Thailand’s digital and ecommerce landscape could experience 20x growth over the next ten years as the online ecosystem becomes available to the majority of shoppers.

With social channels and new means of communication, methods of targeting consumers and a more holistic understanding of shoppers in a digital age, ecommerce is becoming a true staple in driving business growth in the country.

The integration of social channels in all platforms has also increased. Facebook has become a viable platform for buying and selling among online Thai shoppers, with 44 million active users in the country and reaching 7% yearly growth. Instagram is another important platform that has almost 10 million users in Thailand.

Meanwhile, the tech industry’s most talked about mobile app, Snapchat (that recently filed its IPO), remains a less popular social platform in the country. The app, however, is testing social commerce functions to potentially strengthen its positioning in the market.

Priceza: Predicting 20x growth in the next ten years

According to Tanawat Mahabupha, co-founder of Priceza, Thai consumers are not necessarily seeking out the cheapest deals. The quality of products and credibility of brands are becoming integral to the decision making process.

“This year, Thailand will have a strengthened infrastructure. Both payment and logistics will become crucial drivers of progress. It can be said that if e-payment takes off, so will ecommerce.”

The shopping behavior of Thais is a mix between going onto marketplaces to browse and/or shopping directly from brand.com. This is especially the case for more premium products, such as cosmetics.

Currently, Southeast Asia is experiencing the most rapid growth in ecommerce and Thailand has the highest gross merchandise value (GMV) in its group. This means that retailers and brands need to be quick in adopting digital strategies. Aside from competing over the speed of launching a product, brands also need to act swiftly in logistics and customer service. The importance of a speedy delivery service is crucial to the success of an ecommerce strategy.

Lnw Shop: Great consolidated ecosystem by sellers 

Nuttawit Polwattanakul, CEO of Lnw plc, or Lnw Shop says that this year, social commerce will experience even more robust growth. A lot of brands will be turning to channels that do not require them to pay a fee, such as Instagram or Facebook.

According to Nattawit, e-payment may take approximately 3-4 years to fully take off and calm the fears of consumers. It’s important to ensure that marketplaces accommodate the incoming new comers in payment in order to accommodate the country’s diversifying payments landscape.

The government is currently pushing initiatives for SMEs, educating the market about different marketing channels and how to use them. Most recently, the Thai government announced an official partnership with ecommerce giant Alibaba to boost growth for small and medium sized players. SMEs are also recommended to integrate Facebook Live into online strategies.

Aside from the development of payment, logistics and marketing, more sellers will want to join forces to target consumers. It is a challenge to construct and operate a website, which is why Thais prefer to join forces and provide customers with collaborative platform, especially in the area of logistics and last mile.

Ascend Group: Promotions are not enough

Thananan Arunrukchai from Ascend Group has pointed out that for e-payment to take off, it must be a no hassle, one step process, otherwise, the complications will drive consumers to resume  shopping via chat apps and bank transfers.

He also notes that it’s vital for brands to understand what their customers want and identify the appropriate marketplaces. This is more important than dishing out promotions in the long run. Some brands often overlook the importance of a customer experience, and instead focus on giving away promotions without much brand engagement.

COL Plc: It’s not easy to go online

According to Worawut Oonjai, chief executive of COL Plc., ecommerce only makes up 2-3% of total retail, hence the growth potential. According to him, it is not easy to go online. Brands should use marketplaces as a platform to test the waters and diversify their online presence.

Brands should widen their marketplace selection in order to collect enough data and the know-how to launch a brand.com.

However, if a brand truly wishes to pursue a brand.com strategy, they need to be strong enough; factors such as funding and a niche market would be necessary for a successful direct-to-consumer strategy.

Looking forward

TNS, global market research company, reports that Thai people have the highest use of social media platforms – 92% of users on a daily basis. Bain & Co also released findings that the Thailand online market is estimated to make up 15% of total retail by 2024.

For companies realizing the importance of ecommerce, are they too late to the game? Not really. Convenience store chain MaxValu recently announced that they are in the middle of executing an online strategy after witnessing a rise in online demand from when they sold new year gift baskets via online distributors. For companies with large offline footprints and strong customer base, they actually have an advantage.

