Experiencing a New Shopping Approach with the Next Generation of Shoppers

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Gone were the days when millennials are the center of attention.

Projected to make up 40% of the global consumer base by 2020, Gen Z, those who were born between 1995 and 2010, is the new focus for brands around the world to market to. In Southeast Asia, this generation accounts for 277 million of the region’s 660 million population, with over 50% spending more than $30 a month on online shopping.

In his book, ‘The Gen Z Frequency: How Brands Tune In and Build Credibility’, Gregg L. Witt’s highlights the needs for brands to look beyond the confines of traditional segmentation and focus on cultivating relationships when targeting the consumers from this cohort as they are driven by sincerity and authenticity from brands and its marketing tactics.

What makes them tick?

Growing up with ready access to the Internet doesn’t make Gen Z be more inclined to do online shopping as the connectivity of it all also make them more impatient. They want what they want when they want it.

However, access to smartphones and the Internet do keep them well informed and they care more about the end-to-end brand experience, especially one that have close ties with their social values.

Being digital-natives, this generation is more attuned to technological development and constantly craving new experiences the technology can provide for their shopping journeys such as voice and visual search. The latter part is especially popular when paired with social media, another influential aspect in the life of Gen-Z. 33% of them said they’ve made a purchase after seeing the production social media.

Snap’s Eagle feature that sends users to Amazon’s app or site to buy the product they scan; TechCrunch

“Because they came of age with online shopping and branded social media campaigns, they have even higher expectations for digital shopping experiences,” – Forbes

Platforms like Facebook and Instagram are already capitalizing on their users. Facebook Marketplace already has 800 million users on its platform, making it one of the biggest competitors to existing marketplaces and increasingly important for brands to turn their social media fan page into a sales channel.

It’s about the experience

In Southeast Asia, it’s increasingly common to see ecommerce players and brands employ more creative tactics in the hope to engage their youngest audience.

Taking a page out of Alibaba’s book, Lazada went all out for their 7th birthday celebration, dubbed as the Lazada Super Party, with the performance from 2019 Grammy winner Dua Lipa and several local celebrities to create a “shoppertainment” experience for their shoppers across the six markets via live-streaming.

Gamification is also a popular strategy used by companies to engage consumers from this generation. From ecommerce players like Lazada, Shopee, and Qoo10, as well as ride-hailing app Go-Jek, they’re all employed in-app games to provide a more interactive way for their consumers to earn rebates and points to shop on the platforms.

The entertainment features e-marketplaces across the region introduced to enhance the in-app experience

Meanwhile, cosmetics brand L’Oreal partners with Watsons to introduce an in-app virtual make-up testing service on Watsons’ mobile application across Asia. The feature lets consumers create their own looks, capture it in photos and videos, then ordered the products they use to create the looks.

These experiences are only some of the examples of a unique selling proposition that can attract this generation and it’s important for brands to be more flexible in trying something new in order to appeal to the consumers. Every generation presents a different challenge for brands to stay relevant and with the authenticity the Gen-Z expects from brands, this generation may take you on the experience of a lifetime.

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8 Trends That Will Shape Southeast Asia Ecommerce in 2019

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One hundred two billion dollars. That’s how much the value of ecommerce in Southeast Asia is estimated to exceed by 2025.

The latest e-Conomy of Southeast Asia report by Google and Singapore-based Temasek confirmed the growing confidence among investors in the region. Startups raised $9.1 billion in the first half of last year, almost as much as throughout the whole of 2017.

2018 was dubbed as the year of ecommerce for the region, so what can we expect in 2019? We speak to industry leaders to discover the anticipated trends for online retailers and brands in Southeast Asia.

1. Brands Shift Their Focus from Data Gathering to Data Utilization

The biggest differentiator between online and offline retail is the ability to track, collect, monitor, and manage information, all in real time.

Through online channels, brands are able to access customer data through chats, social media, and their own websites. This information can be used to devise online strategies. Globally, 73% of brands plan to allocate their ecommerce budget on data & analytics services in 2019.

However, despite the general agreement of its importance, many brands still have no concept of how to utilize data to their advantage.

“Even today, not all retailers have embraced data fully to the point where they think of themselves as data companies, and this might be why many companies are suffering.” Harvard Business School Professor Srikant M. Datar.

Data collection is easy but having and optimizing the analytics capability to use it is a completely different ball game.

A survey by ecommerceIQ identified data analysis as one of the most difficult skills to find among the digital talents in Southeast Asia. Brands are constantly searching for data aggregators to consolidate information into one place for convenient retrieval and use to target, retarget, and personalize products and services.

Reagan Chai, Head of Regional Business Intelligence and Business Development at Shopee told ecommerceIQ that data acquisition enables the company to map out and optimize buyer and seller user experience while pre-empting customer demand and anticipating future potential. The company has seen an increase in website traffic in the past year that even surpasses the other regional players.

In China, Alibaba and JD.com have taken this a step further by utilizes the data gathered online to improve inventories and experiences at their physical stores. Alibaba Chief Marketing Officer, Chris Tung said the company wants to help brands find the right consumers by tracking them throughout Alibaba’s system.

