that led to its rapid initial growth within the WeChat ecosystem. Fostered by a shared investor — Tencent — Go-Jek would be the perfect launch partner for PDD in Southeast Asia.
3. Existing players will adopt the PDD business model to compete against horizontal ecommerce plays
Local ecommerce players like MatahariMall, Konvy, and Orami could pre-empt PDD by adopting its customer acquisition strategies to compete with regional giants like Lazada and Shopee.
For Konvy and Orami, two female-focused ecommerce platforms, this move could make a lot of sense since the majority of PDD’s users in China are female, over 40 year old, and living in smaller cities.
https://ecommerceiq.asia/wp-content/uploads/2018/02/colin.png555840Pathttp://ecommerceiq.asia/wp-content/uploads/2022/01/EIQ-LOGO332x55px.pngPat2018-02-23 15:45:342018-02-23 17:05:30China’s Fastest Growing Ecommerce Startup is One You’ve Probably Never Heard of
Brands in Southeast Asia are choosing leading marketplaces like Lazada and Shopee when trialing ecommerce, but most are still unaware of the intricacies of online channels.
An often overlooked aspect to opening an official Shop-in-Shop (SiS) is the impact of customer reviews. Traditionally, brands have leveraged sources like Nielsen or focus groups to understand consumer behavior but one of the key advantages of an ecommerce store is the ability to analyze consumer sentiment right when it happens.
How much do product reviews really matter?
A 2017 survey by Podium shows that 93% of shoppers find reviews influential when buying online. 88% of consumers trust product reviews as much as a personal recommendation, and 72% say a positive review makes them trust an online business more.
With Hummingbird, we can assume that product reviews that naturally feature conversational language are given higher search priority.
Lazada incorporates quantity of reviews and average ratings directly into its Google schema markup. In layman’s terms, this means that consumers in Southeast Asia searching for products on Google will see product ratings and reviews directly in the results.
Lazada SKUs highlight average ratings and number of reviews directly in search results
The More “Helpful” the Review, the Higher the Ranking
We’ve demonstrated the tangible effect of product reviews on conversion and visibility but how many products do consumers read before purchasing?
According to a 2017 study by BrightLocal, 67% of customers read 4+ reviews, and 33% read 11+. Naturally, they’ll read the reviews that appear first on the product page – similar to how the first page of SEO results are the most lucrative.
How does Lazada sort reviews?
The first bifurcation Lazada applies is by splitting reviews into two categories: “Verified” and “Unverified”.
“Verified” reviews are those made by customers who have purchased the product in question and leave a review using the same account. “Unverified” reviews can be made by any visitor to the product page. The “Verified” reviews rank at the top, followed by the “Unverified” reviews.
Visitors to product pages can further “like” a product review by deeming it “helpful”. The most “helpful” reviews will rank at the top, meaning visitors to product pages are more likely to interact with “verified” and “helpful” reviews first.
Data analytics platform BrandIQ delved into the trend between review “helpfulness” and its star rating. By analyzing over 715,000 reviews across four Lazada country sites (ID, TH, PH, SG), it determined that, on average, lower ratings are deemed more “helpful” than higher ratings.
This inverse relationship is a critical reason for brands to pay close attention to its product reviews. Customers are far more likely to be reading negative reviews as their first 4+ rather than positive ones due to Lazada’s ranking algorithm.
What’s the possible recourse for brands?
After speaking with a Lazada support representative, there appears to be two underlying factors that cause the marketplace to take action on product reviews: the use of vulgar language or reviews that have no relevance to the product.
The first factor can be tackled relatively easily. Lazada itself has a quality assurance process to check each product review before it’s uploaded to the product page. However, the astronomical growth of reviews has made it inevitable for some to fall through the cracks. The week of 12-12 in 2017 garnered just over 34,000 product reviews alone.
The second factor is more complicated as they are evaluated on a case-by-case basis. Lazada’s technical team will entertain petitions to remove reviews that aren’t related to the product such as issues with delivery that stem from problems with the brand’s third party logistics partner.
To incentivize better service and product quality, Lazada provides a framework to incorporate product reviews into a store’s Seller Rating. This metric looks at the percentage of positive (4 or 5 stars) reviews compared to total reviews.