So there we have it, the thoughts of some of Thailand’s ecommerce influencers. The country is undeniably undergoing fast internet adoption and with the increasing popularity of social commerce and marketplaces, brands are under pressure to seize the ten year growth potential. It’s important to use marketplace visibility to tread into ecommerce and as a stepping stone to a brand.com strategy, but brands should be wary of following the herd and without fully establishing a footprint in the ecosystem first.

This post was translated and modified from Bangkokbiznews.com and Prachachat.net. Read the original entries in Thai here and here.

With pure play online brands around the world adopting offline channels, which retail strategy is really the way to go? Is an online-to-offline (O2O) approach feasible for your brand? David Jou, founder & CEO of Pomelo, one of Southeast Asia’s best performing ecommerce fashion brands, shares his views on today’s definition of a “retail experience” and what it means for his company.


A few months back, I had a very memorable meeting with a prominent Indian investor. He was the number one ranked student among all Institutes of Technology in India back in his days as a student, sold his first company for a hefty sum to Amazon and now heads up one the leading venture capital firms in India. His perspective is particularly interesting because India over the last decade has experienced one of the steepest adoption curves for ecommerce globally.

I was given a bit of time to pick his brain at his office.

“Ask him your hardest questions, because he’s an absolute genius.”

I sat down, launched into a quick introduction of myself and Pomelo and got him up to speed about my margins, growth, the brand, our competitive advantage, the team, our factory etc. etc. I looked over and asked,

“Does that all sound good?”

“Yes, that all makes sense.”

“So, you think this all makes sense?”

“Yes I think you’re absolutely spot on and you’ve figured something out.”

So there it was, we were on the same page and the discussion could continue.

With the groundwork in place, I decided to ask him a question Pomelo had been considering over the past few months.

“Should Pomelo spend its capital on creating an offline retail footprint or on marketing its mobile app?”

I had asked this particular question to many before and heard variations of “forget offline, you’re online! Why would you want to deal with a non-scalable, hassle-filled business model that’s crowded and competitive. You’re exactly where you want to be. Double down!”

Without hesitation and much gusto he answered,

“Go offline.”

Astonished, I asked, “why?”

“Even 5–10 years from now, best case scenario, only 10–15% of retail spending in your markets will be online. 85% of spending will still be offline.”

So there it is. For the coming years, offline will remain an important part of the 360 retail experience. Think of Warby Parker, Amazon, Bonobos in the US who have all opened offline stores. Now how can online players really take advantage of clicks to bricks?

1. Provide concrete incentives to visit your offline location

Spend time with your team to figure out the ‘why’ behind your offline project. Why would your target customer come to this particular location and what benefits do they get from coming to it? Opening a flagship store for the sake of it isn’t a good enough reason, answer these questions first:

  • Is it to showcase your physical product because it shows better in the real world?
  • Is it to alleviate a particular barrier to purchase that exists in your category?
  • Is it to provide a space where you can build a community?

If your “why” is to drive more sales or a generic “to increase awareness”, it will be hard to determine if you’re set up for success or failure. Imagine the location you’re contemplating is really a physical billboard to drive customer acquisition and that the metrics you track should be on that basis.

Amazon recently picked up a lot of attention following the launch of Amazon Go, an offline grocery store that boasts zero queues and no check-out. The major realization was that Amazon could reinvent the grocery store experience by getting rid of lines and cash and draw in more users online through a highly attractive offline experience.

“Grab & Go” at the Amazon Go store.

2. Scrap traditional retail conventions

The key to success is to provide a differentiated experience and scrap traditional retail conventions. Remember that you’re not in the business of building more efficient candles, you’re after the next light bulb. Figure out how to disrupt the traditional store format that reigns in your category.

One great example is New York based workwear website MM.LaFleur that has become famous through a product it calls the “Bento Box”, a mail-ordered shipment that comes with four to six ready-to-try wardrobe staples.

The company focuses on professional women’s wear for the office and have been extremely successful, with revenue growing 600% in 2015 and a projected $30 million in 2016.

David-Jou-Pomelo

The “Bento Box”

The brand’s approach to its offline experience directly mirrors the Bento Box philosophy. Stylists curate a selection of products based on a survey customers fill-out when they book their appointment online. A lot of players in traditional retail would say the cost of having a personal stylist on hand for an unpredictable amount of customers is highly inefficient and consequently won’t scale.

MM.LaFleur’s success would suggest otherwise; they’re launching a showroom in Washington DC this March, in addition to a showroom in New York and pop-ups scattered the country.