“We’re finding all data that has to do with people, their behavior, what they like, what they buy and binding this online data to real people,” concluded Chris.

Seeing the need, regional brand ecommerce enabler aCommerce launched a data analytics platform BrandIQ last year to enhance their capabilities as a data partner to help brands centralize their customer data and offer customized products or services to each target group.

The capabilities of BrandIQ that aim to enhance brands’ performance on online marketplace; BrandIQ

This leaves brands with two options: find an economical way to utilize the data or continue looking for a needle in a haystack.

2. Social Commerce Channels are Brands’ New Sales Outlets

Social commerce in this region boomed before the rise of ecommerce as we know now.

Facebook groups have long established as an online space where people connect to buy and sell goods, even before the launched of Marketplace feature. The social media’s rapid growth in Southeast Asia is propelled by mobile adoption and smartphone, where 90% of the online population access the internet via smartphones. For some, Facebook even defines the internet itself.

With multitudes of potential customers gathered in social media platforms, brands naturally espied alternative sales channels. Following Facebook’s footsteps, social platforms like Instagram and Pinterest have also developed their own shoppable features.

“Brands will miss out if they don’t have a social media presence. The best way to get feedback from consumers is by having a direct conversation,” Deb Liu, Vice President, Facebook Marketplace told Forbes.

LINE recently acquired a social commerce management startup Sellsuki in Thailand, where it has the second biggest user base, to build a strong foundation for its ecommerce business. The company has also formed a joint venture with three local banks to offer personalized loans to SMEs.

A few big brands like L’Oreal have already equipped their social media page with ‘Shop’ feature that allows consumers to purchase the order directly on the page and it’s only a matter of time before more brands activate the platforms as one their sales channels and remove another layer between them and the consumers.

Consumers can purchase L’Oreal products on their Facebook page assisted through the Messenger app until the checking out process; L’Oreal Thailand.

3. E-Marketplaces Launch New Services to Differentiate

Looking at the successful existing ecommerce players in more developed markets, one key success factor they share is the various services rolled out on their fully-controlled supply chain.

JD.com’s investment to the development of their own supply chain allows them to scale their technology and offer Retail-as-a-Service proposition to help other retailers or brands sell online. Alibaba is unrivaled on its extensive ecosystem beyond commerce, including a logistics network Cainiao, a payment firm Ant Financial, not to mention its recent foray into the entertainment industry.

The same practice has infiltrated down to Southeast Asia. Lazada has strengthened its logistics arm FBL (Fulfilled by Lazada) post the acquisition, and although no concrete plans have been disclosed, Shopee has expressed the intention to build its own logistics network.

Singapore’s Qoo10 is set to launch its blockchain-based ecommerce site QuuBee this year, leveraging the blockchain technology to eliminate the transaction and listing fee which in turn increase the retailers’ profit margin and make a more sustainable commerce approach.

In Indonesia, Tokopedia is set to offer “Infrastructure-As-a-Service” with the fresh $1.1 billion funding. They also plan to use AI for customer care services and to run credit checks on merchants seeking loans to expand their businesses.

The practice is not exclusively done by the general e-marketplaces. Fashion e-marketplace Zilingo scored $226 million in funding due to their new focus to build a network of fashion supply chain that anyone, small merchants or big retailers, can tap into.

“It’s imperative for us to build products that introduce machine learning and data science effectively to SMEs while also being easy to use, get adopted and scale quickly. We’re re-wiring the entire supply chain with that lens so that we can add the most value,” revealed Zilingo CTO Dhruv Kapoor to TechCrunch.

Facebook is also showing more intention to jump into the bandwagon that is the region’s ecommerce. The social network has launched Marketplace feature in Thailand and Singapore without much fanfare, but the recent partnership with Kasikorn Bank in Thailand to allow in-app payment feature might be the start of the company’s effort to bulk up its commerce capabilities and cater to those that utilized the platform for their business.

Facebook partners with Thailand’s Kasikorn Bank to enable transfers and card payments on chats from Facebook Messenger; Facebook

 

In a bid to recruit more brands to sell on their platforms, we anticipate that e-marketplaces will continue to go head-to-head with each other through new services, acquisitions, and partnerships. Ready to burn more cash to win in this battle, e-marketplaces?

4. Brands to Reinforce Reviews and Fund User-Generated Content to Win Ecommerce Consumers

E-marketplaces in Southeast Asia has been upscaling and building add-ons which provide consumers with the utmost convenience. The search for better technology and assistance for the consumers is constant and never-ending.

Lazada introduces AI-powered image search feature onto its platform which allows shoppers to take a picture of an item and the platform will suggest similar items available; LiveatPC

Online consumers begin their online purchasing journeys by searching for product information or reading reviews, usually on the e-marketplace platforms, before making their purchase decision. They are looking for real opinions and user-generated reviews to validate the products.