Lazada advertises Seller Rewards as a gift for high Seller Ratings: such brands will enjoy greater visibility of products in search as well as access to its promotional campaigns.
Lazada’s Seller Performance Metrics
What does this mean?
In essence, product reviews have multiple dimensions and a plethora of use cases. Not only are they taken into account by channels that drive traffic to your SiS, they can make or break a product’s conversion and directly affect your brand’s perceived trust.
Some brands are also leveraging reviews for digital marketing campaigns by incorporating them directly into the ad copy.
Different use cases for product reviews are emerging in digital marketing
Reviews are an under-utilised resource in Southeast Asia, but this might be on the cusp of changing. You could always hope a gem of a review goes viral, like this one:
https://ecommerceiq.asia/wp-content/uploads/2018/02/student-849825_1920.jpg12801920Pathttp://ecommerceiq.asia/wp-content/uploads/2022/01/EIQ-LOGO332x55px.pngPat2018-02-22 14:32:382018-04-27 17:07:39Online Product Reviews: The Gleam of a Brands’ Armour
You might recognize a signature Burberry trench coat because of its distinctive check pattern.
When Burberry first came to life in London in 1856, CEO & founder Thomas Burberry was, at the time, only 21 years of age. The brand focused solely on outdoor attire in its early days but quickly established a reputation for quality and longevity.
In 1879, Burberry received a patent for its ‘gabardine’ fabric – a water-resistant, breathable material that it would use for trench coats. The company went from strength to strength, opening a store in the upscale Haymarket area of London in 1891, designing its signature equestrian knight logo in 1901, and supplying outdoor attire to South Pole expeditioners in 1911.
Burberry’s popularity skyrocketed after its trench coats were used by British infantry forces during the First World War. An outpour of patriotism boosted its brand identity with members of the public clamoring to buy the products after the end of the war.
Further validation came in the form of high profile celebrity endorsements by movie stars such as Humphrey Bogart in Casablanca, Audrey Hepburn in Breakfast at Tiffany’s, and Peter Sellers in Pink Panther.
The UK luxury brand is best known for its sharp coats and jackets but has also ventured out in designing shoes, scarves, bags, & other accessories. By the mid-1980s as a result of spreading itself too thin and chasing short-term profitability goals, the brand started to stagnate. What happened?
The makings of a crisis
The 70s and 80s were rewarding for Burberry in terms of its bottom line. It signed licensing agreements with many global manufacturers to design suits, trousers, shirts, and accessories and distributed them via independent retailers as well as its own stores. The effect of this expansion i.e. higher operating profits was felt well into the 1990s.
But the licensing partnerships also had an unintended effect: counterfeit products flooded markets across the world, particularly in Asia, causing price disparities that existed even in original products.
Western countries were subjected to higher rates and items were often rerouted back to markets; for example, cheaper bags in Asia were exported back to Europe resulting in a blow to its image.
Burberry had severely diluted the power of its brand by adopting a mass-market route. Once associated with list-A celebrities and daring thrill seekers, Burberry had rapidly lost its aura of glitz and glam.
Shockingly, the elitist brand was now equated with thuggery, chicanery, and hooliganism; adopted en-masse by ‘Chavs’ – a pejorative British term used to describe degenerates and lowlifes. Bouncers would turn away people wearing Burberry outfits as it was assumed they would cause trouble once inside.
“Burberry was not able to identify its target group of consumers because of its uneven distribution and licensing policies in different countries of operation,” says Arittra Basu, business development manager at Westin Hotels.
The long road to redemption started in the late 1990s after Burberry hired Rosie Marie Bravo to steer the ship. She immediately tried to stem the decline by reducing the company’s footprint in Asia, ending price disparities, and appointing a new creative head to reestablish the brand’s core values.
In 2006, Angela Ahrendts was appointed the new CEO and began a journey leading the company to reemerge as a force to be reckoned with.
Initially, there were subtle design changes. The check pattern was scaled back and started to appear less and less on merchandise. Stringent measures were adopted to crackdown on counterfeit items and the licensing agreements were gradually rescinded to centralize design and operations under one roof.
But the most important decision made by Ahrendts, along with Chief Creative Officer Christopher Bailey was the declaration of their vision to see Burberry as the world’s first fully digital luxury company.
