Ecommerce website content, which encompasses all copywriting and visuals, provides the first impression of a brand to any customer. Content is a major deal breaker for an ecommerce website to inspire confidence to shop without the user seeing or sampling the product. 34% of online shoppers in the Philippines reported they were influenced by online content prior to making the purchase.

With its young populations, growing middle class and digital adoption, Southeast Asia is right in the middle of the ecommerce hype. Around 40% of Southeast Asia’s 620 million population have smartphones and 100 million or one in four consumers over the age of 16 have made an online purchase. The region’s middle class is expected to double to 400 million people by 2020.  

As a result, global brands are looking to expand their online footprint in the region. So how can ecommerce sites in the region ensure returning traffic and ultimately convert their visitors?

To create engaging content, an ecommerce site in Southeast Asia should include these features:

beautyiq-content-types

Transactional content means that product images, collections, and reviews should be enticing and lure customers to make the purchase without seeing the product in real life.

Discovery content, also known as editorial, is the content that does not have a strong sales message, but is useful or enjoyable to the user. Discovery content is not new in the online world, but brands that are able to blend both transactional and discovery content seamlessly will find themselves ahead of the curve.

Localized content means that content is not just translated, but together with visuals it is adjusted to cultural preferences of the target customers.

The first of beautyIQ series will cover tips for making good transactional and discovery content, while the importance of the localization will be featured in the next article later this week.

eIQ’s Take on Thailand’s Beauty Ecommerce

eIQ has taken a deep dive into the ecommerce maturity of beauty brands in Thailand. Worth over $7.2 billion, the beauty industry in Thailand is highly attractive for brands overseas, especially due to high demand for global beauty products in the local markets.

eIQ combed through global brands who have their own brand.com websites such as MAC and L’Occitane, and also brands who sell their products on ecommerce marketplaces. This series will provide insight on various topics to show how these beauty brands successfully approach the tricky market that is Southeast Asia and how they could further tailor their transactional and discovery content for consumers in the region. Here are the top three content must haves:

1. Invest Big in Visuals

75% of customers cite quality of images as the most important feature when viewing products in online stores. Without being able to touch and feel the product, customers can only rely on images to make their decision so it is extremely critical to show them an accurate color tone  and provide the option to zoom. This also ensures they do not get a disappointing surprise when they receive the product – ending up in a negative review of your brand. For that reason, high resolution images is quite obviously a must.

Unlike fashion, beauty has the challenge of selling a product that looks virtually the same no matter what angle it is photographed at. As a result, eIQ found that the majority of the brands limited their product display to a zoom functionality of the container. This is not considered helpful in the customer journey when deciding whether to make the purchase of let’s say, a lipstick.

How can a brand show a product’s texture or color palette other than simply contrasting the desired tone against a white (or black) background?

South Korean cosmetics brand Innisfree is a trailblazer in this area and can provide some ideas even to major global brands. Its online store provides high resolution product images in multiple angles – from top, from side, with packaging or flat on the table. All products have zoom option and are photographed in an environment that feels like home.

Innisfree also uses real models to showcase the genuine color and texture of the products. For example, a customer can compare tones of eyeshadows or see the texture of a cleanser applied on a model’s skin. Whether the brand is selling cosmetics or skin care, the goal is to give shoppers a ‘real life’ perspective.

Innisfree texture

Innisfree uses models to showcase the genuine color and texture of their products giving shoppers a ‘real life’ perspective. Source: Innisfree website

 

Attractive, clean images do not require the best of breed photographers. It is possible to do it yourself using simple Shopify’s at-home tutorial or outsource to a content specialist who excels in digital production such as Channelsquid CMS.

channelsquid

Channelsquid CMS offers companies to outsource creation of visuals and content to specialists who excel in digital production. Source: aCommerce website

2. Encourage Customers to Leave Reviews

According to Econsultancy, 63% of customers are more likely to make a purchase from a site which has user reviews, and the sales uplift from reviews can be as much as 18%.

Unlike in Western markets, many brands in Thailand omit the funcionality of user reviews on their brand.com webstore. Gain from customer reviews by making them as visible as the product purchase content. L’Occitane local webstore has reviews in Thai language and also incorporates reviews in English from customers overseas providing a broader overview of customer experience. On the Innisfree webstore, customer reviews are easily seen right below the “Add to Bag” button.

