Brands in Southeast Asia are choosing leading marketplaces like Lazada and Shopee when trialing ecommerce, but most are still unaware of the intricacies of online channels. 

An often overlooked aspect to opening an official Shop-in-Shop (SiS) is the impact of customer reviews. Traditionally, brands have leveraged sources like Nielsen or focus groups to understand consumer behavior but one of the key advantages of an ecommerce store is the ability to analyze consumer sentiment right when it happens.

How much do product reviews really matter?

A 2017 survey by Podium shows that 93% of shoppers find reviews influential when buying online. 88% of consumers trust product reviews as much as a personal recommendation, and 72% say a positive review makes them trust an online business more.

An analysis of 57 million reviews and 35 billion product pages by the Buzzplant network found that increasing the volume of reviews has a tangible effect on your conversion, SEO, and product development.

“Any business owner knows that your most authentic and impactful advocate is a happy customer, and technology has made every customer’s voice extremely powerful,” says Eric Rea, CEO of Podium.

Source: Buzzplant

Impact on SEO

The volume and recurrence of product reviews has a direct correlation to search engine SEO. Moz found in 2017 that “Review Signals” affect up to 13% of how search engines rank results.

The factors that influence SEO include review quantity, review velocity, and review diversity.

In 2013, Google implemented the Hummingbird update, the most significant change to its search engine algorithm since 2001. The new code has far greater affinity for natural language processing and user intent as opposed to the earlier practice of ranking for keyword stuffing.

With Hummingbird, we can assume that product reviews that naturally feature conversational language are given higher search priority.  

Lazada incorporates quantity of reviews and average ratings directly into its Google schema markup. In layman’s terms, this means that consumers in Southeast Asia searching for products on Google will see product ratings and reviews directly in the results.

Lazada SKUs highlight average ratings and number of reviews directly in search results

The More “Helpful” the Review, the Higher the Ranking

We’ve demonstrated the tangible effect of product reviews on conversion and visibility but how many products do consumers read before purchasing?

According to a 2017 study by BrightLocal, 67% of customers read 4+ reviews, and 33% read 11+. Naturally, they’ll read the reviews that appear first on the product page – similar to how the first page of SEO results are the most lucrative.

How does Lazada sort reviews?

The first bifurcation Lazada applies is by splitting reviews into two categories: “Verified” and “Unverified”.

“Verified” reviews are those made by customers who have purchased the product in question and leave a review using the same account. “Unverified” reviews can be made by any visitor to the product page. The “Verified” reviews rank at the top, followed by the “Unverified” reviews.

Visitors to product pages can further “like” a product review by deeming it “helpful”. The most “helpful” reviews will rank at the top, meaning visitors to product pages are more likely to interact with “verified” and “helpful” reviews first.

Data analytics platform BrandIQ delved into the trend between review “helpfulness” and its star rating. By analyzing over 715,000 reviews across four Lazada country sites (ID, TH, PH, SG), it determined that, on average, lower ratings are deemed more “helpful” than higher ratings.

This inverse relationship is a critical reason for brands to pay close attention to its product reviews. Customers are far more likely to be reading negative reviews as their first 4+ rather than positive ones due to Lazada’s ranking algorithm.

What’s the possible recourse for brands?

After speaking with a Lazada support representative, there appears to be two underlying factors that cause the marketplace to take action on product reviews: the use of vulgar language or reviews that have no relevance to the product.

The first factor can be tackled relatively easily. Lazada itself has a quality assurance process to check each product review before it’s uploaded to the product page. However, the astronomical growth of reviews has made it inevitable for some to fall through the cracks. The week of 12-12 in 2017 garnered just over 34,000 product reviews alone.

The second factor is more complicated as they are evaluated on a case-by-case basis. Lazada’s technical team will entertain petitions to remove reviews that aren’t related to the product such as issues with delivery that stem from problems with the brand’s third party logistics partner.

To incentivize better service and product quality, Lazada provides a framework to incorporate product reviews into a store’s Seller Rating. This metric looks at the percentage of positive (4 or 5 stars) reviews compared to total reviews.