David-Jou-Pomelo

MM.LaFleur New York City location

3. Have a built-in digital marketing plan

One thing I would say is if you build it, they will not so simply flock. If your brand is considering an offline location, you have most likely built up a loyal following on social media, your email database and an efficient conversion funnel online. The trick here is to take the same approach with offline as you did online, and fully utilize it for your brick & mortar venture.

One of the best examples I’ve come across was by fashion label Marc Jacobs at the Marc Jacobs Daisy Pop-up Tweet Shop in 2014.  The three day pop-up store in lower Manhattan used tweets and Facebook posts as viable payment methods, where customers walked out with products after tweeting or posting a picture about the pop-up event.

The pop-up was a huge success and the brand received a ton of PR via social engagement to reinforce the fun playful character of the brand all at the same time. This concept was later replicated at a few additional Marc Jacobs locations, including London.

Marc Jacobs Pop-Up Tweet Shop window

David-Jou-Pomelo

Signage showing how the tweet shop works

From eIQ:

What’s next for Pomelo?

Multiple mall staples in the US, such as BCBG and JC Penny are struggling to keep stores open. Long-standing department stores Macy’s had to shut down multiple stores, while scrambling to launch ecommerce strategies to stay afloat. Ironically, purely digital brands are beginning to adopt offline strategies, most notably eyewear startup Warby Parker and Rent The Runway. If the death of pure play retail is indeed true, then what is stopping Pomelo from pursuing an offline store strategy to become a global fast fashion powerhouse?

BY DAVID JOU, FOUNDER & CEO OF POMELO

Read more about David Jou in eIQ’s SPARK 40

Tucked away in Singapore’s Little India is a 24-hour retail centre that is never devoid of foot traffic. There is little doubt Singaporeans don’t know what and where Mustafa Shopping Centre is. The company was on the annual Enterprise 50 list for five consecutive years from 1995 – 2000, and has outlived plenty of other retail centres.

What makes it so enticing?

Shoppers say the enormous product selection and bargain prices. The 200,000 sq ft space is composed of seven floors selling over 300,000 items ranging from Indian spices, wheelchairs and vitamins to gold and DVDs.

Everything is available at any hour of the day – money exchange, flight tickets, postal service, and restaurants. The store has even become one of Singapore’s tourist attractions, but a quick search of online reviews suggests that the retail experience has drastically changed since the megastore’s heyday:

 

And to think it might get even more crowded. The 46 year old company recently announced the closure of its 65,000 sq ft flagship branch in Serangoon Plaza earlier this year due to construction. This essentially cuts Mustafa’s retail space by a quarter and all products will be stored in its remaining branch in Little India.

With all this in mind, and a growing selection of cheap goods more readily available online, how many more trips will Singaporeans undergo to save a few dollars?

Without an influx of returning shoppers and smaller customer reach with the closure of its second branch, how can Mustafa ensure the continued growth of its business? We take a look at some factors:

1. Singapore’s Average Shopper

Euromonitor International data shows that average annual disposable income per capita in Singapore is now US$27,664 and predicted to reach US$30,143 in 2020. This is quite high in comparison to consumers in the rest of Southeast Asia who make less than US$500 a month.

Even so, modest retail growth was witnessed in 2016 due to Singapore’s slowing economic rates of 3.3% to 2.2% YoY. More price-sensitive shoppers means good things for low-cost sellers like Mustafa but consumers are more likely to go online to compare prices, especially for more expensive products such as electronics.

And this is where they will find a plethora of pure-play sites such as ShopBack, Ebates SG, and Lazada SG to save on well-known brands and everyday items with cash back and daily offers.

[Singaporean] Consumers cited convenience, cheaper prices and direct delivery as key reasons to turn to internet retailers — VISA report

Purchasing from overseas websites is also highly attractive because of the absence of Goods and Services Tax on imported goods of S$400 or less, which puts more strain on traditional retailers.

Mustafa ecommerce

It’s important to note that Singapore’s population is aging and less willing to endure a cramped, unorganized and adverse customer experience to buy discounted mouthwash. Although shopping is still seen as a social activity, a consistent terrible customer experience is enough to outweigh small savings.

As one online commenter suggested,

“If you’d like to avoid crowds, try not to come here during peak shopping months, which runs from October to the following October.” — Indu Balachandran, FirstPost

2. Expansion Opportunities

The company could look for another venue to open a second branch but a quick overview of Singapore’s expensive rental costs and competition for prime locations against players like Apple also opening up shop makes that option look dim.