L’Occitane user reviews are easily seen on its product description page. Source: L’Occitane Thai website

Customers will not skip Innisfree product reviews that are featured just below the “Add to Bag” button. Source: Innisfree website

However, it is not only about creating the functionality, customers should be actively encouraged to leave reviews. For example, American premium skincare brand Kiehl’s on its Thai webstore enables reviews after the user has made a purchase. Another option is to offer a discount or some other incentive for users to leave a review.

One of the best tools of marketing still is word-of-mouth, therefore allowing your customers to share their favorite products on social media channels by having share buttons will be for your benefit as well.

3. Combine the Shop and Editorial Content

“How-to” make-up tutorials either as blog posts or videos show the brand’s products in action and can nudge viewers anywhere from 64-85% more likely to purchase. Yet often the discovery content is isolated from purchase content. As eIQ observed, in many cases the user is asked to make a choice between entering the site’s magazine/blog or entering the shop.

The best practice is to give the user an option to browse through both blogs and shop. Websites such as Estée Lauder and Bobbi Brown succeed in framing content around certain products in an educational narrative of how-to tips, which also gives the user an option to click on the product and make a purchase.

Beauty brands Bobbi Brown and Estée Lauder offer how-to tips while also giving the user an option to click on the product and make a purchase. Source: Bobbi Brown and Estée Lauder Thai online stores

The blend of editorial and product content also works the other way around – with links to tutorials or blogs included on the product description page.

Another way to offer the user a glimpse into the variety of products is user generated content. Drive traffic and sales to your brand’s webstore by integrating social media, such as Instagram or Facebook,Youtube, posts of local beauty bloggers or make-up artists using the brand’s products.

By using a hashtag or creating a special campaign, your brand can save costs and let the happy user showcase their satisfaction with your product on social media.

Kiehl’s Malaysia Instagram account encourages users to use the hashtags #mykiehls and #UseItRight in order to be featured on their page. The content created by their customers is spread across their other country specific accounts such as Kiehl’s Thailand.

kiehls-ig

Kiehl’s Malaysia features on their Instagram account customers who use their products and share pictures with hashtags #mykiehls and #UseItRight. Source: Kiehl’s Malaysia Instagram account

 

Offering discounts is another way to incentivize customers to share their experience. This strategy not only increases audience reach as customers share your brand with their network, but also helps other potential customers. 93% of customers find user generated content helpful when making a purchase decision and it can increase web conversions by up to almost 30%.

Stay tuned for the next article in our eIQ series that will focus on the importance of localization, content adjustments to cater to cultural preferences.

By Anutra Chatikavanij and Aija Krutaine

What do you think makes content a lasting impression?
Tweet your feedback to @ecomIQ

opportunity for Men's Grooming in Thailand

Products for men’s grooming are now varied as the demand increase. Source: Harper’s Bazaar

Even after reading about the rise of the Nouveau Bro, I didn’t realize the times were really changing until my eye cream went missing from the bathroom. Thinking I had simply misplaced it next to my laptop during a Netflix binge, I was shocked when my hunt ended abruptly in front of my mirror, boyfriend caught wide-eyed, daintily dabbing the brightening cream around his eye lids. He blinked at me and continued shamelessly.

A couple years ago I may have found the idea of male grooming a bit fringe, but turns out that he is part of a global market for male beauty products estimated to reach $19 billion this year alone. In Thailand, the trend is even more pronounced, growing almost two times faster than the overall beauty sector – valued at $360 million in 2015 and projected to reach $443 million by 2020.

In Thailand, the male beauty sector is growing almost 2x faster than the overall beauty sector – valued at $360m in 2015 and projected to reach $443m by 2020.

“Thailand is known for its gender fluid acceptance, the freedom of sexuality has even given rise to a ‘third sex’. This phenomenon in addition to the popularity of K-beauty breaks any traditional gender norms meaning beauty isn’t only for women anymore,” says Chalermkiat Jinah, popular male beauty blogger of Pemikaz, in Thailand.

But how are these market trends translating to ecommerce in Southeast Asia, and specifically Thailand? EcommerceIQ posits that there is a very strategic and largely untapped opportunity for brands to leverage ecommerce as a major channel for male beauty products. This may prove true even more so than their female counterparts because online shopping behavior between the sexes varies greatly and facilitates male behavior.