The habit of leaving product reviews on ecommerce platform is not as common in Southeast Asia as it is in the US — Amazon even have dedicated page for top reviewers — and when they do, the reviews usually left little information about the product and more about the other aspect of the purchase (i.e. delivery time, packaging, etc).

Platforms like ReviewIQ are used by brands to increase their ratings and reviews engagement on their e-marketplace listings to help boost consumers make their decision. While the use of chatbots is an increasingly popular solution to help smooth the online customer experience, it’s more suitable for generic questions such as “where is my order?” or “is this product available?” instead of personalised questions such as “will this lipstick look good on a yellow-undertone skin?”.

Community-crowd model like one that’s popular with travel platforms such as Airbnb might also be suitable for ecommerce in the region to help consumers get passed their apprehension with online shopping — something that Edouard Steinert, aCommerce Thailand’s Director of Channel Management, is investigating to help the company’s clients as this model has shown to save time, increase results, and keep costs low.

“Consumers today want to hear genuine feedback and reviews about a product and become more averse to hard-sell methods. [User-generated] Reviews, especially from people who share the same passion with them, proved to drive better conversion for the brand,” added Edouard Steinert.

5. Brands Employ Direct-to-Consumer strategies to Acquire Direct Consumer Data

89% of companies are now competing mostly on a customer experience playing field and the Direct-to-Consumer (DTC) approach is becoming more important for brands as it allows them to gain insights into their end users and anticipate their needs.

One trend observed among brands to promote DTC is ecommerce subscription. From a consumer perspective, subscription offers a convenient, personalized, and often cheaper way to buy what they need. For brands, it’s a subtle method to create customer loyalty in the digital landscape.

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

“They may have dropped out of the subscription but not the brand. They still buy capsules from different channels; ecommerce website, online marketplaces, and supermarkets. A subscription strategy is not just a long-term consumption enabler but also a consumer acquisition channel for the whole brand,” Bhuree Ackarapolpanich, Brand Director & Digital Expert at Nescafé Dolce Gusto.

aCommerce’s Regional Director of Project Management, Mandy Arbilo said that e-sampling is a popular strategy employed by brands to evaluate the demand, especially ecommerce.

While normal sampling techniques used by offline retailers are expensive, e-sampling saves brands up to 40% as well as providing essentials customer data.

Mars Petcare is one of the e-sampling pioneers for aCommerce. The campaign prompted up to 25% of pet owners to try Pedigree as the main meal; aCommerce

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

6. 2019 Will Finally see Regulation of Ecommerce across the Region

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

News of the implementation of ecommerce tax regulations in Southeast Asian countries has been floating around since the beginning of last year but nothing concrete has as yet materialized.

A couple of months ago, Economic Ministers from the Association of Southeast Asian Nations (ASEAN) signed an agreement to facilitate cross-border ecommerce transactions within the region.

However, while nothing has written in stone, predictions abound concerning the impacts of ecommerce tax on imported goods into the region. In Indonesia and Thailand, ecommerce tax is predicted to bolster the growth of social commerce because, unlike marketplaces, they are uncontrolled.

“If tax regulations restrict ecommerce platforms, making selling in Bukalapak complicated, there will be an exodus of people who prefer selling on Instagram and Facebook. These platforms are uncontrolled and not chased for tax because they sell through the back door,” Bukalapak co-founder and Chief Financial Officer Muhamad Fajrin Rasyid.

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

A snapshot of the state of ecommerce tax regulations across six major Southeast Asian markets; ecommerceIQ

Looking at another high-potential ecommerce market, India introduces the new e-marketplace laws that indicate the prohibition of marketplace “owners” to sell products on their own marketplace through vendor entities in which they have an equity interest. It also prevents marketplaces to make deals with sellers that grants the marketplace exclusivity rights on the product. Could we see such laws be applied in Southeast Asia?

Regardless, brands will have very little influence on how the new tax policies take root but they will be behooved to anticipate the ruling and adjust online strategy accordingly to mitigate the impact of a shift in customer behavior. This ASEAN agreement will encourage more local entrepreneurs to create new products and venture online to access a larger and more diverse market. Brands will now need to be nimble and innovative to adapt to local nuances and preferences.

7. Grab and Go-Jek Challenge Logistics Providers to Capture Ecommerce and Online Food Delivery

Since Uber’s exit last March, Grab monopoly in countries like Thailand, the Philippines, and Malaysia has led to complaints about services and prices increased which resulted in protests from consumers and fines from governments which hit the headlines of the Filipino newspapers and Singaporean watchdogs.

But with the recent regional expansion from Indonesia’s Go-Jek, the competition between the two will only get fiercer. Go-Jek has successfully carved its existence in Vietnam, Singapore, and Thailand last year alone. In addition, Grab’s competitor in Malaysia, Dacsee, has also expressed the plan of expanding to Thailand.

Both companies are not racing to be the best ride-hailing providers, they’re aiming for something much bigger; super apps. Go-Jek has secured $1 billion funds from Google, Tencent, and JD.com in part of their plan to raise $2 billion for this venture. Meanwhile, Grab recently nabbed $200 million investment from Thailand’s Central Group, boosting their valuation to 11 billion to date.