The high cost of renting retail space has slightly declined since 2015 but the massive space that Mustafa needs to operate would set the company back a hefty amount if average rent was still S$24.35 – S$36.25 per sq ft like it was two years ago.

There are also many additional challenges to opening a department store. The company was denied its request to convert a warehouse into a wholesale retailer and given a SGD$10,000 fine for unauthorized commercial use in that same location. They were also slapped with a court order to suspend business for 40 hours after overcrowdedness and fire-safety concerns became too serious.

But even if Mustafa was able to secure a perfectly suitable location to house its next brick and mortar branch, now they need employees to run the business. How much would that cost?

Let’s say at least 50 employees to start where a customer service rep in Singapore makes approximately S$32,267 a year. Each employee would need to generate value to make up for employment and training costs.

JP Morgan shared this neat chart below. The average employee of an offline retailer generated US$279,000 in gross sales compared to the average electronic shopping and mail-order house employee who generated an average US$1,267,000.

Offline expansion may not be in the cards right now but the promise of ecommerce is that Mustafa can sell its products and services to anyone in the region.

3. Future of Retail

Weak tourism, a notable decline in retail sales last year and even a small drop in retail space rent paints a pessimistic future for Singapore in the coming years. Online retail sales in Singapore, however, are expected to reach US$5.4B GMV for 2025.

mustafa-online

Mustafa makes a relatively small profit margin of 10-15% on most products to keep prices lower than competitors. The company imports large quantities of goods directly from cheap sources such as Thailand, Malaysia, the US, etc. and saves additional costs by cutting out the distributor.

Regardless of its popularity, there are already a slew of online and offline businesses, especially specialty shops, that Singaporeans frequent for bargain deals and special sales without the uncomfortable crowds, i.e. AnchorPoint Shopping Center. But offering budget prices cannot save the slow death of traditional retailers.

Ecommerce shouldn’t be seen as a separate channel but instead as another store branch.

What happens when one branch is closed and the other is too far away? You either do a quick Google search for the company’s online webstore or you go into a competitor’s store.

Bargain hunters have no brand loyalty but brands online are able to build and maintain relationships with customers via email marketing and ad-retargeting touting upcoming promotions and discounts. Mustafa has only word of mouth to rely on, curious foot traffic and its social channels, which are currently not being put to the best use.

Source: Mustafa Facebook page

More pure-play brands are moving into the offline territory by adopting omni-channel strategies after realizing the importance of a positive customer experience. Electronics brands like Samsung, Huawei, Parisilk and Lenovo are adding online channels through partnerships with e-marketplaces Qoo10 and Lazada in addition to letting Singaporeans test products in their flagships.

Multi-channel retailers are benefiting from having an online presence growing at 11% CAGR, which mitigates any worry that ecommerce will cannibalize traffic to offline stores.

Mustafa is one of the best-primed offline retailers in Southeast Asia to dominate commerce with an omni-channel strategy.

Would Mustafa Do Well Online?

Probably, but there are many other factors to consider. The business already meets the standard requirements to successfully launch an ecommerce business: large number of SKUs, strong branding and awareness, existing customer base and an experienced entrepreneur running the entire company.

The purpose of going online is to give your customers access to your products or services at anytime – the exact same concept of Mustafa’s 24/7 offline store.

In 1999, Mustafa did try its hand at an online website aimed to do B2B ecommerce but shut down after experiencing losses due to credit card fraud.

Although that problem still persists in today’s retail world, most notably in the US, credit card and tech companies are introducing their own ways to combat hackers: 3-D Secure, two-step verification and tokenization (Apple Pay, Android Pay, etc.).

These are four paths the company could use to test the online waters:

  1. Ecommerce ‘popshop’ where customers can submit online remittance forms or check a list of products offered in store. This bare-bones landing page would be able to capture visitor data and activate them in the future with bargains on social channels such as Instagram or Facebook.
  1. Add a shopping functionality to the current Mustafa website that already experiences on average 260,000 visitors per month, most likely to view the latest foreign exchange rates.
  1. A mobile application where shoppers can sign up to order and pay for products and services such as remittance, flight booking or restaurant takeaway.
  1. A chatbot on the Mustafa Facebook page that facilitates transactions through Messenger and answers FAQs.

