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Shoppers around the world are making more room in their budgets for the finer things in life – not in the sense of designer handbags or diamonds but upgrades in everyday consumables.

31% of global respondents say they consider a product to be premium because it’s expensive — a warning to companies who push up prices without providing a very clear value proposition to support the change.

Nielsen‘s latest global report on “Premium Potential” takes a look at growth of different categories based on consumer input around the world and how well do premium products will perform. For example, almond milk versus regular milk.

Unsurprisingly, respondents in Southeast Asia, Latin America and Africa/Middle East are willing to spend more money on better electronics and clothing/shoes, 37% & 36% respectively.

30% of global respondents say they’ll consider paying more for dairy products or better meat or seafood.

More than a quarter of global respondents say they’ll consider spending a few more dollars for premium hair-care (27%), body-care (26%) and oral-care (26%) products.

The premium segment accounts for roughly 23% of sales in the personal category in Southeast Asia.

In Southeast Asia, premium products accounted for 55% of face moisturizer sales, 39% of face cleanser sales and 36% of toothpaste sales, 31% of shampoo sales.

Unilever has also responded to increased demands for personal care within its Southeast Asian markets by launching shop-in-shops on marketplaces in Indonesia and Thailand to heighten visibility.

Unilever on Shopee Indonesia

Vitamins were among the top five categories in the region, which should be encouraging to companies like Blackmores that have gone online to widen its customer reach with a shop-in-shop on Lazada.

 

Blackmores on Lazada Thailand

Although “premium products” seem to be more attractive, it’s still important to note that customers won’t give up their dollars so easily.

“Many are looking for everyday items that perform better or fulfill their emotional needs or social aspirations at a price that doesn’t break the bank,” said Liana Lubel, senior vice president, Nielsen Innovation Practice.

Source: Nielsen

It’s important for brands in Southeast Asia to understand that the growth of premium goods will open up opportunities for distribution and product variation within the scope of fast moving goods. These premium brands are able to bring new consumers into the category and reengage lapsed consumers.

Read Nielsen’s original research on premium goods here.

In the recent years, Southeast Asia has embraced the internet and growth opportunities it provides with arms wide open. As approximately 70% of the population in the region is under 35 years old, the young people have been driving the adoption of the internet that continues to disrupt existing business models.

The latest Digital in 2017: Southeast Asia report by We Are Social and Hootsuite provides useful data for ecommerce entrepreneurs about internet and mobile usage trends in the region. The data once again emphasizes how different each country is across one region, meaning a one-fits-all solution in Southeast Asia wouldn’t fly without localization.


The scope of the report 
has expanded over the years and new data points have been added to provide a wider picture of the digital trends in the markets.

Here are the key insights from the report about the region to know:

  • Ecommerce is becoming the region’s gold mine as 53% of Southeast Asia’s population uses the internet
  • The growth opportunity in the region is tremendous, to put it in the words of the new US president Donald Trump – the number of internet users grew by 31% (80 million) during the last year, continuing the double digit growth in 2015
  • More than 300 million people or 47% of the region are active mobile internet users and mobile internet penetration is likely to pass 50% in the next few months

While the situation does vary across countries – the trend remains the same, Southeast Asia is digitizing and very quickly. This is a list of what is expected to change from 2016, some things we expected and others, we were surprised to learn:

1. The love for mobile

Southeast Asians love their mobile phones. Across the region, around 90-95% of the population use mobile phones, and in most countries, except for Indonesia, more than 60% of the population have smartphones.

Source: compiled by eIQ based on reports Digital in 2016 and Digital in 2017. Digital in 2016 contains data about device ownership, while Digital in 2017 provides insights on device usage.

The smartphone is essential for accessing the internet, especially taking into account that only 21% of Indonesia’s population and 26% of Thailand’s population use laptops.

In Malaysia, the Philippines and Vietnam, the computer usage is higher – around 40% of the population but that is still well below the popularity of smartphones.

With this in mind, ecommerce businesses should think mobile-first by ensuring that their customer experience is mobile friendly. The biggest online marketplaces like Lazada, Zalora, 11street and Zilingo have launched mobile apps to capture this growing audience.

Zilingo built a seller app specifically with the small fashion brands in mind to make it easier for them to create an online store just with their mobile phone.

2. Media consumption is hypnotic

Cheaper smartphones and tailored data services for social networks mean that people can afford to use the internet more often. In 2016, the number of respondents who are using the internet every day has increased by around 10 percentage points in Malaysia, the Philippines, Singapore and Vietnam. In Indonesia, the increase is a staggering 30 percentage points.

