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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.

Earlier this year, Amazon partnered with the Vietnam Ecommerce Association (VECOM) to provide ecommerce services for local online businesses under VECOM. They also held numerous workshops for sellers, the latest one being in Hanoi and Ho Chi Minh City, called Selling Globally on Amazon.

Similarly, Alibaba-backed AliExpress has been looking to sign up more Vietnamese sellers on its platform since July as it teams up with OSB Investment and Technology JSC to support international exports by Vietnamese small and medium-sized enterprises (SMEs).

Why Vietnam?

Vietnam is one of the biggest exporters in the world, ranked at number 28 out of 225 countries at $214 billion of export value in 2017. Based on 2016’s exports data, Vietnam’s main exports are machinery products, textile goods, and footwear and headwear products.

Figure 1: Vietnam’s amount of exports and its categories in 2016; OEC

Vietnam has become a manufacturing hub with one of the lowest minimum wages in the ASEAN region at $147 to $167 per month (Figure 2). Expanding infrastructure for new projects and a rapidly increasing working age group have promoted low-cost mass-production with many global companies establishing manufacturing bases in the country.

Global companies are benefitting from low production costs but local businesses also have access to ready-to-sell goods at competitive prices. In Vietnam, some 600,000 SMEs are searching for appropriate channels to expand their market share. Ecommerce offers this opportunity from the comfort of their homes.

Figure 2: Minimum wage in ASEAN for 2017; World Economic Forum, Philippines’ National Wage and Productivity Commission, The ASEAN Post

As in all other developing countries, ecommerce in Vietnam is mushrooming. Statista forecast annual growth at 16.8%, higher than Thailand (12.8%) and Indonesia (13%). However, the Vietnamese market is small and still in its infancy. Therefore, the international market offers economic opportunities for local retailers.

Vietnamese merchants are attracted to global e-marketplaces which access customers searching for a broader variety of products and enable international sales at low cost. Online merchandising boosts sales while mitigating the risks of the local economic downturn.

AliExpress executive Yang Ninh commented, “Vietnam, as one of the most diverse manufacturers in the world, is an important destination for Alibaba.”

Comparing between Amazon and AliExpress

To know which platform suits Vietnamese sellers, we compared the specifications of the two platforms in the table below.

Amazon

AliExpress

  • 2.435 billion monthly visits at an average of 6 minutes per visit
  • Most Amazon customers have a high annual income (above $30,000)
  • Visitors are mainly from the Americas, Australia, Western Europe, and South and East Asia (Figure 3)
  • Available in different languages with localized websites in the US, UK, and Japan
  • Monthly subscription fee of $39.99 for those selling over 40 items per month – professional plan or per-item fee of $0.99 for each item sold – individual plan
  • Referral fee of 3-45% of total sales price or a $1 applicable minimum referral fee, whichever is greater, depending on the product category
  • Shipments completed either by sellers using courier services from providers like UPS, DHL and local post or fulfillment by Amazon
  • 549 million monthly visits at an average of 8 minutes per visit
  • Most AliExpress customers have lower annual income (below $30,000)
  • Visitors are mainly from the Americas, Australia, Europe, Asia, and a few African countries (Figure 3)
  • Available in different languages such as French, Spanish, and Korean serving over 200 countries
  • Annual service fee of at least $1,436 (RMB 10,000) and 5-8% seller commission; amount depends on the product category
  • Annual service fees are eligible for 50% and 100% discount if sales reach a certain amount depending on the product category
  • Shipments completed either by sellers, AliExpress or other delivery companies

Figure 3: Where visitors of Amazon (top) and AliExpress (bottom) are located and their average income; Alexa

Whether Vietnamese sellers choose Amazon or AliExpress depends on the target market

Those selling high-end, expensive products may prefer to sell on Amazon because site visitors have higher purchasing power and the majority hail from developed countries. Those wishing to target consumers in the Americas may also prefer Amazon which has a stronger top-of-mind awareness in the region.

Conversely, AliExpress offers Vietnamese sellers a wider global customer base. AliExpress has a more extensive global presence (Figure 3), with site visitors to the platform spending on average 2 minutes longer than at Amazon.

However, the annual service fee at AliExpress is higher than Amazon. Sellers with limited funds or those just starting out might be better to opt for Amazon which also offers different pricing plans for individuals and professionals. Meanwhile, AliExpress discounts annual service fees for retailers if they manage to attain the required annual sales specified for particular categories. This offers value for those selling hundreds or thousands of items.