Other Hurdles to Mustafa Going Online

Opening an webstore means choosing the right product offering, presenting it attractively online and safely delivering it to the end customer. A key piece Mustafa lacks is online infrastructure but given the strong selection of service providers in the region, it’s not hard to find a suitable partner to handle content management and last mile.

Chief Logistics Officer from aCommerce, Mitch Bittermann, who also lived in Singapore for six years, advises Mustafa to evaluate if the company’s margins would cover the cost of operating ecommerce. He also suggests a few ways Mustafa could leverage its existing resources.

“Using the shopping centre as a fulfillment center would allow next-day or even same-day delivery. Given Mustafa’s reputation for faulty products, it would be simple to hire an employee to QC items before delivery right at the store and lower chances of returns,” comments Bittermann.

“They also wouldn’t want to offer its entire offline product selection online, for example food wouldn’t sell since HappyFresh and Redmart already exist.”

Where Do We Go From Here?

Sometimes ecommerce works, sometimes it doesn’t. But as consumers on this side of the world only further develop a ‘digital habit’ thanks to new online services, it’s only a matter of time before retailers clamber to where everyone else is.

The move online will not be a painless process but each retailer will reach a point and ask themselves, “should I be online?”. A quick look at Macy’s, Best Buy, Sears or any of these other offline retailers paints a pretty clear picture of ‘adapt or die’.

Online retailers and brands have long been asking for an email address upon signup or login on their  websites. And why not? It enables the establishment of a relationship with customers and push for sales through email marketing. But as the global usage of smartphones increases, the focus of businesses should move towards mobile, and it is customer phone numbers that hold the future potential to better target online shoppers and track their behaviour.

Phones these days are no longer reserved for only voice calls or text messages. With smartphones, the internet is accessible at any time opening up new ways for customers to interact with businesses – they can research and browse for products, call or text and make purchases all on a single device.

Southeast Asia has quickly become a mobile-first region with nearly 800 million mobile connections which constitutes to 124% penetration of the general population.

Every fourth person in the region has two mobile connections.

And smartphone subscriptions are increasing. By 2021, they are expected to pass 100% of the population in Malaysia, Thailand, Singapore and Vietnam, while in the Philippines and Indonesia, they will more than double.

Smartphone subscription in “mobile-first” Asia is rising. Source: South East Asia and Oceania Ericsson Mobility Report, June 2016

What are the benefits of capitalizing on phone numbers?

1. SMS marketing has higher conversion rates than email marketing

Email direct marketing (EDM) is still one of the most effective tools to boost sales as 48% of online consumers in Southeast Asia have made a purchase as a result. However, it is becoming a crowded space – if every ecommerce player asks customers to sign up for a newsletter, the customer inbox fills with several emails all pushing them to buy. 

According to popular email marketing service MailChimp, of all ecommerce emails sent 16.7% are opened, but the click rate is only 2.36%.

SMS marketing, on the other hand, is more efficient as 99% of text messages from brands are opened and the click rate is nearly 20%. While emails tend to get lost in a crowded inbox, the chat-loving Southeast Asians rarely miss an instant message.

Online marketplace Orami is one of companies in the region which actively uses SMS marketing to get its message through to customers. Orami sends text messages with promotions to its clients approximately every two weeks. They contain a link and promotion that encourages customers to shop on Orami.

Online marketplace Orami regularly sends its customers text messages with latest promotions.

2. Phone numbers enhance ad targeting precision

Phone numbers can easily be used for the same purpose that email addresses are collected for by advanced online marketers. They can be uploaded to a platform such as Facebook or Google Adwords that allows mapping to its corresponding user profile to send ads to a specific audience.

Two years after the eye-popping $22 billion acquisition of WhatsApp by Facebook, the social network revealed its true intention – to gain access to WhatsApp users’ phone numbers to better target ads.

Facebook is also using other tactics to obtain more phone numbers by forcing usage of its Messenger app that can be activated only with a number verified with One-Time Password (OTP). In addition, new users now can sign up for Facebook with their phone numbers.

Facebook has been actively pushing to get phone numbers from its customers – one can now sign up with a mobile phone number for a Facebook account.

By adding phone numbers to its extensive database, Facebook will improve its ad targeting capability and remain a highly attractive advertising platform. Ecommerce businesses could separate their own large phone number databases into different sectors depending on interest, channel of acquisition, gender or other to improve campaign performance and sales.