Lazada advertises Seller Rewards as a gift for high Seller Ratings: such brands will enjoy greater visibility of products in search as well as access to its promotional campaigns.

Lazada’s Seller Performance Metrics

What does this mean?

In essence, product reviews have multiple dimensions and a plethora of use cases. Not only are they taken into account by channels that drive traffic to your SiS, they can make or break a product’s conversion and directly affect your brand’s perceived trust.

Some brands are also leveraging reviews for digital marketing campaigns by incorporating them directly into the ad copy.

Different use cases for product reviews are emerging in digital marketing

Reviews are an under-utilised resource in Southeast Asia, but this might be on the cusp of changing. You could always hope a gem of a review goes viral, like this one:

You might recognize a signature Burberry trench coat because of its distinctive check pattern.

When Burberry first came to life in London in 1856, CEO & founder Thomas Burberry was, at the time, only 21 years of age. The brand focused solely on outdoor attire in its early days but quickly established a reputation for quality and longevity.

In 1879, Burberry received a patent for its ‘gabardine’ fabric – a water-resistant, breathable material that it would use for trench coats. The company went from strength to strength, opening a store in the upscale Haymarket area of London in 1891, designing its signature equestrian knight logo in 1901, and supplying outdoor attire to South Pole expeditioners in 1911.

Burberry’s popularity skyrocketed after its trench coats were used by British infantry forces during the First World War. An outpour of patriotism boosted its brand identity with members of the public clamoring to buy the products after the end of the war.

Further validation came in the form of high profile celebrity endorsements by movie stars such as Humphrey Bogart in Casablanca, Audrey Hepburn in Breakfast at Tiffany’s, and Peter Sellers in Pink Panther.

The UK luxury brand is best known for its sharp coats and jackets but has also ventured out in designing shoes, scarves, bags, & other accessories. By the mid-1980s as a result of spreading itself too thin and chasing short-term profitability goals, the brand started to stagnate. What happened?

The makings of a crisis

The 70s and 80s were rewarding for Burberry in terms of its bottom line. It signed licensing agreements with many global manufacturers to design suits, trousers, shirts, and accessories and distributed them via independent retailers as well as its own stores. The effect of this expansion i.e. higher operating profits was felt well into the 1990s.

But the licensing partnerships also had an unintended effect: counterfeit products flooded markets across the world, particularly in Asia, causing price disparities that existed even in original products.

Western countries were subjected to higher rates and items were often rerouted back to markets; for example, cheaper bags in Asia were exported back to Europe resulting in a blow to its image.

Burberry had severely diluted the power of its brand by adopting a mass-market route. Once associated with list-A celebrities and daring thrill seekers, Burberry had rapidly lost its aura of glitz and glam.

Shockingly, the elitist brand was now equated with thuggery, chicanery, and hooliganism; adopted en-masse by ‘Chavs’ – a pejorative British term used to describe degenerates and lowlifes. Bouncers would turn away people wearing Burberry outfits as it was assumed they would cause trouble once inside.

Shudder.

Turnaround

“Burberry was not able to identify its target group of consumers because of its uneven distribution and licensing policies in different countries of operation,” says Arittra Basu, business development manager at Westin Hotels.

The long road to redemption started in the late 1990s after Burberry hired Rosie Marie Bravo to steer the ship. She immediately tried to stem the decline by reducing the company’s footprint in Asia, ending price disparities, and appointing a new creative head to reestablish the brand’s core values.

In 2006, Angela Ahrendts was appointed the new CEO and began a journey leading the company to reemerge as a force to be reckoned with.

Initially, there were subtle design changes. The check pattern was scaled back and started to appear less and less on merchandise. Stringent measures were adopted to crackdown on counterfeit items and the licensing agreements were gradually rescinded to centralize design and operations under one roof.

But the most important decision made by Ahrendts, along with Chief Creative Officer Christopher Bailey was the declaration of their vision to see Burberry as the world’s first fully digital luxury company.

The brand had, in their opinion, appealed to an older clientele for far too long. It was time to catch the attention of suave and fashionable millennials.