Male Beauty Case Study in Thailand

Studies show that male shoppers tend to buy more for utility than for the enjoyment of the browsing and shopping experience. So the convenience and speed offered by ecommerce creates the perfect storm to leverage online beauty sales for men.

When online subscription beauty service Birchbox started selling men’s sample boxes three years ago, the company’s founders quickly learned there are certain shopping habits that distinguish men from women. Females would test samples that the company sent them in the mail—sometimes purchasing a full-size version of an item they really liked—men would immediately snatch up six to a dozen versions of the same thing.

Birchbox was so unaccustomed to such buying behavior that its website started to code the orders as fraudulent.

To test global consumer behavior of males in beauty for the Thai market, ecommerceIQ partnered with aCommerce to look at one of the region’s trailblazing beauty brands. This brand has made impressive steps in ecommerce adoption, and whose brand equity is strong for both male and female shoppers, hence providing an interesting case study for male beauty shopping behavior. (Scope: The data covers Jan-Dec 2015 & a half million online sessions. Products ranged from $5-125 targeted to middle and upper class customers)

 What kind of men shop online? Not your grandpa

Male consumers of this beauty brand are younger, urban and from middle-upper classes where internet and smartphone penetration is higher. 

opportunity for Men's Grooming in Thailand

Half of men shopping online for beauty products are between 25 and 34. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

Once connected, they go deep into the experience 

Surprisingly, they consulted more pages per session (9.7 versus 8 for women)

opportunity for Men's Grooming in Thailand

When shopping for beauty products, men consult more pages than women Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

They stayed longer each session (3.56 mins versus 3.17 mins)

  • This may support the Interactions’ study, which found that men are more likely to read all of the product information before purchasing an item.
opportunity for Men's Grooming in Thailand

Men tend to consult more pages on beauty websites than women. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

They had a significantly lower bounce rate (38.6% versus 43.1%)

  • “Most men are destination shoppers,” said Fashion Institute of Technology associate professor Vincent Quan to CNBC. “They are looking for something specific [and] make a beeline.”
opportunity for Men's Grooming in Thailand

Men have a much lower bounce rate than women on beauty website. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

Why? Because men shop to buy, women shop to browse

About 30% of online beauty market revenue came from men’s purchases even when they only represented 20% of the traffic.

  • Male conversion rate was much higher, once a man has landed on an online beauty website, he was 70% more likely to make a purchase than a woman. This supports Birchbox’s findings on male soap, above. “[Men] were buying something that they liked, and they weren’t just buying one of it,” said Katia Beauchamp, one of Birchbox’s co-founders.
opportunity for Men's Grooming in Thailand

Women represent most of the traffic of beauty websites, but compared to women, on average men spend more at each visit. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

What are they buying?

  • Skincare and Deluxe categories dominated the online sales of the brand (3/4 of total sales).
  • Men tend to buy much more products focused on the body than women.

“Anti-aging and skin whitening products in both higher and lower ends of the quality spectrum continue to have a strong presence in the Thai market,” said the President of L’Oréal Asia, “The company saw a boom in men’s skin care in China and realized the potential for the segment globally. The use of anti-aging products has become common among both male and female consumers.”

opportunity for Men's Grooming in Thailand

Body beauty products are much more popular within male customers. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

What type of devices are males & females shopping with?

As a recent report from Google precises: women, both as breadwinners and primary domestic caretakers have a much more active and mobile behavior. In the eIQ beauty case study, 2 of 3 women prefer browsing on mobile. Ecommerce needs to be mobile friendly to target them. But for men, browsing beauty website on desktop is still their first choice (47%) before mobile (46%).

opportunity for Men's Grooming in Thailand

Women customer are much likely to use their mobile to browse compared to men for which desktop is first choice. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

Tips to Winning the Male Beauty Market Online in Thailand

1. Provide the right content to your audience

Improving online content is the key to higher conversions. In a nascent market such as men’s grooming, customers need to be educated through tailored suggestions, tutorials or services about men beauty products. In Korea, men beauty tutorials are already garnering a huge amount of attention and this trend is starting to get imported into Southeast Asia. Take for example, Thai blogger Pupe So Sweet, who is an expert of men beauty and has millions of views and 20K subscribers on Youtube. 