3. Phone numbers more convenient than emails

In Southeast Asia, more than 85% of adults own a mobile device, whereas many don’t own a computer.

An older colleague once told me she wasn’t able to make a purchase online because she forgot the email address registered earlier by her daughter and couldn’t sign in. Still few marketplaces offer a guest checkout option and even if they do, they still request an email. India’s leading ecommerce player Flipkart last year made a bold move by requesting mobile numbers once they realized only 12% of India’s computer users knew how to use email.

Flipkart, one of India’s top e-commerce players, allow users to register with just a phone number.

Flipkart noted this change would ease the signup process as well as simplify password recovery, the reset process and add an extra layer of security.

4. Better customer behaviour tracking across different channels

For businesses that operate offline and online, using a phone number as a customer identifier allows tracking of behaviour across channels.

Tops Market in Thailand, which has brick-and-mortar shops as well as an online store, recently began using phone numbers to identify customers instead of loyalty cards for point collection. If a customer forgets his loyalty card, he can simply tell the cashier his phone number and Tops Market will record the purchase history.

The retailer can identify whether this particular shopper prefers to shop online or offline, how often and what he is buying throughout the week, the month, the year. Having this data allows the retailer to then create personalized emails or SMS targeted to this shopper and those similar to him and improve click-through rates by an average of 14%.

Connecting all these behaviors across channels will enable businesses to gain insight about their customers in an unprecedented way.

Higher conversion rates, precision of ad targeting, and tracking customer cross-channel behaviors are the benefits that will drive adoption of a phone number as the main customer identifier in the future. Ecommerce players who will be able to fully capitalize the phone number will have a far greater advantage than competitors in acquiring new customers and retaining existing ones.

 

By Koravut Pavitpok, aCommerce Internet Marketing Manager

 

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Since its launch in December last year, Facebook Live has presented everyone an opportunity to share a live moment in real time, and this feature has become an important addition to the world’s largest social network. As with other products, Facebook has been pushing people to use Facebook Live, either by inspiring to launch an out-of-home awareness campaign or more directly adding a live button on the app’s homepage. The social network also ranks live videos higher than other types of posts to encourage users to interact and ‘be in the moment’.

Facebook Live – Be in the moment

Despite all the effort, brands and publishers in Southeast Asia seem to take a wait-and-see approach as for now they don’t produce many live videos as can be seen on the Live video map. Lack of ideas and expertise in creating this new type of content which differs from traditional promotional videos are the main factors that have hampered adoption of Facebook Live in the region.

On the other hand, Southeast Asia’s Facebook merchants who use the social network to showcase and advertise their products are in the forefront. They’re taking advantage of live videos to engage with customers and sell products in new ways.

How to capture the shifting consumer attention?

As 50% of consumers feel increasingly overwhelmed by brand marketing messages on social media, consumer attention and engagement is scarce. According to Facebook, people spend three times more time watching a video when it is live compared to when it is not broadcasted in real time.

With this change in mind, brands should capitalize on campaigns in the format of a high quality live video. Here are three ways Facebook merchants in Thailand are capitalizing on Facebook Live:

1. Host an auction in real time

One prevalent example how the live video feature is being used is to host in real time an auction of new or second hand fashion products such as bags, dresses, or even items like electronics.

The way it works is similar to a typical auction, just when the auction is hosted on Facebook Live, the bids are submitted as comments. When the broadcast ends, the merchant and the winner arrange the details of the payment and delivery.

2.  Showcase products and answer questions in real time

A number of merchants also use Facebook Live to demonstrate their products. Customers in the comments section can ask questions about the price or details of the product for the seller to answer.

Similar to hosting a live auction, broadcast viewers who want to purchase products can send a Facebook message directly to the merchant to arrange payment and delivery.

3. Attract viewers with games, prizes, Q&A sessions

Hosting interactive games or quizzes and giving away prizes for sharing a Facebook Live video with friends is also a tactic used in Thailand to attract more viewers and followers.

The owner of cosmetics brand B’Secret Chonnipa Wisedsuranun is a live broadcaster who has successfully leveraged this strategy. One of her Facebook Live videos generated over a million views and almost as many comments.

She uses live video to engage with her customers and build a fanbase by asking viewers to share her live video during which her cosmetic brand is mentioned throughout. To incentivize customers to share the video she gives away prizes like iPhones, cash, gold, and more. This technique allows her to garner a huge amount of viewers and fans in a short period of time.

