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Coffee is the second-most traded commodity in the world after crude oil. The ubiquitous drink commands a sizable US$100 billion market globally, with exports accounting for US$20 billion.

But as traditional coffee drinking markets in the West exhibit signs of stagnation, Asia is stepping up to fill the void. Indonesia, India, and Vietnam are ranked within the top five fastest-growing markets in the world.

 

Part of the reason behind this spurt is product innovation in the value chain. The number of new coffee products in Asia rose by 95% between 2011 and 2016, offering consumers tantalizing choices and catering to local palettes.

Specifically, it was the growing role of coffee pods that spurred and accounted for 26% of global coffee retail innovation in 2016.

“As emerging market consumers develop their taste for coffee, innovation is stepping up a notch as drinkers trade up from instant to fresher-tasting coffee […] pod and capsule sales will [continue to] increase,” says Johnny Forsyth, global drinks analyst at Mintel.

This presents a rare opportunity for FMCG brands to cash in. Tea has generally been the caffeinated drink of choice across most of Asia but a combination of glitzy marketing, an increased footprint of global coffee brands like Starbucks, and “cafe socialization” is changing habits.

Nescafe Dolce Gusto doubles down on Asia

The Dolce Gusto machine was first introduced by Nescafe in 2006 as a cheaper alternative to its premium Nespresso offering. The mechanics are similar; consumers insert ‘pods’ of coffee to make instant drinks like cappuccinos, latte macchiato, espresso, and hot chocolate.

Sales of the machines have been rising steadily in Asia due to Nescafe’s social media campaigns to engender brand loyalty.

The company launched its first Southeast Asian customer relationship management program in Singapore. The email marketing campaign segmented users based on their individual profiles and alerted them about offers, new flavors, and seasonal products.

“From the highly-engaged Facebook following, we know that consumers enjoy that the brand is sophisticated but not too serious […] It has allowed us to develop a new, innovative programme which really engages members,” said Will Adeney, VP of marketing analytics for Ogilvy One.

More recently, in Malaysia, Nescafe deployed social listening strategies to further entrench Dolce Gusto as a fan-centric brand. The company learnt coffee drinking wasn’t an activity done in isolation; connoisseurs loved to document it on social media with a prodigious amount of hashtags. Engagement from followers was robust.

Key themes and hashtags linked to coffee in Malaysia.

This helped Nescafe develop marketing campaigns around user-generated content. Its fans were already posting brand images on social – why not give them an enhanced platform?

Nescafe leveraged user-generated content along with its own collateral.

Why does this matter? Because according to Nielsen, the most credible advertising comes from people we know and trust.

83% of people have faith in the recommendations of friends and family.

Another interesting caveat: 53% of millennials indicated that user-generated content has influenced their purchasing decisions.

To tackle developing markets like Thailand, Nescafe launched a subscription commerce campaign powered by ecommerce enabler aCommerce. The offer, first introduced in August 2016, enticed consumers to sign up for a yearly subscription of coffee pods with the perk of a free Dolce Gusto machine.

Consumers only needed to pay via credit card, which would be billed automatically every month for a total of 12 recurring payments. It was a novel concept in Thailand, which still mainly relies on cash-on-delivery as its primary payment mechanism.

But the success of the campaign prompted the global coffee behemoth to launch another similar subscription campaign, this time revolving around Nescafe Gold & CoffeeMate.

Blending online & offline

Coffee drinking in Asia may be accompanied by a blitz of social media activity, but there’s a large offline component, too. It’s a way for friends and family to bond, building meaningful experiences and connections along the way.

It’s because of this factor Nestle has relied on pop-up campaigns inside shops and department stores. Visitors to a Tokyo mall last month were greeted by Pepper, the famous humanoid robot, who proceeded to ask them if they wanted a coffee.

An embedded tablet helped determine the size, type, and strength of the beverage and payments were facilitated via Alipay.

The timing of the campaign deliberately coincided with Chinese New Year celebrations and was designed to grow the brand in mainland China, where Starbucks is aggressively promoting its stores.

Another campaign in Australia placed expertly-trained staff across large department stores in the country to educate potential customers about the benefits of Dolce Gusto machines.

This particular promotion targeted Mother’s Day, typically one of the busiest retail days in Australia.

In 2013, Credit Suisse analysts estimated that about 55 % of Nestle’s coffee sales came from developing markets.