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

Market size of the ride-hailing industry in Southeast Asia; e-Conomy SEA 2018 Report by Google and Temasek

“We will be expanding our GrabFood and delivery business and deepening our relationships with restaurant merchants and key partners in some markets,” said Grab’s head of regional operations Russell Cohen.

Same-day delivery providers are going to feel more competition next year. The impact of Grab and Go-Jek on market vibes will definitely raise the bar for the logistics and delivery sector.

8. Brands and Retailers will Double Down on Omnichannel is Southeast Asia’s Preference over Pure-Play Ecommerce

The omnichannel shopping experience is not a new concept, but companies do have diverse interpretations of the concept. Headlines revealed that online retail behemoths, such as Amazon and Alibaba, are moving into physical retail.

The main reason why Alibaba ventured out of online space reflects its determination to solve core problems of the shopping experience, such as scattered operations and lack of payment transparency.

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

Inside JD.ID X Mart in Indonesia. It is JD.com’s first unmanned store outside of China and it is a demonstration of JD.com’s mission to implement RaaS; Food Navigator Asia

Pure-play ecommerce retailers and brands recognized drawbacks in online marketing channels with fragmented infrastructure and a limited pool of shoppers. They promoted offline as an attractive option to push sales growth.

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

In 2018, Pomelo opened 5 new outlets, embarking away from Bangkok’s prime shopping areas to central business districts (CBDs) like Asoke and residential areas of Bangna. Meanwhile, Love, Bonito has 17 retail outlets spread across Singapore, Malaysia, Indonesia, and Cambodia.

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

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

Updated (28 Feb 2019): Shopee Thailand does not have a solid plan to build its own logistics network yet. The comment was mentioned briefly in the interview with Bangkok Post which was made a focal point by the media.
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Earning Back Its Spot: Offline Stores Makes a Comeback as RaaS Strategy Redefines Retail

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What does the FMCG giant Unilever have in common with grocery retailer The Kroger and a luxury watch brand Audemars Piguet?

The answer is Retail-as-a-Service (RaaS).

Unilever worked with JD.com to distribute goods to both online and physical stores in China, while Audemars Piguet launched its pop-up store on WeChat. In the US, food store The Kroger partnered with Microsoft to increase the level of personalization and productivity in their stores.

The term ‘RaaS’ has clamoring over the headlines over the years, but what exactly is Retail-as-a-Service?

What Is Retail-as-a-Service and Why Is It Becoming a Trend?

An analyst from Kantar Retail, Stephen Mader, defines the Retail-as-a-Service model as when “retailers build open platforms and toolkits that enable brands and third-party sellers to connect with shoppers directly through a physical store”.

Having an abundance of data in hands, these retailers bundle up services, customer data, technology, and its expertise to offer brands a service.

The emergence of ecommerce has reduced the in-store retail visits by billions in the US and part of the reason is because the experience offered by a traditional physical store is no longer enough for the savvy consumers. Besides shopping for products, consumers are slowly and surely seeking an experience when they’re out visiting the store.

“Nearly 3,800 stores are expected to close their doors by year’s end, and the brands that do survive will have done so by creating engrossing experiences.”

In order for the brands to maximize the potential of offline stores effectively, they need to provide engaging experiences to keep the consumers hooked. For example, Sephora combined activities that are completely unrelated to making a purchase into its app, while Samsung’s pop-up store was set up to allows consumers test its technology and experience rather than to focus on sale.

The trend also drives the growth of RaaS platform startups that provide an easy, cost-effective solution to brands wanting to launch physical stores.

In the US, a “Retail as-a-Service” startup b8ta has helped retailers such as Macy’s, Lowe’s, and 15 other consumer brands to set up pop-up stores and physical shops, incorporating technologies and cutting-edge gimmicks to traditional physical retailers.

Chicago-based Leap recently secured $3 million in funding to offer an end-to-end service — that ranges from staffing, experiential design, tech integration, and day-to-day operations — to help digital brands to launch a brick-and-mortar store.

Meanwhile, Fourpost is focusing on providing a ready-to-use retail space for digital native brands looking to open a physical store in the US, lowering the barrier of entry in terms of both capital and time. Each of these companies is tackling the problems that usually came with setting up an offline store and elevate the consumer experience.

“If you shop in one of our stores, you will feel different because we have gone to such a great length to remove the idea of your visit being about buying a product.” – Vibhu Norby, the co-founder and CEO of b8ta.

With over 70 locations, B8ta’s store allows brands to place their merchants and train shop assistants while gaining revenue from space rental and subscription fees from brands; Retail Dive

JD.com spurns the growth of RaaS in Asia

Chinese ecommerce giant JD.com is a big advocate of the strategy.

One of JD.com’s latest initiative to establish RaaS is the partnership with Chinese retailer Better Life. JD.com was also one of the first retailers to develop a mini ecommerce program on WeChat. To date, JD.com has developed and bundled up its marketing, logistics, financial services, and big data as a service and leverage these capabilities to help over 2,000 brands and its merchants.

