Pioneers of ecommerce in Thailand at the ecommerceIQ Summit in Feb 2016. Tarad, Kiehl’s, Lazada, aCommerce discuss the difficulties of moving online.
In the era where two-thirds of the world are going online, a phenomenon known as FOBO, or the Fear Of Being Offline, is becoming a real one. People panic when they lose access to the internet, no matter how temporary those situations might be. But did you know the reverse is experienced by companies in emerging markets?
Despite the massive opportunity of ecommerce in Southeast Asia ($70 billion by 2020, according to Bain and recent Amazon and Alibaba forays into the region), only 3% of total retail sales come from the online channel. What’s going on? In order to understand the apparent slow migration into online retail,ecommerceIQ surveyed 132 senior level retail executives in February 2016 at the eIQ Summit in Bangkok.
The Summit was attended by Director and C-level executives from a majority (67%) of top brands, retailers and e-tailers in Thailand such as L’Oreal, Essilor, LINE, Central Group, Casino Group, P&G and more. Here is the result of their survey responses.
1. Limited internal know-how (47.7%)
Forming an ecommerce team to build an online strategy is one of the most strenuous bottlenecks encountered in Southeast Asia. The region remains low tech intensive and resources are so scarce that Lazada, Southeast Asia’s largest online marketplace, has taken the talent challenge into its own hands by educating the first ecommerce generation and generating local expertise out of fresh graduates.
Sheji Ho, aCommerce Group CMO, explains, “Because of the lack of talent, companies are constrained to hire ex-digital marketer or brand managers as to run ecommerce divisions but the scope encompasses warehouse management, delivery, fulfillment, reverse logistics, it is a much broader set of activities than what they are used to.”
2. Cannibalizing offline sales (24.2%)
Channel conflict is when online sales cut from offline sales or if you’re a brand looking to sell direct to consumer, you immediately create a channel conflict by putting yourself in competition with your distributors. In Brand Commerce, channel conflict can be crippling, as retailers can sometimes punish brands offline positioning due to ecommerce promotions or perceived exclusive offers. To overcome this, brands like L’Oreal are creating coordinated online and offline promotional campaigns that compliment and encourage each other.
3. Not enough demand (23.5%)
With ecommerce slated as less than 3% of all retail sales in Southeast Asia, businesses simply do not think the market is ready yet. But as the Bain report showed above, the market is evolving rapidly. Others believe that the demand is there, but because the customer experience is so poor, Southeast Asians are not compelled to repeat purchase. The internal ecommerceIQ Beauty Report findings in Thailand showed that only 20% of top global brands have a customer experience rated higher than 70%.
II.What are the top in-demand services?
Source : ecommerceIQ Thailand 2016 Survey
Interestingly, strategy and consulting is the top sought after service for ecommerce in Southeast Asia. This reflects the very nascent level of ecommerce development for the vast majority of retailers in the region still who are not ready to get operational and is very much indicative of an emerging market. Below is a ranking of the top ecommerce services businesses are looking for in Southeast Asia:
#5 Web Development
A website serves as the first touchpoint with customers in an online world so an experienced team dedicated to its development is key to a successful strategy. It helps the company reach millions of internet users who may become potential customers. UX, UI developers are highly sought after.
#4 Fulfillment, Logistics & Delivery
The ecommerce ‘business-to-consumer’ model requires a different set of systems and mindsets. In Southeast Asia, the complexity of deliveries due to the region’s poor infrastructure, difficult geography, complex cross-border commerce, high rates of cash on delivery all take the challenge to an entirely foreign level. The company must also take into account the customer demand for visibility and transparency. Reverse logistics in case of returns must also be taken into account.
#3 Omnichannel enablement
The omnichannel experience leverages customer behavior across all relevant sales and distribution channels, online and offline. It is basis for a consistent, personalized interaction between brand and customer. Having an omnichannel strategy is the next step to reaching your customer and providing them with convenience to shop anywhere at anytime.
#2 Performance Marketing
Data collected online is a powerful tool to enhance marketing to a level that cannot be reached with offline tools. A combination of new advertising tools and innovation makes performance marketers able to help retailers and affiliates grow their businesses and drive online sales. Performance marketing done right creates win-win opportunities for both retailers and affiliates.
#1 Strategy and Consulting
It is necessary in today’s digital age to have an online presence if businesses want to continue growth. In order to get pass the fear of going online, finding the right ecommerce service partner to provide strategy and consulting will take the brand to the next stage of ecommerce maturity and rid them of FOGO once and for all.
III. Value of the ecommerce B2B landscape
The good news is that these potential ecommerce businesses are willing to invest into the process, although almost a quarter of participants are not willing to spend more than $20 thousand annually. In ecommerce terms that’s barely enough for a website and fulfillment of very few items per week, according to The Evolution of Brand Commerce in Southeast Asia, which gives a cost breakdown of ecommerce.
Ecommerce in Thailand and Southeast Asia is being restrained by a lack of expertise and fears of offline retail legacy politics. But as the region wakes up to the opportunities inherent in online, much like the US and China before them, businesses will find a way to overcome the bottlenecks.
By Alexandre Henry