2. Win the online battle of peer endorsement 

In Thailand, beauty shoppers rely heavily on peer affirmation and highly trust reviews and content from others to make decisions. A recent release from AT Kearney shows that 59% of the online shoppers for beauty and personal care find peer reviews very important or somewhat important. 

opportunity for Men's Grooming in Thailand

3. Get more products specifically ‘for men’ online

Currently, men still use unisex or women’s products because of the low offering of specific products specifically for men. On average, they use seven grooming products but only three are “for men” products. Also keep in mind, a recent study shows that men are selective with their purchases and prefer to use “for men” products that are fast-acting, easy to use, less processed, and with visible results. “These products are used on daily basis and have been previously tested by customers. A large majority of this kind of customer is more loyal compared to their counterpart,” says Tiffany Schmitt-Chretien, Senior Brand Commerce Manager at aCommerce.

4. Make the wives convert their husbands

Women have a significant influence on male behavior. If encouraged by the people around them, men will take much more care of themselves. eIQ internal data suggests many conversions are triggered by women in Thailand: 40% of ‘for men’ products are purchased by women.

opportunity for Men's Grooming in Thailand

Even if men represent the majority of the customer for “for men” product, women are important customers of this category. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

5. Retarget existing offline customers

Men, in general, have higher brand loyalty compared to women. When they decided to branch out from their usual basic grooming regimen, they will go to the most familiar brands. By giving a better deal that they couldn’t get when shopping offline, for example, free samples or discounts on product set, you can convert them to this channel. Selling these products online can also offer males the anonymity that some men may still crave despite the changing image of men’s grooming.

 

Contributed by ecommerceIQ Team (Rara Kinasih, Alex Henry, Anutra Chatikavanij, Felicia Moursalien)

Tweet your feedback to @ecomIQ

Tencent, China’s biggest brand has announced its plans for western expansion through a focus on content, messaging and major global brand investment, reports Marketing Week.

The company currently has more than 1 billion monthly users, and runs the country’s most popular internet portal and messaging services. It is also the most valuable brand in the country, worth one hundred billion dollars, according to Millward Brown’s BrandZ research.

That valuation puts it ahead of the likes of Coca-Cola, Disney and MasterCard.

Regardless of the scale, the company is relatively unknown in the west.

China’s Internet market is so big that it offers an ideal environment for massive Chinese firms like Tencent, owner of WeChat, to establish itself before going global.

In China, trust is one of the most important, so the company itself represents a lot of value and meaning. – Steven Chang, Tencent’s corporate Vice President.

You can have the iPhone but you buy into the Apple brand. And in China, people buy into the Tencent brand. – Steven Chang, Corporate Vice Price of Tencent.

While Tencent may not be that well known among Western consumers, it is a different story with Western brands. And the likes of BMW, Burberry and Nike are all working with Tencent as they look to quickly transition their brands to a Chinese audience.

The ecosystem for China digital advertising is evolving but it will be a China edition. We are not behind; the speed of change is very fast but development is different.

Tencent is also buying in content through exclusive deals with creators such as HBO and NBA, but it is adapting the ‘Netflix Model’ and creating its own content.

A version of this appeared in Marketing Week on August 4. Read the full version here.

Nike is undergoing a fundamental shift in its digital strategy by introducing a brand new Nike+ mobile application, reports Forbes.

The shift stems from the assumption that consumers are increasingly using their phones to purchase shoes and apparel online. Nike needs to establish their digital platform to maintain market dominance.

Nike introduced its new Nike+ app, which is more than another shoe and apparel company designed to track performance.

This stand-alone app actually provides the user with a feed of stories, personally tailored to meet their interests, and to a store with highlighted products that makes it easy for a consumer to busy straight from the Nike brand.

“Many of the other apps in the world are focused on customer acquisition. What we really see is the opportunity to extend and deepen the relationship with customers, making it more than a dashboard of data,” says Nikki Nueburger, Vice President, Global Brand Running at Nike.

Brands and retailers are increasingly investing in digital strategies that allows them to directly reach customers, as having direct access allows for total brand control and better hold of consumer data.

A standout function of the Nike+plus app is “Reserved For You” invitations. Users can personally set aside products in their size or events in their city that they can reserve without setting an alarm or going online at a specific time.

At the end of June, Nike reported fiscal 2016 fourth quarter and full year results, which emphasized the company’s shift to focusing on direct-to-consumers initiatives. The company reported a 7% increase in operation overhead expense to $1.9 billion, reflecting continued growth in the direct-to-consumer business.