JD.com also partnered with Google to develop next-generation retail infrastructure solutions by combining JD.com’s supply chain and logistics expertise and Google’s technology strengths.

All of these were the result of JD.com’s mission to go forward by scaling its technology in order to outsource its developments to third-party retailers around the world. Chen Zhang, Chief Technology Officer at JD.com says that making money is not their priority at this stage as he believes that:

“With Scalability, comes profit”

Taking the burgeoning amount of investment coming from China to the region into consideration, it’s only a matter of time for RaaS to kick off in Southeast Asia.

In Indonesia, JD.com has already started the concept on its unmanned store JD.ID X Mart. The store collected data that can be used to understand shopping behavior and optimize inventory, product displays, and other aspects of store management and marketing.

With JD.com’s joint-venture in Thailand, it’s fair to assume that the market will be the next destination for the innovation. And although Alibaba’s Lazada has been quiet on the front, looking at the fierce competition between the companies in the mainland, it seems like a matter of time until Alibaba does so.

Inside JD.ID X Mart in Indonesia. It is JD.com’s first unmanned store outside of China and it is a demonstration of JD.com’s mission to implement RaaS; Pandaily

With the ‘offline is the new online’ trend carried over to 2019, we can expect to see more traditional retailers offering their service and retail space to help online brands expanding their reach and getting more foot traffic in return.

A win-win strategy for the ever-changing landscape of retail.

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BrandIQ: How Brands Like Beiersdorf, L’Oreal and Kimberly Clark “Out-Data” and Out-Smart Their Competitors

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The ecommerce world today is all about data. It’s not a nice-to-have but rather a must-have. Why? Because the richer the data, the better the decision brands make.

Collecting data is easy when brands have their own ecommerce website or what we call 1st party data. Some channel partners do share their data to a certain extent, that’s called 2nd party data. The 3rd party data, which is a set of data collected from sources by a company that isn’t directly involved in the transaction, will help brands drive successful action and increase their ecommerce sales.

Types of data in today’s ecommerce world; BrandIQ

Brands in Southeast Asia are accustomed to ‘surveyed data’, but have a limited amount of data from online marketplaces, so much so that it is insufficient for them to craft a successful online marketplace strategy.

BrandIQ is envisioned to provide brands in Southeast Asia with measurable data and actionable insights for their online commerce strategy. Using sophisticated ecommerce data collection and proprietary machine learning technologies, BrandIQ will empower brands to monitor online merchandise, analyze competitors, offer better promotions, understand consumer sentiments, and improve the overall ecommerce experience.

When 4Ps is not enough. BrandIQ Analytics will be able to provide brands the data and insights across 9Ps; BrandIQ

At Okura Prestige Bangkok, three brands – Beiersdorf, Kimberly Clark, and L’Oreal, were brought together by BrandIQ to discuss and share their experience about the growing influence of data usage and user-generated reviews.

From left: aCommerce’s Group Director of Product, Poonpat Wattanavinit as the moderator, and panelists: Praponsak Kumpolpun, Senior Ecommerce Manager, L’Oreal CPD Thailand, Aviroot Prasitnarit, Sales Director – Kimberly Clark Thailand, and Phunnapa, Limtansakul, Senior Ecommerce Manager SEA – Beiersdorf Thailand

This is what was discussed:

Keep your Friends Close, Your Enemy Closer

By having an understanding of your competitor’s movement, brands can gain a significant advantage to help guide its own pricing and marketing strategy.

Tracking your competitor can be easily done offline, especially the price. Brands can simply send an intern to take note of the price. In the country’s FMCG industry, prices change every two weeks. Online channels? Every minute.

“Unlike offline, monitoring our competitors’ online movement is extremely challenging. Promotions are constantly changing and without a proper tool, it is impossible for a human to keep up,” says Aviroot Prasitnarit, Sales, Kimberly Clark. “My team once woke up to a surprise that our competitor could perform really well overnight because of its flash sales at 10 PM. None of my team members was standing by to track that.”

Being in the competitive FMCG industry, Kimberly Clark aims for a double-digit growth. Therefore, taking up more market share from its competitor is very important to Aviroot. So when it comes to price, Aviroot suggests keeping friends close, enemies closer.

In addition to direct competitors, brands should also be aware that grey sellers on the online marketplace can be a threat. According to BrandIQ, 35% of e-marketplace sales happen through grey sellers. This should raise a concern among brands because not only can grey sellers take away your share on an online marketplace, brands will not be able to create a unified brand experience.

Because at the end of the day, consumers will not differentiate if the sellers are grey, authorized or official. They will perceive it as one brand.

The New Rising Star: Nano Influencer

Besides price, reviews and ratings are also important for L’Oreal Thailand where the cosmetic industry is a “Red Hot Ocean”, according to Praponsak Kumpolpun, Senior eCommerce Manager, L’Oreal CPD Thailand.