Source: compiled by eIQ based on Digital in 2016 and Digital in 2017.

The amount of time people spend with media is also rising. In the Philippines, people on average spend 9 hours online on their computers compared to a little more than 5 hours a year ago.

Indonesia, Malaysia and Thailand follow closely as people spend around 30 minutes less than Filipinos do online. Southeast Asians use the internet on their phones for about 4 hours a day except in Singapore and Vietnam where the average daily use of the internet via a mobile device is around 2.5 hours.

As more and more people go online, it makes sense for businesses to meet their customers where they prefer to be – in the digital environment. This doesn’t mean giving up offline channels.

Ecommerce players such as eyewear brand Glazziq and fashion brand Pomelo have gained their popularity as online-only businesses but plan to expand their presence offline also by launching physical showrooms.

3. Email? What is that, majority of Thais may ask

Email marketing is typically one of the most effective tools for ecommerce businesses to lure customers and drive conversions. According to Campaign Monitor, for every $1 spent on email marketing, it generates $38 in return on investment.

A report by Salesforce Marketing Cloud showed that 96% of Southeast Asian online consumers identify themselves as email newsletter subscribers and 48% have made a purchase as a result of a marketing email.

However, the latest Digital in 2017 shows that email might not be the best choice to target customers in the region, at least – not in all countries.

Apart from Singapore where 71% of respondents check their emails weekly on smartphones, less than one third of the rest of Southeast Asia checks their emails during a week.

The situation is most surprising in Thailand where less than 10% of the population checks their emails either on smartphone, computer or tablet.

This has significant implications for online marketers because instead of asking for customer emails, they should capitalize on phone numbers. If most Southeast Asian customers are plugged to their phones, SMS marketing could be good for targeting customers.

99% of text messages from brands are opened and the click rate is nearly 20%.

4. Ecommerce is growing up

The highly quotable report by Google and Singaporean investment fund Temasek predicts that the ecommerce market will reach $88 billion by 2025 from the relatively low $5.5 billion in 2015. There are indications that the market opportunity might be even bigger and valued at $238 billion.

The data shared by online statistics and business intelligence portal Statista in Digital in 2017 predicts the value of the consumer (B2C) ecommerce market of six Southeast Asian nations in 2016 has been $14.8 billion.

Source: Digital in 2017, Statista Digital market outlook, e-commerce industry, January 2017.

In all countries, more respondents have reported making a product or service purchase online in the past 30 days. More than half of the population in Malaysia, Singapore and Thailand, which make up a $6.4 billion market together, buy online.

Source: compiled by eIQ based on Digital in 2017 and Digital in 2016.

Singapore at the moment is the dream market for ecommerce businesses as the average annual ecommerce spending per user in 2016 was $1,022. In Indonesia and Thailand, the annual ecommerce revenue per user was 4.5 times smaller.

Source: Digital in 2017, Statista Digital market outlook, e-commerce industry, January 2017.

In Vietnam, the average ecommerce revenue per user is predicted to have been $55 in 2016, the second lowest in the region only to the Philippines but the country’s eagerness to shop online makes up for it. Vietnam has the third highest ecommerce penetration (35%) in the region following Singapore (51%) and Malaysia (45%).

What does all this data tell us? That ecommerce is moving away from being a “buzzword” to a business model that traditional companies in Southeast Asia should consider adopting. The region’s real potential, either $88 billion or $238 billion, will only grow as the respective countries develop and their populations urbanize.

Indonesia’s groceries market is plentiful but fragmented. While traditional supermarkets still reign, wet markets and independent grocery stores are gradually being replaced by modern retail chains and hypermarkets, a superstore that combines a supermarket with a department store or moving to ecommerce.

With a population of more than 258 million and an emerging middle class with surging purchasing power, hypermarkets, supermarkets and online players are working hard to capture the Indonesian potential.

How will they compete for the attention of shoppers? Data. Consumer insights are valuable to  retailers and marketers because it provides them a peek into the population’s purchase patterns and product preferences, which allows implementation of successful marketing strategies.

Startup from Indonesia Snapcart aims to do exactly this for their clients. The app offers shoppers cashback and rewards in return for photos of their offline shopping receipts. Data from the receipt is then collected by Snapcart, providing a window into the shopping behavior of Indonesians, Southeast Asia’s largest market.