“It’s always been about getting the right product in the hands of the consumer based on their needs”, said Neuburger.

Nike also launched its first purely digital studio in New York this week, in tandem with the launch of Nike+ app.

A version of this appeared in Forbes on August 2. Read the full version here.

Indonesian retail distributor company for medium-high brands, Mitra Adiperkasa (MAP), recorded profit growth of 78% to $3.5 million (46.3 billion IDR) from $1.9 million (26 billion IDR) in the same period last year. One of the reasons for this increase, as reported by Bisnis.com, is the company’s venture to ecommerce.

MAP, who has more than 150 brands under its management, launched its ecommerce site MAP eMall last year.

The company’s investment through ecommerce has created more productivity, efficiency and increased their profit margin – Corporate secretary of MAP, Fetty Kwartati

She also added that the achievement in the first semester of 2016 is also supported by strong consumer spending during the month of Ramadan. She claimed the increase in demand is also because the brand is getting more recognition.

According to Bloomberg, MAP profit until the end of the year is projected to reach $14.6 million (192.4 billion IDR), growing 415.36% from last year at $2.84 million (37.33 billion IDR). Revenue projection for MAP will reach $1.1 billion (14.19 trillion IDR), growing 10.59% year-on-year.

In the financial statements, the company state that their net income until June 2016 has reached $502.2 million (6.66 trillion IDR), up 9.18% from $464.2 (6.1 trillion IDR) YOY.

The company’s revenue mostly came from retail and wholesale sales worth $462 million (6.07 trillion IDR), an increase of 9.56% from the same period the year before $421.5 million (5.54 trillion IDR).

A version of this appeared in Bisnis.com on August 3. Read the full article in Bahasa here.

direct to consumer strategy

Ecommerce has completely disrupted not only how people shop, anywhere anyhow, but also the supply chain and distribution of goods. Brands and businesses are empowered in a way never before possible, most noticeably by cutting the middle men and selling directly to consumers. By adopting a direct to consumer strategy, businesses gain a stronger presence in both online and offline markets.

The Apple example

Dive into Apple’s branding strategies in the past and you’ll recognize the importance of a direct to consumer approach for success. Long before its growth streak, Apple’s sales were driven by big box electronic retailers. After launching an online store in 1997, the company turned around and aggressively expanding its own retail stores internationally. Since then, Apple has grown to become the number one tech company in the world.

But Apple isn’t the only success story. Nike, Puma, L’Oréal, Kiehl’s, and Dell have expanded their distribution channels and sold directly sell to customers by increasing their ecommerce distribution channels, specifically brand.com websites and mobile apps, and by establishing brick-and-mortar stores worldwide.

So why should other brands shift from a traditional distribution process through retailers to a direct to consumer model? How has this shift triggered such a phenomenal growth for these brands? Let’s dive in.

1. Direct to consumer is the best way for brands to build a strong relationship with customers

Directly selling to consumers gives brands a chance to gain complete control over their brand presentation. Whether through a brand.com website and/or a brick-and-mortar store, they’re able to portray a story that conveys the purpose and meaning behind their products and add a distinct personality to their brand so their products can shine.

Southeast Asian consumers are predicted to drive the ecommerce boom in the future as they are among the world’s fastest and strongest adopters of mobile and social media in online and in-store purchasing activities. According to Bain80% of digital consumers use social media or messaging apps to research products and connect with sellers. With online stores, the style of the images, the way the site looks, and even how the items are packaged when shipped, all add to a brand’s customer’s experience.

Take for example Kiehl’s, the global luxury skincare brand is currently expanding a full scale ecommerce strategy in Thailand by adopting an unconventional O2O campaign in order to create an omnichannel experience and in turn drive customer conversions as well as brand awareness. Figure 1 and 2 show the comparison between how products are presented to customers with its own branded website and brand presence on an e-marketplace. 

brands direct to consumer strategy in Southeast Asia

Figure 1: Kiehl’s beauty products displayed on its own website

brands direct to consumer strategy in Southeast Asia

Figure 2: Kiehl’s beauty products displayed on the website of its retailer partner

“The advantage of having a brand.com is control. You can create your in store experience and highlight the products you choose. It’s not the same as selling through other retailers because you can’t create your own story.” – Tiffany Schmitt-Chretien, Senior Brand Commerce Manager at aCommerce.