The brand had, in their opinion, appealed to an older clientele for far too long. It was time to catch the attention of suave and fashionable millennials.
Digital would be central to the brand’s way of thinking and customers would be treated to the same experience whether online or in-store.
One of the most popular campaigns Burberry launched was the ‘Art of the Trench’, a unique play on user-generated content to bring consumers at the forefront.
This was a standalone website where customers were encouraged to upload photos of themselves wearing their trench coats. They were featured on the main page for 15 minutes and customers could share these photos on social media feeds. There was also an option to click on a product and be redirected to Burberry’s main site to purchase it.
The campaign was a resounding success. In 2015, it was reported to have gained almost 25 million pageviews since launch.
Another hugely popular campaign was initiated to promote Burberry Kisses, a lipstick brand launched by the company. For this, it partnered with Google to enable users to send personal messages, sealed with a virtual kiss.
Users from 13,000 cities sent these virtual kisses within the first 10 days of launch.
In 2012, Burberry tried to bridge the gap between the online and offline shopping experience via its Regent Street London store. The store featured huge screens where catwalk shows around the world could be viewed live and the individual products were available for instant purchase.
“Burberry Regent Street brings our digital world to life in a physical space for the first time, where customers can experience every facet of the brand through immersive multimedia content exactly as they do online,” said Burberry CEO Angela Ahrendts. “Walking through the doors is just like walking into our website.”
Not only can shoppers buy online from Burberry’s digital properties, they can also choose to pick up in-store or have a sales associate order from the website for them while visiting an outlet. Burberry’s also experimented with flash commerce features via Twitter as well as allowing users in China to order via WeChat.
In China Burberry took the unusual route of opening a store on Tmall; a strategy consistently avoided by upscale brands. The move was meant to counter the growing grey market for its goods as well as embrace the Chinese penchant for online shopping.
Its savvy use of social media has also engendered the growth of a loyal community. The brand has embraced Snapchat to provide peeks into upcoming lines and fashion shows. Burberry’s YouTube channel has over 300,000 subscribers and hundreds of videos that not only showcase trench coats, but also includes makeup tutorials, music jams, and other engaging content.
And the result of all of this? In 2011 Business Insider placed Burberry in the top 10 brands of the world with a growth percentage of 86% as judged by an estimate of its brand value. That far outstripped any other company on the list.
Burberry shares, which languished in the $200 range in 2002 now trade at $1,539.
Of course, challenges persist. Weakening demand for luxury brands hurt Burberry’s profitability last year with the CEO saying that the product range “needs to be refreshed”.
But if it continues with its sharp focus on digital and out-of-the-box thinking, it should be able to weather the relative storm.
“Burberry’s digital strategy […] has so far not only put it at the top of the fashion luxury category but among top players across industries,” wrote Digiday.
https://ecommerceiq.asia/wp-content/uploads/2018/02/5569994499_06f11de82e_b.jpg6821024Pathttp://ecommerceiq.asia/wp-content/uploads/2022/01/EIQ-LOGO332x55px.pngPat2018-02-20 13:11:092018-02-22 13:39:17How Burberry Saved its Brand by Focusing on Digital
With almost 4,300 store locations in 69 markets across the world, fast fashion retailer H&M is a quintessential example of a brand that constantly strives to provide high-quality products at affordable prices.
It’s come a long way since its humble origins.
The first store of what would eventually be known as H&M was opened by Swedish entrepreneur Erling Persson in 1947, after inspiration during a trip to New York. Initially, the store catered to womenswear alone; and was called Hennes, Swedish for ‘Hers’.’
The addition of menswear came after Hennes acquired Stockholm-based retailer Mauritz Widforss in 1968. Stores were rebranded as Hennes & Mauritz with international expansion to Denmark, Norway, U.K, and Switzerland starting the next year.
The acronym H&M was adopted as the firm’s official name after it went public in 1970.
H&M has grown by an average of 20% year-on-year in revenue since the 1980s. Part of the reason for this ferocious germination has been its ability to unearth the latest trends and sense what its target consumers aspire for.
Like other fast fashion companies, the product pipeline is quickly replenished as its marketing and design teams work in unison to keep clothes, shoes, & accessories up to date.