Digital would be central to the brand’s way of thinking and customers would be treated to the same experience whether online or in-store.

One of the most popular campaigns Burberry launched was the ‘Art of the Trench’, a unique play on user-generated content to bring consumers at the forefront.

Art of the Trench. Photo credit: Creativity Online

This was a standalone website where customers were encouraged to upload photos of themselves wearing their trench coats. They were featured on the main page for 15 minutes and customers could share these photos on social media feeds. There was also an option to click on a product and be redirected to Burberry’s main site to purchase it.

The campaign was a resounding success. In 2015, it was reported to have gained almost 25 million pageviews since launch.

Another hugely popular campaign was initiated to promote Burberry Kisses, a lipstick brand launched by the company. For this, it partnered with Google to enable users to send personal messages, sealed with a virtual kiss.

Users from 13,000 cities sent these virtual kisses within the first 10 days of launch.

In 2012, Burberry tried to bridge the gap between the online and offline shopping experience via its Regent Street London store. The store featured huge screens where catwalk shows around the world could be viewed live and the individual products were available for instant purchase.

“Burberry Regent Street brings our digital world to life in a physical space for the first time, where customers can experience every facet of the brand through immersive multimedia content exactly as they do online,” said Burberry CEO Angela Ahrendts. “Walking through the doors is just like walking into our website.”

Not only can shoppers buy online from Burberry’s digital properties, they can also choose to pick up in-store or have a sales associate order from the website for them while visiting an outlet. Burberry’s also experimented with flash commerce features via Twitter as well as allowing users in China to order via WeChat.

In China Burberry took the unusual route of opening a store on Tmall; a strategy consistently avoided by upscale brands. The move was meant to counter the growing grey market for its goods as well as embrace the Chinese penchant for online shopping.

Its savvy use of social media has also engendered the growth of a loyal community. The brand has embraced Snapchat to provide peeks into upcoming lines and fashion shows. Burberry’s YouTube channel has over 300,000 subscribers and hundreds of videos that not only showcase trench coats, but also includes makeup tutorials, music jams, and other engaging content.

And the result of all of this? In 2011 Business Insider placed Burberry in the top 10 brands of the world with a growth percentage of 86% as judged by an estimate of its brand value. That far outstripped any other company on the list.

Burberry shares, which languished in the $200 range in 2002 now trade at $1,539.

Of course, challenges persist. Weakening demand for luxury brands hurt Burberry’s profitability last year with the CEO saying that the product range “needs to be refreshed”.

But if it continues with its sharp focus on digital and out-of-the-box thinking, it should be able to weather the relative storm.

“Burberry’s digital strategy […] has so far not only put it at the top of the fashion luxury category but among top players across industries,” wrote Digiday.

With almost 4,300 store locations in 69 markets across the world, fast fashion retailer H&M is a quintessential example of a brand that constantly strives to provide high-quality products at affordable prices.

It’s come a long way since its humble origins.

The first store of what would eventually be known as H&M was opened by Swedish entrepreneur Erling Persson in 1947, after inspiration during a trip to New York. Initially, the store catered to womenswear alone; and was called Hennes, Swedish for ‘Hers’.’

The addition of menswear came after Hennes acquired Stockholm-based retailer Mauritz Widforss in 1968. Stores were rebranded as Hennes & Mauritz with international expansion to Denmark, Norway, U.K, and Switzerland starting the next year.

The acronym H&M was adopted as the firm’s official name after it went public in 1970.

Photo credit: Wikimedia

Unprecedented expansion

H&M has grown by an average of 20% year-on-year in revenue since the 1980s. Part of the reason for this ferocious germination has been its ability to unearth the latest trends and sense what its target consumers aspire for.

Like other fast fashion companies, the product pipeline is quickly replenished as its marketing and design teams work in unison to keep clothes, shoes, & accessories up to date.

But it’s not enough just to make products that people want to buy. Brand building involves striking a chord with your audience; a message that H&M has carefully crafted over time.

Its focus on sustainability as a major ethos for the brand has earned acclaim. Consumers can drop off unwanted garments (of any brand) to H&M stores globally, which will be recycled and used in future products.