“Thailand has many strong local beauty brands that are 40-50% cheaper than L’Oreal with roughly the same quality. So monitoring 4Ps (Price, Product, People, Place) is not enough.”

BrandIQ also found that the FMCG category has almost 70,000 reviews with most comments regarding the quality and speed of delivery. This is because FMCG has a “need it now” characteristic, making consumers very sensitive to delivery lead-time.

The number of reviews versus % of reviews that are about delivery across the categories on Thailand’s leading online marketplace; BrandIQ

Aviroot also added that a survey conducted by his team revealed that commercials on televisions are not convincing for consumers today. 80% of respondents also say they’d rather listen to recommendations of their friends and family. This is where the concept of nano influencers comes in.

Influencer marketing is not new in Southeast Asia. Around 40% of companies’ social media advertising spending has been allocated to influencer marketing in Thailand, up from 15% three years ago. Thailand, being the home to 57 million active Internet users, consumers are fairly familiar with social media. Seeing the success of established influencers and bloggers in the industry, many could not help but aspire to be one, in hope to enjoy the perks brands offer; overseas trips, free products, and a large amount of side income.

The trend to become influencers made the social web of today home to a millennial digital entrepreneurial society. Brands make a good use of it by handpicking matured ambassadors, ready to promote their values, from the army of new social influencers.

“Whether they are macro, micro, nano, influencers play a big part in convincing the digital consumers. Knowing that Nano influencer is new to the market, I think it is a big opportunity that brands should start considering.” – Phunnapa, Limtansakul, Senior Ecommerce Manager SEA – Beiersdorf Thailand.

What Can Brands Take Away from This?

Time and again, brands are constantly curious about two things: what is my competitor doing? How do my consumers feel? As ecommerce and social media become a bigger part of consumers’ daily lives, brands are looking for ways to gather data and gain insights from platforms such as Lazada and Shopee as a rich and dynamic data set.

The metrics that BrandIQ will be able to offer to brands.

And the metrics that brands should start paying more attention to, tools like BrandIQ will be able to track and analyze consumer behavior and sentiment on marketplaces, in addition to tracking their own performance as well as benchmarking against competitors selling similar products.

Interested in monitoring your competitor? Get BrandIQ’s free trial here.

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Indonesian Moms are Ready to Shop Online, are Brands Ready to Sell?

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As the ecommerce trend continues in Southeast Asia, a wave of the new generation of moms is joining the party. These moms are relying more and more on online to help them embrace their role as a parent.

Millennial moms expressed their dependency on online for their shopping journey, especially for the Mom & Baby category, during an ecommerceIQ panel session in Jakarta earlier this month.

ecommerceIQ surveyed 1,144 Indonesian moms with results showing that 66% have attempted to purchase Mom & Baby products online. Shopee was voted as the most popular e-marketplace for this category, followed by Lazada and Tokopedia.

Mom & Baby Indonesia Online Shoppers

aCommerce Group CMO Sheji Ho on stage presenting the findings from ecommerceIQ’s report: Digital Profile Mom & Baby Shoppers in Indonesia.

Indonesian actress and Miss Universe 2007 finalist Agni Pratishta was one of the panelists at the event. She agreed with the findings and also mentioned that most women visit numerous websites to find the best deals.

“I have a group chat with other moms where we exchange information regarding which e-marketplace is having a sale right now,” admitted Agni.

Agni was joined in the panel session with the Head of Marketing Baby Care from Softex Indonesia, Wenny Damayanti, and aCommerce Group CMO Sheji Ho to shed light on the current landscape comprising Mom & Baby online shoppers in Indonesia.

What else did we discover from the event?

Panel session during ecommerceIQ event in Jakarta with Agni Pratistha (middle) and Wenny Damayanti (right).

Indonesian moms shop cautiously online

When Indonesian moms were asked about their favorite online shopping platforms, brand websites did not feature much in their answers, with only Mothercare Indonesia appearing on the radar at a score of 4%.

Digging deeper, the result is most likely related to the type of products they are more likely to buy online in this category. Following general ecommerce trends in the country, Baby Clothing (49%) ranked as the most popular product purchased online in this category, followed by Baby Gear (23%) and Toys (18%).

Mom & Baby Indonesia Online Shoppers

Top products purchased online in Mom & Baby category in Indonesia; ecommerceIQ Mom & Baby Customer Survey in Indonesia (2018)

Meanwhile, perishable goods like Baby Personal Care and Baby Food are less popular and the cause of it is rooted in the main reasons why Indonesian moms don’t shop for this category online.

Mom & Baby Indonesia Online Shoppers

Top reasons for consumers to not shop for Mom & Baby products online; ecommerceIQ Mom & Baby Customer Survey in Indonesia (2018)

More conviction is necessary for consumers to purchase perishable goods online; moms require full assurance of product quality, and one way to avoid buying counterfeit products in the e-marketplace is to purchase only from brands’ official online flagship stores.

The top three consumer-favorite platforms all benefit from their official brand-dedicated portal inside their platform.