But it’s not enough just to make products that people want to buy. Brand building involves striking a chord with your audience; a message that H&M has carefully crafted over time.
H&M explains that the global ambition is to work towards a “sustainable fashion future”, where unwanted clothes are used for fresh textile fibers and ensure no garments wind up in landfills.
The drive towards sustainability, which has been embraced by everyone at the company – from the CEO to middle management – is an example of how the company has always sought to redefine itself (and save itself from a PR disaster). Much like its products, the global retailer has tried to avoid stasis and remain top of mind for shoppers.
It first introduced online shopping in 1998 when the concept was still nascent, and in the 2000s set on a spree of international expansion, which saw further store openings in Europe, the US, and East Asia.
But central to the strategy of top line growth was the constant addition of new stores. This entailed costs – locations for new outlets need to be scouted, linking the store to a centralized supply chain, hiring staff, and ensuring all brand guidelines are adhered to. Not only does it take time, it can also prevent a fast fashion brand like H&M from trimming prices as much as it would like.
Despite H&M’s original launch of its online store in 1998, analysts are unequivocal in their opinion that the company has been slow to adapt to the internet age.
“We view value fashion retailers as the clothing retail segment most disrupted by online,” explains Anne Critchlow, an analyst at Societe Generale.
Digital disruption has eaten into H&M’s business. Pure play fashion ecommerce sites like Asos, Zalando, Zappos, and even Amazon private label brands don’t have to contend with managing expensive offline inventory and retail space. It helps them keep prices low in an attempt to undercut retailers like H&M.
Euromonitor International estimates that online channels account for 14% of the global apparel and footwear market, with an overall size of US$231.7 billion. In developed markets, this statistic is even higher: 15.5% for the US, 18.7% for the UK, and 25.9% for China.
H&M is physically present in 69 countries but only offers ecommerce in 43.
The primary target market for fast fashion brands are digitally savvy millennials, which begs the question, why have they been so slow to respond?
2017 was a disappointing year for the company with its share price sliding to the lowest level since the 2008 financial crisis and the announcement that it would close 170 stores in 2018.
But the company plans on a net addition of 220 stores, causing even further consternation from investors who want it to double down on ecommerce and trim expensive offline forays.
“Fast pace is vital,” affirmed Karl last year, signalling H&M’s intention to accelerate its efforts towards ecommerce.
H&M stock isn’t performing well at all.
But this needs to happen sooner rather than later.
“[H&M and Zara] have been lagging definitely and they do need things like just faster delivery times; shoppers want it now,” explains Maureen Hinton, global retail research director at GlobalData. “They face a tougher, more competitive market who have less to spend and far more competition with Zalando, Amazon, and others.”
What’s the future?
At the moment, H&M seems to be concentrating on markets with large growth potential. Its decision to open up new stores in India helped increase revenue in the country by almost 100% and resulted in 12 new outlets. The retailer is also selling online in India, hoping to capitalize on the ecommerce rush in the South Asian state.
But this seems to be a repetition of the old business model, which hasn’t exactly gone to plan. The writing’s on the wall. US retailers are in significant stress as they haven’t prepared for the digital age.
Millennials demand an omni-experience i.e. a consistent experience across both online and offline. Zara, has already picked up on this trend with its popup shop in London trying to bridge the gap, whereas H&M only realized it needed to integrate physical and online stores after a 2% drop in Q3 compared to last year’s figures.
The company is also relying on its presence on Alibaba’s Tmall to improve its online footprint in overseas markets.
It seems like H&M is finally aware of the fact that it needs to improve its overall purchasing experience. Nils Vinge, H&M’s head of investor relations, told LA Times that they’re deploying algorithms to support forecast demand and reduce the chance of markdowns.
But are these feeble attempts enough to survive in the hypercompetitive environment that fast fashion operates in today?
For H&M, it’s not enough anymore to sell relatively cheap products. The entire retail experience needs an overhaul and it better start doing that soon or the stock price might see a sustained nosedive.
https://ecommerceiq.asia/wp-content/uploads/2018/02/trendy-1030996_1920.jpg19201770Pathttp://ecommerceiq.asia/wp-content/uploads/2022/01/EIQ-LOGO332x55px.pngPat2018-02-15 13:35:272018-02-15 13:41:28H&M Faces an Uncertain Future as it Struggles to Adapt to Digital
Asian lovers don’t seem to shy away from Valentine’s day.