H&M explains that the global ambition is to work towards a “sustainable fashion future”, where unwanted clothes are used for fresh textile fibers and ensure no garments wind up in landfills.

The drive towards sustainability, which has been embraced by everyone at the company – from the CEO to middle management – is an example of how the company has always sought to redefine itself (and save itself from a PR disaster). Much like its products, the global retailer has tried to avoid stasis and remain top of mind for shoppers.

It first introduced online shopping in 1998 when the concept was still nascent, and in the 2000s set on a spree of international expansion, which saw further store openings in Europe, the US, and East Asia.

But central to the strategy of top line growth was the constant addition of new stores. This entailed costs – locations for new outlets need to be scouted, linking the store to a centralized supply chain, hiring staff, and ensuring all brand guidelines are adhered to. Not only does it take time, it can also prevent a fast fashion brand like H&M from trimming prices as much as it would like.

Challenges lurk

Despite H&M’s original launch of its online store in 1998, analysts are unequivocal in their opinion that the company has been slow to adapt to the internet age.

“We view value fashion retailers as the clothing retail segment most disrupted by online,” explains Anne Critchlow, an analyst at Societe Generale.

Digital disruption has eaten into H&M’s business. Pure play fashion ecommerce sites like Asos, Zalando, Zappos, and even Amazon private label brands don’t have to contend with managing expensive offline inventory and retail space. It helps them keep prices low in an attempt to undercut retailers like H&M.

Asos recorded US$2.6 billion in sales last year – a fair distance behind H&M – but the brand operates with a fraction of the same overheads as the Swedish retailer.

Euromonitor International estimates that online channels account for 14% of the global apparel and footwear market, with an overall size of US$231.7 billion. In developed markets, this statistic is even higher: 15.5% for the US, 18.7% for the UK, and 25.9% for China.

H&M is physically present in 69 countries but only offers ecommerce in 43.

The primary target market for fast fashion brands are digitally savvy millennials, which begs the question, why have they been so slow to respond?

CEO of H&M, Karl-Johan Persson says the company has made mistakes in its strategy.

2017 was a disappointing year for the company with its share price sliding to the lowest level since the 2008 financial crisis and the announcement that it would close 170 stores in 2018.

But the company plans on a net addition of 220 stores, causing even further consternation from investors who want it to double down on ecommerce and trim expensive offline forays.

“Fast pace is vital,” affirmed Karl last year, signalling H&M’s intention to accelerate its efforts towards ecommerce.

H&M stock isn’t performing well at all.

But this needs to happen sooner rather than later.

“[H&M and Zara] have been lagging definitely and they do need things like just faster delivery times; shoppers want it now,” explains Maureen Hinton, global retail research director at GlobalData. “They face a tougher, more competitive market who have less to spend and far more competition with Zalando, Amazon, and others.”

What’s the future?

At the moment, H&M seems to be concentrating on markets with large growth potential. Its decision to open up new stores in India helped increase revenue in the country by almost 100% and resulted in 12 new outlets. The retailer is also selling online in India, hoping to capitalize on the ecommerce rush in the South Asian state.

But this seems to be a repetition of the old business model, which hasn’t exactly gone to plan. The writing’s on the wall. US retailers are in significant stress as they haven’t prepared for the digital age.

Millennials demand an omni-experience i.e. a consistent experience across both online and offline. Zara, has already picked up on this trend with its popup shop in London trying to bridge the gap, whereas H&M only realized it needed to integrate physical and online stores after a 2% drop in Q3 compared to last year’s figures.

The company is also relying on its presence on Alibaba’s Tmall to improve its online footprint in overseas markets.

It seems like H&M is finally aware of the fact that it needs to improve its overall purchasing experience. Nils Vinge, H&M’s head of investor relations, told LA Times that they’re deploying algorithms to support forecast demand and reduce the chance of markdowns.

But are these feeble attempts enough to survive in the hypercompetitive environment that fast fashion operates in today?