Mom & Baby Indonesia Online Shoppers

Tokopedia’s dedicated page for brands’ official store; Tokopedia

The importance of word-of-mouth in the digital world

Brands should always take cues from its consumers to adjust and hone their retail strategy. These include instilling customer confidence to overcome the reservations mentioned above. Wenny revealed that internet habits of millennial mothers provided the driving force for Sweety’s shift to digital.

“These moms are constantly searching for information online. TV commercials alone are no longer sufficient. Modern day moms use the internet to talk to their friends, surf for product information and read customer reviews before deciding which products to buy. Sweety took these cues onboard and redefined its online strategy,” explained Wenny.

Sweety’s official flagship store is offering online exclusive offer on ShopeeMall Indonesia.

Product reviews are a key aspect for Indonesian moms to overcome the wariness of doing their shopping online, as seconded by Agni

“Reviews are the make or break point for me when I shop online. When I see a product in e-marketplace with no review, even if the price is right, I wouldn’t risk buying it most of the time.”

Unfortunately, leaving a product review is not a habit mastered by Southeast Asian consumers yet, especially compared to consumers in developed ecommerce market like the US. And most of the time, Southeast Asians are prone to leave only bad reviews as a way to express their dissatisfaction and to caution other consumers.

Brands must concentrate on encouraging satisfied consumers to be more proactive and do the same. Some brands have utilized user-generated content platforms like ReviewIQ to help with the problem. Nivea, for example, achieved an increase in the number of positive reviews with the help of ReviewIQ from real consumers for its flagship store on Lazada Thailand.

“At this stage, brands still need to incentivize satisfied consumers to help generate good, organic reviews,” says Sheji.

How should Mom & Baby brands go about online?

Sheji stresses the importance of brands understanding the nature of their products and their primary objective to determine the optimal online strategy.

“If your products fall into the luxury category, you might as well sell it on your brand website to retain the full control of your channel. However, this strategy requires you to invest extensively in bringing in traffic,” advised Sheji.

But having a website also means owning a proprietary media channel that can be used for marketing and educational purposes. Brands like Sweety and Frisian Flag, for example, use their sites to connect offline promotion with the online audience as well as equip consumers with detailed product information.

For most brands, however, if the objective is to diversify sales channels, then opening an official flagship store on an e-marketplace like Shopee or Lazada is sufficient and also easier to maintain, while providing access to a broader online consumer base.

Drawing on her extensive experience in promoting Sweety to e-marketplaces, Wenny opined that prioritizing e-marketplace sales avenues is paramount for success. Especially in Indonesia where consumers are presented with many options, and competition between e-marketplaces is high, brands often feel the needs to have ubiquitous footprints.

Wenny summed up, “Choosing the right e-marketplace is an important step in the online expansion. Selection must consider the available audience, while also ensuring that the e-marketplace’s infrastructure is compatible with the business.”

Get the full report of Digital Mom & Baby Shoppers Profile here.

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Understanding the Upcoming and Current Tax Regulations on Ecommerce in Southeast Asia

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Ecommerce has been snowballing for more than six years in Southeast Asia but yet only recently, was there any progressive movement in taxing digital transactions.

Government bodies in Thailand, Singapore and Indonesia understand the importance of taxes on ecommerce sales (products and services) in order to capture a piece of the fast growing segment and more importantly, level the playing field between its brick-and-mortar peers.

But implementing new tax regimes proves difficult given Southeast Asia’s “diverse and uncertain legal environment” explains Steven Sieker, head of Asia Pacific tax practice group.

Under existing taxation laws, only local players and not foreign companies across markets fall within local tax regimes.

“The main point is to try to tax multinational companies that are not registered in Thailand for their online business,” said Kanchirat Thaidamri, tax partner for Deloitte Thailand.

“Online is simply a reflection of what exists in the offline world: small stores don’t report all their taxes in the outside world” – Jason Ding, partner at Bain & Co, China

Below is a snapshot of the state of ecommerce tax regulations across six major APAC markets:

Ecommerce Tax in Indonesia

ecommerceIQ

In 2017, Finance Minister Sri Mulyani stated the government wanted to “level the playing field between businesses that operate online and those offline, which must add 10% Value Added Tax (VAT) to the price of goods purchased”. While the tax rate is still unknown, it is expected to be lower than 10%.

The ecommerce tax, when implemented, will cover four types of platforms: online marketplaces, classified ads, daily deals and online retail that operate in the local markets but will not be levied on sales through social networks (mainly Instagram and Facebook).

Impact? Bolster the growth of social commerce in Indonesia, a country where social media platform usage is one of the highest in the world and weaken incentive to sell on e-marketplaces like Tokopedia and Lazada. Applying a 10% VAT rate to the online sector would bring in approximately USD$1.34 billion in additional tax revenues.

The Indonesia Ecommerce Association (idEA) was discussing a 0.5% VAT from each marketplace seller at the beginning of the year with the Finance Ministry – nothing has been implemented.