Vietnam has many local ecommerce players, providing sellers with alternative options for domestically growth. However, reliance on these e-marketplaces alone is not sufficient for Vietnamese sellers to tap international customers.  Listing on either or both of the AliExpress or Amazon platforms offers the most realistic opportunity to maximize sales.

Customer reviews matter for brands selling online. Studies have shown an increase of 161% in conversion rates when adding user generated product reviews.

Amazon of course has become the gold standard for high quality user generated reviews. Unfortunately for brands in Southeast Asia, getting customers to leave reviews is hard. Users don’t proactively write reviews and when they do, the content is short and not very helpful.

In this article, we’ll look at some of the brands that are doing well in terms of ratings and reviews on Lazada Thailand and identify some ways for other brands to get more quality reviews.

How do Ratings & Product Reviews help brands?

Ratings and product reviews help brands increase sales on marketplaces in three ways:

  1. Getting more traffic

Products reviews are basically user generated content on a brand’s product detail page. This content helps increase the ranking of that particular page on Google, therefore driving more offsite SEO traffic, leading to more sales.

In addition, higher ratings and more content also help the brand rank higher in terms of onsite search, i.e. users searching while on Lazada or Shopee.

  1. Increasing conversion rates

High ratings and positive, holistic user reviews also help increase conversion rates from the brand’s product detail page into checkout. Based on ecommerceIQ research, social proof or friend and family recommendations is a top 3 customer acquisition channel for marketplaces like Lazada and Shopee, demonstrating how important reviews are for conversions.

  1. Improve and defend brand equity

Marketplaces attract grey sellers. Genuine reviews from real users help distinguish your products from those of grey sellers or knock-off products.

Findings from our study

For our research, we looked at how the top brands that have an official shop-in-shop presence on Lazada Thailand perform in terms of ratings and reviews.

Specifically, we looked at and compared the below metrics. (Please note that you’ll be able to download the full data set with all these metrics by brand at the very end of this article. Click here to go there right now.) Please keep in mind that the ratings and reviews data was collected separately over a short period of time so minor discrepancies are to be expected.

  • Quantity:
    • Number of ratings
    • Number of reviews
    • Number of SKUs with at least one rating
    • Number of SKUs with at least one review
  • Quality:
    • % of SKUs with at least one rating
    • % of SKUs with at least one review
    • Number of ratings with at least 3 stars
    • Average rating
    • Average length of reviews (character count)

Based on the above metrics, we identified the following patterns and findings:

  • Top 18 official shop-in-shops are responsible for 80% of all the ratings (out of 161 official shop-in-shops tracked in this experiment)
  • Top 22 official shop-in-shops are responsible for 80% of all the reviews (out of 161 official shop-in-shops tracked in this experiment)
  • Average length of a review is 83 characters
    • This is how 83 characters looks like (short right?):

      “Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Aenean commodo ligula ege”

  • The top 3 categories with the most reviews are:
    • Health & Beauty (33,002 reviews, 46% of total)
    • Mother & Baby (23,970 reviews, 34% of total)
    • Bags & Travel (3,165 reviews, 4% of total)
  • The top 3 categories with the longest reviews are:
    • Health & Beauty (avg. 98 characters)
    • TV, Audio / Video, Gaming & Wearables (avg. 81 characters)
    • Mobiles & Tablets (avg. 76 characters)
  • The top 3 categories with the least reviews are:
    • Pet Supplies (7 reviews)
    • Sports & Outdoors (8 reviews)
    • Laundry & Cleaning (107 reviews)
  • The top 3 categories with the shortest reviews are:
    • Tools, DIY & Outdoor (avg. 37 characters)
    • Groceries (avg. 38 characters)
    • Cameras (avg. 45 characters)

Full table of data (best viewed on desktop or tablet)

Want do download the full Excel spreadsheet? Sign up here with your email and receive a download link.

Key Metrics By Category:

[table id=5 /]

Key Metrics By Brand:

[table id=6 /]

Full Raw Data:

[table id=7 /]

Want do download the full Excel spreadsheet? Sign up here with your email and receive a download link:

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On June 28, 2018, Alibaba announced the launch of Taobao Xinxuan (淘宝心选), which translates to ‘Taobao Selected’. After a year in alpha testing, the company’s new concept is finally available to the wider public.