Part of the reason startups like Asos and Zappos have been able to snatch away market share is because millennials care more about the product, and less for brands. 51% have no preference between private label and national brands.

For H&M, it’s not enough anymore to sell relatively cheap products. The entire retail experience needs an overhaul and it better start doing that soon or the stock price might see a sustained nosedive.

Asian lovers don’t seem to shy away from Valentine’s day.

According to Mastercard, 75% of mainland Chinese are likely to buy a gift for their partner on this amorous occasion, followed by 74% of Thai, and 63% of Malays and Filipinos.

They’re shelling out hefty sums too.

Chinese residents indicated they would spend an average of US$310, closely trailed by Hong Kong at US$282 and Taiwan with US$281.

Filipinos don’t spend as much as some of their other Asian counterparts, but they’re ranked as some of the most romantic in the region.

An Orient McCann study revealed that Filipinos are the most emotional people in the world and second among those who most frequently say “I love you”, making Valentine’s Day an ideal event to let their feelings be known.

Google Trends data for the past week show interest in Valentine’s Day from the Philippines reaching a zenith as we approach the day itself.

Search interest is escalating fast.

What are Filipinos searching for online? And how can brands leverage this information?

Analyzing customer preferences in The Philippines

ecommerceIQ surveyed 500 Filipinos with access to the internet in an effort to understand how they prepare for Valentine’s Day.

87.2% of those surveyed said they intend to purchase a gift to mark the occasion, whereas only 12.8% indicated that they had no plans to do so.

But it’s not so straightforward.

63.9% of survey respondents said their eventual purchase would take place offline.

Within this subset, 42.8% said both the search and purchase would happen in-store and 21.1% outlined that their purchase journey would start online by searching for products but would be followed by a visit to their local mall.

36.1% of the people surveyed said they’re comfortable transacting online, mainly because of better deals & discounts, as well as the option of scheduling delivery at a particular time.

The most popular gifts sought by Filipinos for Valentine’s Day were surprisingly clothes at number one, followed by chocolates, and perfumes.

Flowers ranked a distant fourth – likely because the price of flowers in Manila tends to spike by 500% on or right before Valentine’s Day.

There’s no real substitute for red roses but consumers have a plethora of options when it comes to clothing and perfumes, leading to price stability.

What’s preventing Filipinos from purchasing online?

According to the survey results, more than 75% of respondents exhorted that they prefer to see the product before buying it.

A further 17% said they can’t trust the quality of products they see online or that they’ve been subjected to scams. Only 5% thought malls offer better deals & discounts.

Lazada was the overwhelming favorite among those who did purchase online. Almost 60% of respondents said they’d shop for Valentine’s Day gifts from the popular etailer. Shopee came in second, with 22.2%.

Despite the fact that the most sought-after gift was clothes, pure-play fashion ecommerce site Zalora secured only 4.4% of the vote.

Photo credit: Maxpixel

Capturing love online

Filipino preferences are indicative of a larger trend engulfing global ecommerce markets.

“It’s very hard to launch a brand these days that’s just online-only,” explains Sucharita Mulpuru, analyst at Forrester Research. “It’s an incredibly difficult and crowded ecommerce environment.”

Filipino brands have consistently tried to latch on to prevailing sentiments during Valentine’s Day to either sell more products or increase brand awareness.

Popular fast food joint Jollibee launched a successful campaign last year playing on themes of unrequited love and eventual reunification.

The ads, which were released in three parts, went viral on social media with over 50 million views on Facebook alone.

Condom manufacturer DKT Health gave away nearly 40,000 condoms in Manila during the Valentine’s Day weekend in 2015 by partnering with stalls selling balloons, chocolates, and roses.

Southeast Asian brands are cognizant of this dynamic, at least in Thailand. David Jou, the CEO and co-founder of Pomelo wrote in 2016 about how he viewed offline as a key component of his business moving forward.

“[…] is our goal to be the biggest online fast fashion brand or is our goal to be the biggest fast fashion brand?”, he said, posing an apparent challenge to his team.