Southeast Asian consumers tend to use physical stores as a platform to gain more knowledge of a wide range of products, touch and feel are very important. As opposed to selling through retail intermediaries, brands with a physical presence have the advantage of enhancing the whole shopping experience by providing in-person interactions. This can be something as simple as in-store music and lighting to set the mood, to themed decor pieces that reinforce brand identity. Sales assistants can also dress the part to create an immersive experience. Stores like Dior and Chanel often spray their signature scents in the air to play into all the senses – a unique element that intermediaries would overlook. Warby Parker, also moved from ‘click to brick’ back in 2013 to provide a special experience that could contribute towards building relationships with its customers. 

brands direct to consumer strategy in Southeast Asia

Example: A Kiehl’s Store with their trademark industrial lab style visual merchandising

Physical brick-and-mortar stores also allow brands to offer special events and in-store promotions exclusive for members only, which provides the opportunity to strengthen a customer’s return. This becomes a significant advantage for brands wanting to target the Southeast Asian market as consumers in this region hold unique views on special events. According to PWC’s report, consumers in Singapore, Malaysia, and particularly in Thailand place a significantly higher level of value on member-only events than global consumers – they value exclusivity. 

From marketing to customer experience, brands are also able to better connect with their customers through direct channels, and in turn gain their trust. In 2013, L’Oréal, boosted its ecommerce efforts with new business models to support their digital marketing strategy, one of which involved launching the “L’Oréal Paris Make-Up” application. This platform allowed users to test products virtually and create a “brick-and-mortar” type of experience. L’Oréal was able to drive traffic through their application, which effectively strengthened its brand loyalty and contributed towards its significant growth of 29% of online sales in 2013.

2. A key opportunity to collect relevant customer data to drive sales

There’s a clear difference in quality of the data collected directly from a brand’s own channels and the data accessed by third parties. The customer analytics generated from direct channels are more specific to a company’s customers, whereas buying customer data from retailers may be too generic or irrelevant for customer segmentation purposes.

In owning a brand.com site, data is easily collected through techniques such as spotting trends with user’s clicks, identifying the most lucrative search terms and analyzing customer behavior on social media sites. In doing so, brands are able to assess a consumer’s decision-making process and analyze their purchasing behaviors to personalize future campaigns for its existing customers. This is done in the following ways:

  • Customise promotions and special offers to different audiences
  • Improve and/or create new products from product feedback
  • Find the most useful visuals and messaging approaches to boost the effectiveness of marketing campaigns
  • Provide better customer service by tailoring interaction with customers

And we can draw back on brands in the past which have been able to succeed through analyzing the data from consumer purchases. In 2013, Puma’s efforts to gather and analyze data on consumer interests had significantly improved their brand marketing and engagement strategies. Apple’s use of big data over the years has allowed them to analyze their user’s behavior, build new products and determine what new features should be added to their existing products.

Ecommerce fills a gap when it comes to understanding consumer’s interests. – Tom Davis, Global Head of Ecommerce for Puma

In owning a branded retail store, brands can also obtain indirect information from its customers – a phenomenon known as ‘in-store analytics’. The ability for brands to analyze in-store performance is vital to understanding consumer behavior and manage in-store marketing campaigns, as both factors facilitate shoppers deeper into stores for maximum exposure. In recent years, Topshop was able to install a WiFi-based analytics system and fitting call bells to analyze conversion rates, which provided better insight on how to refine store layouts and position in-store advertising messages more effectively.

Customer analytics therefore enable brands to discover the hidden preferences of their consumers and better understand their needs and demands. According to a 2014 Infosys survey, 78% of consumers claim to more likely purchase from a retailer again if they accurately provided offers targeted to their interest, wants or needs. It is crucial brands maintain strong control over customer data to better understand their customers, and in turn drive sales up.

3. A direct to consumer strategy allows brands to control their pricing structures

Pricing is a factor that significantly influences the overall competitiveness of a brand’s products and affects the generated sales revenue. By selling direct, brands are able to formulate their own pricing strategies to improve sales margins, rather than being influenced by the varying pricing structures set by retail partners. Nike for example, has taken advantage of pricing adjustments by commanding higher prices for its products: a factor which has significantly contributed to its phenomenal gross margins.