Through the website or one of two physical stores in Hangzhou and Shanghai, users can shop for affordable quality lifestyle and functional daily necessity goods including home fragrance, smart power sockets, underwear, and sonic-control toothbrushes.

ecommerceIQ

Rimowa?

According to TechNode, the recently opened store in Shanghai was raided and emptied by eager customers in a mere two hours.

What is Taobao Xinxuan?

Appearance wise, the Taobao Xinxuan concept will remind many of Japanese retailer Muji, whose clean and simplistic stores offer a wide range of quality and affordable clothing, stationery, bags, and even furniture.

ecommerceIQ

Taobao Xinxuan Store Concept Design

From a business model perspective, Taobao Xinxuan is actually more like Xiaomi, the smartphone-manufacturer-turned-global-electronics brand. Its Manufacturer-to-Consumer (M2C) approach and short supply chain allows the company to quickly go from the latest consumer insights to manufacturers to create products and achieve go-to-market in a few months.

ecommerceIQ

Xiaomi Flagship Store in Shanghai

ecommerceIQ

Xiaomi Flagship Store in Shanghai

Arguably, Taobao Xinxuan could be considered a clone of the M2C ecommerce platform launched by Chinese gaming company NetEase called Yanxuan. Since its release in 2016, Yanxuan has seen rapid growth in a unique vertical that avoids direct competition with Alibaba and JD.com.

The Yanxuan model can be described as an ODM (Original Design Manufacturer) model as well. By going directly to Chinese manufacturers creating products for established global brands, NetEase is able to get the same quality while selling at a much lower price by skipping over distributors.

ecommerceIQ

NetEase’s Yanxuan website

By targeting young, mainly urban consumers who value quality and design but are also price sensitive, Yanxuan has been able to achieve rapid growth in the Chinese ecommerce space. The company reached a monthly GMV (gross merchandise volume) of RMB 60 million (about US$9 million) by Q3 2016, only a few months after its initial launch. This allowed Yanxuan to break into the list of top 10 Chinese ecommerce platforms based on GMV.

ecommerceIQ

Yanxuan Home & Living Category

Alibaba’s New Trojan Horse?

For a business to execute the M2C model well, it needs to understand what consumers want and then act on it swiftly. Considered the pioneer in M2C in China, Xiaomi is well known for asking its users directly what they’d like to see in terms of new features and products.

Another company that knows what its users want is – surprise, surprise – Alibaba. Being the largest ecommerce company in China, Alibaba has extensive data on what brands and products people are buying and when and where. This doesn’t even include the additional data it gathers through its other businesses Ant Financial, Ali Health, and its offline Hema supermarkets and ‘New Retail’ initiatives.

Alibaba’s US counterpart Amazon hasn’t shied-away from using its data to introduce its own private label brands to compete directly with the other brands selling on its platform.

“The company now has roughly 100 private label brands for sale on its huge online marketplace, of which more than five dozen have been introduced in the past year alone. But few of those are sold under the Amazon brand. Instead, they have been given a variety of anodyne, disposable names like Spotted Zebra (kids clothes), Good Brief (men’s underwear), Wag (dog food) and Rivet (home furnishings).”

New York Times, ‘How Amazon Steers Shoppers to Its Own Products’

And this move by Amazon isn’t a small pilot project. Amazon private labels have a large impact on revenue:

“The results were stunning. In just a few years, AmazonBasics had grabbed nearly a third of the online market for batteries, outselling both Energizer and Duracell on its site.”

Amazon’s home court advantage gives it a leg up versus other brands:

“Take word searches. About 70 percent of the word searches done on Amazon’s search browser are for generic goods. That means consumers are typing in “men’s underwear” or “running shoes” rather than asking, specifically, for Hanes or Nike.

For Amazon, those word searches by consumers allow it to put its private-label products in front of the consumer and make sure they appear quickly. In addition, Amazon has the emails of the consumers who performed searches on its site and can email them directly or use pop-up ads on other websites to direct those consumers back to Amazon’s marketplace.”

Alibaba has been flying under the radar with regards to any private label initiatives, and for good reason. Unlike Amazon, which started out as a retailer buying and selling products, Alibaba’s Taobao and Tmall properties are pure marketplace plays from the beginning. Because Alibaba’s main goal is helping connect merchants and buyers via its platforms, a neutral stance is essential to the platform’s success.