Brands in mature ecommerce markets have already started to take a similar route too. Zara opened a pop-up shop in London last month to support its ecommerce channel. Staff at the store were trained to assist with online orders – shoppers can walk in, examine the inventory, receive recommendations from assistants, and eventually pay for the goods they like. But all the products they purchase are shipped to their address.

For companies looking to capitalize on the visible potential and consumer intent to purchase, they’ll have to overcome the prevalent trust barrier currently impeding ecommerce. A consistent online-offline retail experience could very well be a significant first step in doing so.

Ever since Netflix made the pivot from a DVD mail-order business to streaming video-on-demand (SVOD), it’s been besieged by the likes of Hulu, Amazon Prime Video, and free-to-stream sites like Pluto.tv that have tried to play catch up.

They realized the future of video streaming was primarily via on-demand.

Part of the reason is the shift of consumption patterns towards the internet. Millennials have brought the cord-cutting phenomenon to the mainstream and they’re no longer interested in 24/7 cable television but would rather stream sports, movies, and shows on their own devices.

Asia Pacific is viewed as a laggard to this dynamic. The proliferation of cheap, pirated DVDs plugged the problem of access to the latest Western movies and TV shows. But the web changed everything: as more households came online, Asian consumers warmed to the idea of watching content directly on their phones.

The dawn of a new era?

The benefits of SVOD are undeniable. There’s a far richer user interface and experience than linear television. Streaming devices also aren’t clunky and fixed to a certain place like a television is and with Asian consumers flocking to smartphones, the opportunity to sidestep television directly is very real.

According to App Annie, the time APAC consumers spent consuming video on their phones grew by 300% between 2015 and 2017. This ferocious rate of growth was double the global average in the same time period.

Asians are consuming a lot of video. Source: App Annie

While impossible to quantify the effect of this systemic shift on the Asian pirated DVD market, it’s fair to say that purchasing DVD players is going out of vogue, especially with younger consumers.

A rapid surge of wireless high-speed broadband networks and mobile data connections mean users have a wider library of content to choose from, and more channels from which to acquire it i.e. YouTube, torrents, and streaming services like Netflix, iFlix, HOOQ, ViKi, Viu, & others.

The SVOD market was valued at US$51.6 billion in 2016 and projected to grow by an annual rate of 8.93% until 2022, eventually settling at US$86.1 billion.

North America will occupy the largest market share, but the majority of growth will be driven by Asia Pacific.

Goes to show why players like Netflix & iFlix are doubling down on their efforts to win over the Asian consumer.

The race for dominance is on

For its part, iFlix, which has raised $300 million and counts companies like UK’s Sky Television as investors, explains that the very reason for its existence is to switch consumers over from pirated DVDs to licensed content.

Comparisons to Netflix are inevitable, but the Kuala Lumpur-headquartered startup has tried to downplay this impression.

CEO Mark Britt told TechCrunch that the two streaming companies don’t share the same target audience.

iFlix, with its price point of about US$3/month caters to the mass market, while Netflix, which is significantly more expensive at about US$10/month is trying to capture the “global elite”, he affirmed.

The Malay company, which now operates in 25 countries across Asia, the Middle East, and Africa, relies on local teams to lock in licensing deals and enhanced payment options via partnerships with telcos & banks.

That’s radically different than Netflix, which allows anyone around the world to sign up (excluding China, North Korea, & Syria) provided they have a functional credit card. This factor alone precludes the overwhelming majority of consumers in Southeast Asia (excluding Singapore).

Most Indonesians, Filipinos, Thais, and Malaysians don’t possess credit cards and this situation won’t change drastically in the near future.

Netflix understands this bottleneck towards acquiring new users. During a visit to Singapore in 2016, CEO Reed Hastings told journalists that they need to start offering more payment options in markets where there’s low credit card density.

It’s been almost two years since that visit without significant developments.

Netflix did partner with Lazada to offer six months of free streaming with every Live Up membership – opening itself to an affluent population and more points of entry into ASEAN as Live Up is introduced in other markets.

But so far the streaming giant hasn’t adopted any hyperlocal strategies for each specific country.