According to Mastercard, 75% of mainland Chinese are likely to buy a gift for their partner on this amorous occasion, followed by 74% of Thai, and 63% of Malays and Filipinos.
They’re shelling out hefty sums too.
Chinese residents indicated they would spend an average of US$310, closely trailed by Hong Kong at US$282 and Taiwan with US$281.
Filipinos don’t spend as much as some of their other Asian counterparts, but they’re ranked as some of the most romantic in the region.
An Orient McCann study revealed that Filipinos are the most emotional people in the world and second among those who most frequently say “I love you”, making Valentine’s Day an ideal event to let their feelings be known.
Google Trends data for the past week show interest in Valentine’s Day from the Philippines reaching a zenith as we approach the day itself.
Search interest is escalating fast.
What are Filipinos searching for online? And how can brands leverage this information?
Analyzing customer preferences in The Philippines
ecommerceIQ surveyed 500 Filipinos with access to the internet in an effort to understand how they prepare for Valentine’s Day.
87.2% of those surveyed said they intend to purchase a gift to mark the occasion, whereas only 12.8% indicated that they had no plans to do so.
But it’s not so straightforward.
63.9% of survey respondents said their eventual purchase would take place offline.
Within this subset, 42.8% said both the search and purchase would happen in-store and 21.1% outlined that their purchase journey would start online by searching for products but would be followed by a visit to their local mall.
36.1% of the people surveyed said they’re comfortable transacting online, mainly because of better deals & discounts, as well as the option of scheduling delivery at a particular time.
The most popular gifts sought by Filipinos for Valentine’s Day were surprisingly clothes at number one, followed by chocolates, and perfumes.
Flowers ranked a distant fourth – likely because the price of flowers in Manila tends to spike by 500% on or right before Valentine’s Day.
There’s no real substitute for red roses but consumers have a plethora of options when it comes to clothing and perfumes, leading to price stability.
What’s preventing Filipinos from purchasing online?
According to the survey results, more than 75% of respondents exhorted that they prefer to see the product before buying it.
A further 17% said they can’t trust the quality of products they see online or that they’ve been subjected to scams. Only 5% thought malls offer better deals & discounts.
Lazada was the overwhelming favorite among those who did purchase online. Almost 60% of respondents said they’d shop for Valentine’s Day gifts from the popular etailer. Shopee came in second, with 22.2%.
Despite the fact that the most sought-after gift was clothes, pure-play fashion ecommerce site Zalora secured only 4.4% of the vote.
Filipino preferences are indicative of a larger trend engulfing global ecommerce markets.
“It’s very hard to launch a brand these days that’s just online-only,” explains Sucharita Mulpuru, analyst at Forrester Research. “It’s an incredibly difficult and crowded ecommerce environment.”
Filipino brands have consistently tried to latch on to prevailing sentiments during Valentine’s Day to either sell more products or increase brand awareness.
Popular fast food joint Jollibee launched a successful campaign last year playing on themes of unrequited love and eventual reunification.
The ads, which were released in three parts, went viral on social media with over 50 million views on Facebook alone.
Condom manufacturer DKT Health gave away nearly 40,000 condoms in Manila during the Valentine’s Day weekend in 2015 by partnering with stalls selling balloons, chocolates, and roses.
Southeast Asian brands are cognizant of this dynamic, at least in Thailand. David Jou, the CEO and co-founder of Pomelo wrote in 2016 about how he viewed offline as a key component of his business moving forward.
“[…] is our goal to be the biggest online fast fashion brand or is our goal to be the biggest fast fashion brand?”, he said, posing an apparent challenge to his team.
Brands in mature ecommerce markets have already started to take a similar route too. Zara opened a pop-up shop in London last month to support its ecommerce channel. Staff at the store were trained to assist with online orders – shoppers can walk in, examine the inventory, receive recommendations from assistants, and eventually pay for the goods they like. But all the products they purchase are shipped to their address.
For companies looking to capitalize on the visible potential and consumer intent to purchase, they’ll have to overcome the prevalent trust barrier currently impeding ecommerce. A consistent online-offline retail experience could very well be a significant first step in doing so.