“If the tax regulation restricts ecommerce platforms – making selling in Bukalapak complicated because of the tax – there will be an exodus of people who would prefer selling on Instagram and Facebook, which is uncontrolled and not chased for tax because they sell through the back door,” – Bukalapak co-founder and chief financial officer Muhamad Fajrin Rasyid.

Timeline for implementation? Public trial in 2019.

Ecommerce Tax in Thailand

ecommerceIQ
In July earlier this year, the Cabinet approved a proposal to collect 7% VAT from foreign ecommerce platforms deriving annual service income exceeding THB1.8 million (US$56,000). These businesses must sign up as operators under the VAT system to report to the Revenue Department.

The Nation reports the taxes apply to those selling goods and services on Internet platforms as well as the operators of Internet platforms such as Google, Amazon and Alibaba. Companies with an overseas presence and earning income from advertising/website space rental from Thailand are also subject to a 15% withholding tax.

Impact? Operators such as Facebook and Google could pass on the additional costs to its sellers and ad buyers, likewise with  JD Central, Lazada and Shopee customers. Smaller players could be deterred from doing ecommerce if the business cannot sustain these taxes. Currently, vendors outside of Thailand are liable for 7% VAT only if value exceeds THB 1,500 (USD$45.76).

Timeline for implementation? Government needs to forward the draft VAT bill to the Council of State (the government’s legal advisory body) before submitting to the National Legislative Assembly for a debate. Early 2019.

Ecommerce Tax in Philippines

ecommerceIQThe country is the only market out of the region with an ecommerce taxation. The 12% VAT on total value of online transactions of more than USD$37,310 came into effect in 2016 and is applicable to store owners as well. For transactions lower than the threshold, a 3% VAT is levied instead on online transactions.

Impact? Any person or entity who, in the course of trade or business, sells, exchanges, or leases goods or properties, or renders services, and any person who imports goods, is liable to VAT. The government has its own challenges enforcing these taxes on different online business models as shutting down websites only leads to another one being created under a different IP address.

Ecommerce Tax in Malaysia

ecommerceIQAs of late 2017, there is a mechanism under Malaysia’s current GST model that taxes online services provided by local companies to Malaysian consumers, but currently is not applicable to foreign service providers.

Impact? The implementation of the digital tax may mean that foreign service providers serving Malaysian consumers will be charged with tax. The service provider can pass on the tax to customers by adding it to existing prices.

Timeline for implementation? The country is likely to follow the steps of its close neighbour Singapore.

Ecommerce Tax in Singapore

ecommerceIQCurrently, any online purchase in Singapore under SGD$400 (USD$290.17) is exempt from GST. The government did not include ecommerce tax in the budget released in February 2018 but the Ministry of Finance (MOF) said “B2B imported services will be taxed via a reverse charge mechanism, while B2C imported services will be taxed through an overseas vendor registration model” according to the Strait Times.

Impact? Decrease in shopping overseas as prices could increase with the introduction of GST on ecommerce goods and services from overseas.

Timeline for implementation? While many thought the new GST would be implemented in the 2018 budget released February this year, the government has tabled a concrete tax for ecommerce until 2020. Starting January 1, 2020, consumers will pay GST when buying online services from overseas, which includes music, video streaming, apps, online subscriptions, and digital B2B services such as marketing/accounting).

Ecommerce Tax in Vietnam

ecommerceIQ

Vietnam is one of Southeast Asia’s most attractive and also nascent markets. Foreign ecommerce firms must have local representative office registered in Vietnam and pay VAT of 10%. Individual residents without an established ecommerce company in Vietnam will be subject to tax if they have annual sales revenue over USD$4,300. As of now, there isn’t heavy enforcement in place but there are plans for higher scrutiny by the National Assembly next year.

In November 2017, Vietnam’s government also released a proposal for all cross-border payments to be made through domestic gateways via the National Payment Corporation of Vietnam.

Impact? Not much concern in regards to Vietnam’s attractiveness as few companies have managed to ‘crack the local market’ and ecommerce contribution to total retail is still relatively small compared to other markets. The cross-border payments funnel will increase the tracking of tax liabilities by the National Payment Corporation of Vietnam.

Timeline for implementation? Late 2019.

Difficulties implementing an ecommerce tax in Southeast Asia

Apart from climbing over the layers of government and overcoming pressure from big corporates, and complaints from SMEs calling foul play, regulators also face the large task of enforcing such new reforms, especially concerning tax on digital services.

Products are easily tracked through physical movement in the country but services are intangible.

Axcelasia Inc Executive Chairman Dr. Veerinderjeet Singh shares: “The problem with foreign online companies is they will charge 6% GST on customers for the purchase and delivery [in Malaysia], but how will the Customs collect that amount when they don’t have offices in the country? How do you regulate that? And if they miss a few payments, how will you impose a penalty on them?”

Between now and 2020, when most implementations across Southeast Asia are expected to take root, Internet platforms and operators have little influence on the new tax policies but it’s the customers and the shift in their behaviour that will be largely impacted.

In the words of Senior Minister of State for Law and Finance Indranee Rajah, “keep shopping while you can”.

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