Snapcart has shared exclusive data with ecommerceIQ to reveal what consumers are buying on a monthly basis at the country’s top five offline grocery stores: Alfamart, Carrefour, Hypermart, Indomaret and Super Indo.

By understanding offline retail trends, retailers can adjust sales campaigns or push out creative marketing strategies to make ecommerce more attractive to shoppers. What do we mean? Here’s how marketers can improve their online marketing tactics through Snapcart offline data:

Bundling

Bundling refers to the grouping of products to maximize sales and often an effective strategy used by marketers. By selling complementary products together, it incentivizes shoppers to make a larger purchase at one time to save money and time.

Fast food companies such as McDonald’s and Burger King have seen a significant rise in sales due to the introduction of combo deals. Approximately 35% of customer visits to these chains have been to purchase a ‘meal’. Starbucks also cashes in on the bundle deal, offering a customizable $8 ‘power lunch’ that combines a sandwich, popcorn, fruit bar and a bottle of water.

However, there’s a catch. If a retailer is looking to purely sell through bundling strategy, it may backfire. Researchers from Carnegie Mellon University found that:

Companies profited best when the bundle strategy was coupled with an option to buy each piece individually.

Looking at customer data from Alfamart, baby diapers, cookies, fresh milk and cooking oil rank in the top 10 categories consistently every month.  It would be simple for the retailer to bundle fresh milk and cookies together or formula milk and diapers together to boost the sale of both category items. (see fig.1)

(fig.1)

Bundling is also used to sell less popular products. For example, cooking oil was a best seller every month at Super Indo and could be paired with an underperforming frozen package food at a promotion, to nudge shoppers with their grocery choices.

Other data also shows that Indonesians love to snack. Online retailers could offer shoppers the option to customize a snack basket online and increase basket size.  

Subscription Model

At Carrefour, instant noodles outperform every other product category each month (see chart). If consumers are purchasing large amounts of instant noodles regularly, Carrefour could introduce a subscription model.

[show-rjqc id=”61″]

 

For example, online shoppers would be able to order a customized instant noodle box, with variations in both brands and flavors, to be delivered to their homes once a month. Global brands in Southeast Asia such as NESCAFE are already adopting a subscription model strategy for everyday necessities people buy regularly such as coffee. 

Another startup from the US called Love with Food is expanding globally with a subscription-based service that sends consumers a box of all-natural, organic, and gluten-free snacks. Everything in the box comes from smaller food brands that want to get their product in front of customers.

Supermarkets lacking an online presence can create a simple popshop that will allow shoppers to sign up to have instant noodles or diapers in bulk delivered monthly to their homes.

Special Sales

Both the supermarket and distributor have the ability to push out a sale. But a sales strategy isn’t only about lowering the price of a product, it should effectively increase sales.

Discounts

A discount strategy should be used sparingly, and is effective only when a retailer awards loyal customers or happens occasionally.

Adjust pricing to increase short term sales or to boost impending dead stock to increase inventory turnover. This also means that as a retailer, you have a chance at negotiating a good deal with your product supplier as you will have increase in stock order.

For some grocery stores, they tend to offer discounts just before closing time, so discounts usually begin around 7pm-8pm.

BOGOF

The ‘buy one get one free’ strategy is arguably one of the most effective psychological pricing strategies that is used with shoppers. Consumers are typically drawn to the word ‘free’, which makes them buy more than they initially wanted but a lot of doubt surrounds this model.

British supermarkets such as Sainsbury’s and Tesco have started to phase out BOGOF deals, following the release of a report highlighting how it misleads shoppers.

Retailers actually increase the price of the product customers think they’re getting a deal on. Instead of BOGOF, a ‘buy 5 get 2 free’ strategy seems to be more effective because the price isn’t deliberately pushed up as high for the sake of luring customers. For retailers that want to adopt this strategy, choose to promote everyday items such as shampoo or cleaning detergent.

The future of groceries

The data collected from Indonesian shoppers can enhance marketing campaigns both online and offline for retailers. As grocery retailing in Southeast Asia begins to move online, chains without a digital strategy such as Carrefour and Super Indo should consider transitioning to ecommerce.

There is still potential in the country for disruption as 69% of surveyed online shoppers are millennials, which means an upcoming generation of shoppers will be accustomed to using various online channels. Retailers should be ready to capture this audience by using offline customer behavior data they already possess to align their digital strategies and effectively enhance sales across channels.

BY anutra chatikavanij