It’s not surprising then that Alibaba decided to launch Xinxuan as ‘Taobao Xinxuan’ rather than ‘Tmall Xinxuan’. Originally a part of Taobao, Tmall spun off to provide a more premium B2B2C marketplace for authentic brands to sell their products online. Mixing in Xinxuan’s private label products would only upset brands competing in similar product categories.

Lazada’s LazMall a stepping stone towards introducing Lazada private label in Southeast Asia?

Last week, Lazada officially launched LazMall, its Southeast Asian version of Tmall. It’s a move towards splitting Lazada (‘b-to-C’) and LazMall (‘B-to-c’) and aims to offer a premium place for big brands to sell online, away from the grey market sellers on the platform.

ecommerceIQ

From the outside, this looks like an obvious move against JD, known to offer a better customer experience according to our recent Indonesia online marketplace survey.

However, seeing Alibaba’s new concept in China with Taobao Xinxuan, it’s not far-fetched the LazMall spin-off will lead to Lazada M2C private label brands in the near future.

The Chinese ecommerce market, being about 10 years ahead of the Southeast Asian one, acts like a crystal ball for brands operating in our region. Battle-tested brands with operations in China know better to diversify their channels before putting all their eggs into a single basket.

Southeast Asian-native brands are recommended to shake off their naivety and learn from China’s history.

Monogamy in ecommerce does not lead to happiness.

It’s amazing how this highly upvoted answer (Ron Rule’s answer to What stops Walmart from beating Amazon in online shopping?) is basically proving, without the author realizing it, why Disruption Theory works. The answer takes an exceedingly narrow view of the entire retail industry and labels the pursuit of leadership in an emerging market/channel (ecommerce), which is clearly where the world is heading over the next few decades, as mere “bragging rights”.

“Disruptive innovations tend to be produced by outsiders and entrepreneurs, rather than existing market-leading companies. The business environment of market leaders does not allow them to pursue disruptive innovations when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations (which are needed to compete against current competition).”

(Source: Disruptive innovation – Wikipedia)

The real answer is, Amazon has already won in online shopping. It is not due to a lack of effort from competitors, which is probably too little too late.

ecommerceIQ

This quote, attributed to Jeff Bezos, sums up why:

Your margin is my opportunity.

Even with Walmart’s massive revenues and profits (compared to Amazon), it cannot compete with the juggernaut that is built by Bezos. Amazon is “not profitable” by choice. All the earnings are put back into the business, either into more capital investments or to sell loss-leading products that lock in customers or drive competitors out of business, vertical by vertical, and market by market.

The investments that Amazon has made over the first two and a half decades of its existence give it momentum such that it is tough if not impossible for any other company to catch up over the coming decades: the technology stack, the deeply integrated logistics/supply chain (they are now getting into competition with FedEx/UPS), the effective third-party seller marketplace, the customer loyalty (through Prime).

Every exponential curve runs below the linear curve in it’s infancy, that is until it suddenly crosses over, goes through the roof and hits the sky. Even though in absolute numbers Walmart is still bigger than Amazon, only one of the lines below is going up and to the right:

ecommerceIQ

On top of all this, in the last couple of years, Amazon is also getting into physical retail, with acquisition of Whole Foods and pilot of Amazon Go. Here’s a great analysis of this: Amazon’s New Customer (I highly recommend Stratechery for tech+strategy topics in general).

At this point it is more likely that Amazon will eventually beat Walmart at physical retail, than Walmart will beat Amazon at online shopping. If Walmart wants to survive till the end of this century and not go the way of Sears, Walmart must come up with a strategy that creates value in a digital, super-connected future where everyone is hooked on to the convenience and choice furnished by online shopping, but in a manner that converts their massive current investments in physical retail from liabilities to assets.

The last thing Walmart should do is to build an Amazon clone. As then, they are playing by Amazon’s rules. And nobody beats Amazon at their own game.

 

Read the original on Quora by Pararth Shah, Software Engineer at Google

Singaporean netizens rank at 4th place globally for sessions per year on Amazon, when judged in proportion to the number of internet users. That puts them just marginally behind Canada.

Source: SimilarWeb/World Bank

It’s probably one of the reasons why the company chose to enter Southeast Asia via Singapore; not only is there is an internet-savvy population with a high credit card penetration, consumers already have a stated preference to transact with the platform.