It certainly doesn’t seem like it’s preventing the company from continuing to scale into unchartered territory. Only last month, it was officially valued at US$100 billion after declaring that it added over 6 million new subscribers in Q4 2017, reaching 117.58 million subscribers globally.

While iFlix doesn’t publicly reveal its total subscriber base, but chairman Patrick Grove told Hollywood Reporter that they expected to breach the 5 million mark in 2017.

So iFlix has a more hyper-localized strategy, is focused on mass-market consumers, and offers a number of flexible payment options. On the other hand, Netflix is relatively expensive, needs a fast and stable internet connection, but offers better content, HD quality video, and popular original programming.

Which streaming provider is winning over consumers in Southeast Asia?

Our survey results

ecommerceIQ initiated an online survey with majority of respondents from the Philippines and Indonesia. For full transparency, overall sample size was small, but the insights generated are fairly discerning.

Let’s repeat the prior assumptions that we outlined. Senior executives at iFlix believe their product is skewed towards the mass market and tailor-made for viewing on mobile devices with slower internet speeds.

This is why iFlix allows users to download content on their phones in order to view it later. It also deliberately keeps prices low to reach an audience that may not be able to afford Netflix.

Netflix is slowly starting to build local teams, and by extension, is incorporating a local strategy, but it’s still isn’t as laser focused on Southeast Asia as some of its peers.

42.4% of survey respondents said Netflix is their go-to video streaming platform of choice. A similar number chose YouTube. iFlix was actually tied with Viu (which is focused on providing Asian content such as Korean TV and anime) – with 6.2% each.

Let’s put these numbers in context. The Philippines actually has some of the slowest internet speeds in Asia Pacific.

Both countries have low rates of credit card penetration. There were 8 million people who had credit cards in Indonesia, which translates into just 3.2% of the population. The Philippines actually follows the same trend when judged in percentage terms; 3 million credit card holders in 2015, representing roughly 3% of the population.

No credit card? No problem. Source: Informedmag

Despite structural bottlenecks, the data seems to show that Southeast Asian consumers will find a way to pay for the service if they truly desire it.

iFlix has partnerships with local telcos and banks; users can opt to pay from prepaid mobile phone balance and bundle data deals from their provider.

But only 3% of survey respondents actually said they would like to see more payment options and no one indicated that the reason for choosing a provider in the first place was because of ease of making a payment.

It gets more interesting.

Only 9.1% of respondents said a cheap price point was the reason to opt for the platform in the first place. That makes iFlix’s value proposition a relatively weak factor in winning over the Asian consumer.

The ability to download content to watch later ranked as the highest priority for them, followed closely by access to a large range of Western entertainment, original productions, and an excellent user experience.

12.1% said they opted for their video streaming platform of choice because of its range of local television shows and movies, putting it at 5th priority overall.

The insights slightly negate messages from senior executives at iFlix. CEO and co-founder of iFlix Mark Britt told Variety last year that “almost every assumption about subscription video-on-demand that is based on Western metaphors has failed in developing markets […] we are learning those lessons quicker than others.”

But is that view correct? Our findings seem to indicate that streaming media consumption in Asia isn’t a whole lot different than Western habits.

Research from eMarketer in 2017 said iFlix trailed Viu in Indonesia. The same report said iFlix was marginally ahead of Netflix, but the results could have been skewed because Netflix was blocked for a long time prior to the publishing of the study.

Source: eMarketer

eMarketer also quoted AIP Corporation and said that 39% of Filipinos with an internet subscription had signed up for iFlix, but the corresponding figure for Netflix was much higher, at 60%.

What’s the takeaway?

Southeast Asian consumers might be price conscious but they’re willing to pay a premium for services that add value to their lives. The Netflix brand is known for a vast library of content. The recommendation engine is intuitive and strives to understand a user’s preferences.

The results are also consistent with our analysis of the ride hailing space in Indonesia where consumers don’t simply opt for the cheapest player – they are willing to pay for a comfortable, safe ride, and an enhanced user experience.

The Netflix marketing and product teams have also invested considerable time and resources to build an aspirational brand through social proof, and storytelling.