By doing so, she also creates awareness of her products without paying a dime to Facebook for advertising.

Chonnipa also often uses Q&A games where viewers who answer correctly in the comments section to a question she asks win a cash prize.

Facebook Live provides brands and retailers an alternative way to grow their followers, engage with a wider target audience, and drive sales without directly paying money to Facebook for ads. Businesses that still rely primarily on Facebook ads will eventually experience growing advertising costs due to the nature of auction-based advertising that makes bidding more expensive when there are more advertisers.

In contrary, businesses that can effectively leverage this interactive video format are likely to capture the  attention of consumers at a lower cost.

BY KORAVUT PAVITPOK, ACOMMERCE INTERNET MARKETING MANAGER

 

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Amazon’s rapid expansion into private label brands

Earlier today, TechCrunch published an article titled “Amazon to Expand Private-Label Offerings—From Food to Diapers” detailing Amazon’s successful push into private label brands covering lucrative categories ranging from batteries, mom & baby to even perishable food items. The concept of retailers selling their own private label brands has been around for ages, mainly adopted by grocery chains with the goal to increase margins for often low-profit consumer packaged goods (CPG) categories. It’s not so much players like Amazon are doing this but how and why they’re doing this that should ring some alarm bells with brands.

The ultimate bait and switch

Global ecommerce giants like Amazon and, increasingly, local Southeast Asian players like Lazada and MatahariMall are offering perks to entice brands to open stores and sell through their platforms. This strategy resembles Ladies Night at clubs, where women are offered free drinks to indirectly lure men, who, more often than not, end up with a headache, alone and having burnt a hole in their pocket at the end of the night.

With aggressive promotions and subsidies from their hosts, brands often see quick short-term gains in online sales. The extreme example here is 11.11, a man-made online shopping festival during which retailers compete in the Discount Olympics. Obviously, brands benefit from spikes in sales but little do they know that they’re actually selling their souls in the long-term. It’s like crack, it makes you feel great for a while but sooner or later it’s hollowing out your body.

With the massive amounts of data generated on a day-to-day basis, these ecommerce platforms can easily identify consumer trends, such as best selling products and categories beyond what brands are able to see themselves. This data is then leveraged by retailers to develop and introduce their own private label brands to compete with the brands they partnered with in the first place.

Once launched, these platforms could favor their own white-label brands by giving them more visibility through favorable product placements as well as top rankings on internal search result pages.

The bigger picture

Players like Amazon and Alibaba’s Tmall aren’t really traditional ecommerce retailers. Their main objective is to use competitive pricing, often subsidized, on retail products to acquire more and more users, which they then monetize through other means such as Amazon Prime subscription fees for Amazon and onsite advertising and Alipay transaction fees for Tmall.

Amazon’s new CPG brands like Happy Belly and Mama Bear are only available to Prime members in a move to incentivize joining its $99-a-year unlimited shipping program that’s fueling Amazon’s retail growth behind the scenes.

In a post-Alibaba acquisition world, ecommerce power-players like Lazada could potentially increase awareness of their own private label brands through better placements on their marketplace, eventually forcing other brands to pay more for advertising to rank higher and get traffic.

With private labels, Amazon and the likes of Lazada also have more “room” to play in terms of pricing, allowing them to maintain sustainable low prices, keep driving more users and spinning the flywheel.

Strategies for brands

Brands like P&G, Unilever and Nestle should look at ecommerce marketplaces as a relatively easy way to test selling online but in the long-term, brands are arguably better off selling direct-to-consumer where they have full control of the brand image, customer experience and, most importantly, user data.

A case in point is Coach. The luxury brand was one of the first brands to set up shop on Tmall in China but recently closed down its official flagship store, leaving the brand with only a brand.com and WeChat presence. Many luxury brands have expressed concerns about the mass-market image of some of the bigger marketplaces.

Brands don’t have to pick between marketplace and brand.com only. Some brands like L’Oreal have adopted a multi-channel approach where their marketplace presence generates sales for their more mass and lower price point items whereas their brand.com site sustains long-tail and higher average order value sales.

At the end of the day, marketplaces are a great way for brands to jump into ecommerce. However, brands should be aware of the pros and cons and especially long-term implications of such a decision.

BY SHEJI HO