Amazon wasn’t physically present in Singapore until last year but the company’s white-label electronic products such as the Echo Dot and Kindle have been stocked and fulfilled by Lazada Singapore through grey market sellers as far back as March 2015, according to analytics platform BrandIQ.

Demand for Amazon in Singapore

BrandIQ mapped the number of reviews on Amazon products on Lazada SG over a three-year time period. When compared against Google Web Search data from Google Trends, there was a direct correlation between the volume of reviews on Lazada and Google search interest for Amazon from Singapore – until the marketplace’s official launch in July 2017.

Source: BrandIQ/Google Trends

Amazon products on Lazada witnessed a spike of product reviews towards the end of 2015, coinciding with the September 2015 announcement of the Fire Tablet and Fire TV product lines.

Google Trends data shows a very similar spike to that of product reviews on Lazada in December 2015, which can be attributed to the holiday season and popularity of the new Fire product lines.

A very similar trend was also witnessed in 2016; product reviews rose following the September 2016 announcement of the new Echo Dot product, with corresponding spikes in both Google Web Search and Lazada product reviews in December 2016.

Web search interest in Amazon reached a crescendo in July 2017 following the Prime Now launch in Singapore. This event also marked the first inverse trend between web searches for Amazon and product reviews on Lazada. While the number of product reviews grew approaching the December 2017 holiday season, it never recovered to 2016 or 2015 levels, suggesting decreased interest across Lazada following Amazon’s entry.

There’s a correlation between Amazon product launches and their popularity in Singapore based on reviews by certified users, but what does it mean?

Rival on Lazada’s marketplace

Despite Amazon’s belated entry into Southeast Asia, its products are still ranking high on Lazada.

The interesting part is that the products in question; Amazon Fire TV, Kindle, and Echo are simply unavailable on Prime Now and can’t be shipped to Singapore from AmazonGlobal, it’s international shipping site.

Instead, these products are sold and fulfilled by a multitude of grey sellers on Lazada such as GeekBite, that has been active on the platform for 3+ years.

Despite its Amazon Prime Now offerings for free international shipping, some of Amazon’s best selling items can’t be shipped to Singapore

There’s clear demand and interest for Amazon products, which leads us to the question: why is a customer-obsessed Amazon content with grey market sellers fulfilling this need?

Standard industry practices indicate that well-known brands often find a crowded grey market for their products to be a cause for concern. Leaving grey sellers to fulfill local demand for foreign products results in brands losing control of their brand image, as delivery, packaging, and warranties from grey sellers usually don’t correspond to the same brand guidelines adhered to by the company.

The answer here is likely linked to the outdated industry distribution rights for television/movie content on the Fire platform and e-book rights for the Kindle. Content distribution rights are negotiated geographically, and local distributors commonly have long term contracts with content producers. Amazon either hasn’t prioritized, or is still in the process of securing distribution rights for Southeast Asia, and thus can’t make these products available to purchase.

What Amazon is falling short of, grey market sellers are picking up admirably. In the electronics categories including “Tablets” and “Video” on Lazada, Amazon products rank in the Top 10 when sorting by “Popularity”. The Amazon Fire TV Stick and Amazon Kindle stand out within their own respective categories.

The prices of items like the Kindle are also marked up by almost 23% (US$79.99 on Amazon US vs US$103 on Lazada SG) and the Echo Dot is marked up by 15% (US$49.99 on Amazon US vs US$59 on Lazada SG).

Singaporean consumers itching for the new Amazon items are stuck with purchasing through grey sellers on Lazada, like local reseller SGKindleShop, who offers the Kindle for US$155, or like forwarder shipping service like comGateway, which can set you back another US$15 for the US$79 Kindle, only slightly cheaper than the US$103 price tag on Lazada.

Cost of shipping a 1kg package using a forwarder shipping service from the US to Singapore.
Prices in SGD

Amazon is missing out on a large potential revenue source by foregoing some of its best selling products on Prime Now. It’s also unable to cross-sell by offering enhanced product warranties, which are an important addition to overall product revenue streams.

Unless Jeff Bezos makes a conscious decision to include Amazon’s products on Prime Now SG, it’s going to continue to cede the market to grey sellers on its largest regional competitor.

Osman Husain of ecommerceIQ contributed to this report.


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