Brands also no longer face intermediary costs that once consumed a percentage of its sales so there is no need for brands to negotiate pricing with retailers and brands nor outspend the competition for better in-store position and promotions. SaleStock Indonesia, a fast-fashion startup based in Jakarta, recently took a proprietary merchandise strategy with efforts to eliminate all intermediaries. By vertically integrating their design, manufacturing and supply chain processes, they are able to provide on-trend clothing at a fraction of the general retail cost in midst of the increasing competition of other e-retailers such as Lazada and Tmall.

Costs & risks to consider

In light of all the benefits of the direct to consumer model, there are associated costs. In shifting to a direct to consumer strategy, brands need to take on all the responsibilities that were once in the hands of traditional retail intermediaries. From channel to cross-border management, and from tech-development to fulfillment and delivery, maintaining operations and logistics become a significant upfront cost. On top of that, more emphasis needs to be placed on marketing your brand and its distribution channels.

Read also: How Chatbots Are About to Disrupt Social Commerce in Southeast Asia

For well-established brands such an investment is not an issue but it may be a problem for brands with a smaller consumer base. In midst of the intense competition among brands in the ecommerce and the retail market, it becomes a challenge for start up brands to establish their share in the market place. One of the major difficulties faced by the clients of aCommerce is driving traffic to their newly launched online website, particularly those who lack a strong presence on social media platforms.

Another area of concern brands need to consider is the risk of channel conflict with its retailer partners. Retailers may view brands going direct as a threat, as brands draw more sales data for themselves. Back in 2007, Dell’s shift towards selling directly to end users and abandoning its reseller partner channels caused a negative reaction in their traditional sales channels. Also, Apple’s change in focus of its whole channel towards a direct selling model forced 55% of its partners to go toe-to-toe in competition, with 14%, 33% and 46% of these partners rating the channel conflict as high, medium and low, respectively.

The power of bargaining is definitely something to look out for.

In Southeast Asia, the chances of conflict are even greater. According to Praponsak Kumpolpun, Senior Brand Ecommerce Manager of aCommerce, ‘there aren’t many strict laws and regulations where you have to follow pricing guidelines – so the power of bargaining is definitely something to look out for’. For example, let’s take a look at the big intermediary players of Thailand such as Tesco and Lazada. In holding dominant market share, such retailers force brands to maintain pricing integrity. Brands which go against these retailers and adopt an aggressive pricing strategy will jeopardize their long term relationships with them.

However, there are also opportunities to generate sales and product awareness through cross-promotion. Multiple channels can be used to stimulate interest and encourage purchases. There are several ways in which brands may do this, some of which are listed below:

  • Offer a store finder on their website so consumers can discover its retailers
  • Give retail partners advertising space to market their unique bundle promotions
  • Promote in-person store events
  • Reward high-performance retailers with prominent listings on your site

 

brands direct to consumer strategy in Southeast Asia

Figure 3: Chanel’s store finder which includes both its own retail stores and its retailer partners

Many brands nowadays incorporate “Online Channel teams” in their operations to structure a trade plan within their company. By doing so, they have the ability to adjust the slot of promotions across channels without a conflict of interest between channels. Such promotions may include bundle sets unique to each specific retailer. This strategy prevents price comparison across each channel. Alternatively, many brands sell and promote brand exclusive products. Figures 4, 5 & 6 below show the varying promotions of SK-II products unique to the SK-II brand and its retail partners.

 

brands direct to consumer strategy in Southeast Asia

Figure 4: SK-II exclusive offers on the official website

 

brands direct to consumer strategy in Southeast Asia

Figure 5: Unique SK-II product bundles from Sephora

 

brands direct to consumer strategy in Southeast Asia

Figure 6: Unique SK-II product bundle from Lazada

Previous studies do not find strong evidence of cannibalization from direct brand to consumer channels. In fact, according to a study commissioned by Digital river Inc and completed by Forrester Research Inc., more than half of the manufacturers are reported to have seen a positive effect on relationships with other sales channels from its direct to consumer strategy.

What’s next for brands in Southeast Asia

 

Ultimately, the best approach for brands is to reach their consumers through both traditional and direct channels by adopting an omnichannel retail strategy. By doing so, they are able to benefit from selling directly to consumers and can use channel conflict to their advantage. The benefits of direct to consumer outweigh the costs and risks. 

BY ALEXANDRE HENRY & YOOREE WOO

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