Such continued product innovation and catchy campaigns probably mean the figure is much higher now.

To tackle new and competitive markets like Southeast Asia, the best retail strategy is a blend of online strategies like subscription commerce to capture Internet-savvy consumers and traditional offline customer touchpoints to win over the world’s next population of coffee drinkers.

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.

As the year’s largest online sales campaigns wrap up, research from Google and Temasek predict Southeast Asia is well on its way towards becoming a digital powerhouse worth much more than $200 billion USD in eight short years. How did shoppers behave during Single’s Day in light of all the work poured into gaining their trust and promoting online shopping?

From exclusive updates provided by the companies to ecommerceIQ, here is how Google’s recent report correlates with real time results.

Lazada Group Single’s Day and Online Revolution:

  • Single’s Day (11.11) generated USD$123 million gross merchandise value (GMV), 171% year-on-year growth
  • Shoppers ordered 6.5 million items, 191% year-on-year growth
  • 70% of orders were placed from mobile devices
  • Sells 12 limited edition Volkswagen Beetles within 20 minutes, each costing RM112,112 (USD$27,441) during Lazada Malaysia Online Revolution (12.12)
  • Apple products offered officially on Lazada as the brand’s authorised online reseller, opens shop-in-shop (SiS)

11street Malaysia 

  • 600% increase in cross-border product orders, 400% increase in total orders (compared to a regular day)
  • Most popular products: GPS, mobile accessories, smartphones, TV sets, theme park tickets
  • Traffic to the website doubled, 85% contributed by mobile

Shopee 9.9 Mobile Shopping Day 

  • 350% increase in orders, 500% increase in traffic
  • Most popular products: make up brushes, smart watches, canvas backpacks
  • 7 million chats, 30,000 participating sellers
  • Highest number of items ordered by one buyer was 218
  • Find more here

The results from this year’s mega sales campaigns work well with new predictions by Google & Temasek in their latest e-Conomy SEA Spotlight report:

  • Ecommerce sales of first-hand goods will reach $10.9 billion in GMV in 2017, up from $5.5 billion in 2015 (driven by top players like Lazada, Shopee, and Tokopedia)
  • Southeast Asia’s internet economy will reach $50 billion in 2017, growing at 27% CAGR
  • The region’s internet economy accounts for 2% of Southeast Asia’s GDP, will increase to 6% by 2025
  • There will be 330 million monthly active internet users by year end, 90% of which are smartphone users
  • Search interest for ecommerce brands growing more than two-fold in two years thanks to promotional activities and marketing investments by leading regional/global ecommerce players and co-marketing initiatives with top brands in electronics, fashion and consumer goods industries.

ecommerceIQ

It’s shaping up to be a good end to 2017 for ecommerce players, investors and shoppers in Southeast Asia. Stay tuned for 2018 ecommerce predictions.

For more charts & graphs related to ecommerce in Southeast Asia, check out our database.

ASEAN Today and its Digital Potential

The number of internet users has grown rapidly over the past decade and today two-fifths of the world’s population is online. Increasingly equipped with smartphones, consumers depend on the Internet for a growing range of everyday activities, from connecting with friends and family to shopping and banking. Businesses also harness the Internet extensively across their operations. A complex dynamic value chain comprising both global and local players has developed to deliver digital services to consumers and businesses. The digital economy’s value chain broadly consists of three elements: devices, networks, and applications.

By 2025, a digital revolution could transform daily life in ASEAN, making physical cash obsolete and cities smarter safer places to live.

Download the full report: ASEAN Digital Revolution AT Kearney

APAC registered the largest absolute growth in internet user numbers – up nearly 200 million users – which translates to an impressive 12% year-on-year growth. At that pace, APAC saw half a million people use the internet for the fist time every single day in the past twelve months – that’s six new users every second.

The jump in internet users may be partly the result of improved reporting, rather than representing absolute growth in user numbers. We’ve also managed to obtain reliable numbers for social media in countries where previously we had no data, but the overall growth story is still highly compelling despite these caveats. So, just how fast have the numbers been growing since our 2015 global report last January?

  • The number of reported internet users is up by 10%, growing by 332 million
  • The number of reported social media is up by 10%, an increase of 219 million
  • Unique mobile users increased by 4% thanks to 141 million new users
  • Mobile social media users leapt 17%, adding 283 million new users

Check out the presentation at: Digital in 2016 – We Are Social Singapore

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