Its original series such as ‘House of Cards’, ‘Stranger Things’, ‘Orange is the New Black, & ‘Master of None’ command far higher viewership figures than any other SVOD providers. The term ‘Netflix and Chill’ is almost household parlance now.

When consumers sign up for Netflix they gain social validation: they can share updates on Facebook, tell their friends, and be able to participate in discussions about latest episodes. Sure, iFlix is cheaper but can it engender the same kind of excitement?

One of the most attractive points of listing your brand’s products on Lazada is the ability to take part in its multitude of campaigns, accessed by thousands of customers.

Such campaigns aren’t limited in size and scope: they range from huge events like its heavily marketed Online Festival, which include 11.11 and 12.12, to smaller weekly campaigns such as the current ‘Fall In Love’ event for Valentines Day.

Not only does Southeast Asia’s largest ecommerce platform promote campaigns via large banner adverts on its main landing page, it drives traffic via paid acquisition channels and email marketing.

BrandIQ

Valentine’s Day campaigns this week include ‘Valentine Day Sale’ with Unilever in Indonesia, ‘Lazada Delivers Love’ in Philippines, and ‘Fall In Love’ in Thailand

For brands, such visibility is critical; Southeast Asian consumers increasingly use online marketplaces to begin their product journey, bypassing even search engines.

ecommerceIQ

A study by ecommerceIQ found that 57% of Indonesians start their product search on marketplaces.

Lazada promises significant internet traffic during its biggest campaigns – the 11.11 sales event attracted 10 million site visits in the first 24 hours and garnered 10 times the sales volume when compared to non campaign days.

While traffic is definitely attractive to brands, an analysis of campaign promotions by data analytics platform BrandIQ found that companies have limited control over the visibility of their products during such events.

Provided brand managers meet Lazada’s conditions of discount percentage and relevant categories, they can pitch as many SKUs as they like for campaigns such as ‘Flash Sales’ and ‘Daily Deals’. However, this only accounts for a small percentage of the ‘shelf space’ available on the Lazada campaign page with the majority of product placement within the campaign categories out of the brand manager’s control.

BrandIQ

The ‘Flash Sales’ portion of campaigns are among the few ways to boost sales of brand’s products.

Marketplace and Brand relationship

Brands shouldn’t take a hands-off role after agreeing to participate in a particular campaign. BrandIQ discovered that the maximum mileage garnered from these campaigns lean more towards promoting Lazada’s own inventory and not the brand’s official shop-in-shop (Amazon, anyone?).

Lazada holds inventory of major products, and sells it via a retail model. These campaigns offer a window for Lazada to boost sales of its own inventory.

How? BrandIQ deep dived into a current category campaign, ‘IT on Sale‘, running from February 6-9 on Lazada Thailand. The sale advertises ‘up to 70% off’ electronic category products.

BrandIQ

BrandIQ

Both the ‘Recommended Items’ and ‘Mobiles on Sale’ portions of the ‘IT on Sale’ campaign lists Lazada’s own retail SKUs over brand’s Shop in Shop SKUs.

The data indicated that the products listed under ‘Recommended Items’ were sold by Lazada. This is also the case in the sub-category ‘Mobiles on Sale’ portion – for example, all listed SKUs are sold directly by Lazada, rather than the Samsung or Huawei official stores.

Directly under ‘Recommended Items’ is another portion of the landing page titled ‘Top Brands on Sale’.

BrandIQ

Clicking on the brand’s logo takes customers to the brand’s official store, but where is the user directed after clicking the individual SKUs shown to the right of the brand logo?

BrandIQ

BrandIQ ascertained that 13 out of the 20 products listed were those sold directly by Lazada itself, rather than the official store.

This is despite the fact that official shop-in-shops offer the same product; it’s a conscious decision by Lazada to sell its own retail SKU over the brands.

Brands should pay close attention to the evolving nature of marketplaces and look to them as a way to jump into ecommerce, but not the long term game. As the ecommerce landscape becomes increasingly competitive and incentivized; companies need careful monitoring of all acquisition channels if they desire sustained growth.