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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2. Social Commerce Channels are Brands’ New Sales Outlets

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

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

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

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

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

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

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

3. E-Marketplaces Launch New Services to Differentiate

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Updated (28 Feb 2019): Shopee Thailand does not have a solid plan to build its own logistics network yet. The comment was mentioned briefly in the interview with Bangkok Post which was made a focal point by the media.

While president-elect Donald Trump is working hard to stop China from becoming a global superpower, China hasn’t slowed its digital hegemony in Southeast Asia – China meaning Alibaba of course. After calling out Southeast Asia as being on the cusp of an ecommerce golden age in our 2015 trends edition, Jack Ma and his team swooped in four months later and picked up Lazada, the region’s leading ecommerce marketplace, for a crisp $1 billion.

The Lazada-Alibaba deal, Alibaba’s largest overseas acquisition to date, is a pivotal event for Southeast Asia as its implications span the entire commerce value chain from digital advertising, logistics, finance, insurance to even healthcare.

A look back at 2016

Even without the Lazada deal, this year still proved eventful for ecommerce in the region: Fast-fashion fizzled out and Rocket Internet’s Zalora ending up selling for peanuts to Thai retail conglomerate Central Group.

Singpost’s headaches continued after the sudden removal of its Group CEO Wolfgang Baier in 2015, the company also lost its COO, CFO and the group’s chairman stepped down amidst a corporate governance scandal. These events pushed back the company’s deal with Alibaba a third time and wasn’t closed until October.

Across the region, asset-heavy B2C ecommerce suffered. Singapore homegrown RedMart was acquired by Lazada after it couldn’t bleed anymore money and Ascend Group’s iTruemart shut down in the Philippines only a few months after boasting to become the first Thai regional ecommerce player by 2017.

Japan’s ecommerce juggernaut Rakuten withdrew from Southeast Asia and sold its Thailand business back to the original founder. Moxy moved away from traditional mass ecommerce while merging with Indonesia’s Bilna to become Orami, a female-focused content and commerce play that raised funding from Facebook co-founder Eduardo Saverin.

Borrowing Jack Ma’s terminology, if 2016 was the appetizer, then 2017 will be the main course for ecommerce in Southeast Asia. With a $238 billion grand prize and Amazon poised to enter Singapore in Q1, it’s already shaping up to be an interesting year.

Game on.

1. The giant finally awakens: Alibaba becomes more active post-Lazada acquisition

Arguably the biggest ecommerce milestone in Southeast Asia this year was Alibaba’s $1 billion acquisition of Lazada but not much action has taken place at surface level since the deal. That is slowly changing already and Alibaba will soon introduce its entire ecommerce ecosystem to Southeast Asia in the coming year. It consists of Ant Financial, Cainiao and the Taobao Partner (TP) program just to name a few.

Launched in China seven years ago, the TP program aims to enroll suppliers to provide ecommerce related services to Taobao’s merchants. TPs such as Baozun and Lili & Beauty offered store operations and fulfillment services that enabled Taobao and Tmall to grow into two of the biggest ecommerce platforms in China.

The imminent launch of a similar program in Southeast Asia (ahem, Lazada Partners?) will create ample opportunities for an entire ecosystem ranging from digital agencies to delivery companies. Full-service ecommerce enablers such as aCommerce and SP eCommerce are well-positioned to further grow the $238 billion Southeast Asian ecommerce opportunity.

2. Last-mile logistics will get commoditized, accelerated by Alibaba’s Cainiao Network

Logistics is often considered the biggest bottleneck to ecommerce growth in Southeast Asia and has therefore resulted in plenty of venture capital funding spawning an army of last-mile and on-demand delivery startups such as Ninja Van, Ascend Group’s Sendit and Skootar. Even cab and bike hailing apps like Go-Jek and Grab have tapped into delivery services as an additional revenue stream. All this has added pressure to incumbents like Kerry Logistics, DHL and JNE who are only scratching the surface in the fast-paced ecommerce logistics space.

This nascent, fragmented and hyper-competitive ecosystem is similar to that of China a decade ago and what spurred Alibaba to launch Cainiao Network, an open platform that aggregates all last-mile vendors. This asset-light approach addressed Alibaba’s weakest link—logistics—and enables the company to leverage its massive demand to control the conversation.

Over 70% of business for third-party logistics (3PLs) in China now come from ecommerce of which Alibaba drives the vast majority. This allows them to set industry standards and increase price competition among last-mile providers, essentially turning the latter into a race-to-the-bottom, commodity play.

Alibaba has already begun bringing in Alipay and Ant Financial and with Southeast Asia’s logistics ecosystem following China’s trajectory, the introduction of Cainiao Network is only a matter of time.

Cainiao Network is Alibaba’s missing piece of the puzzle to control the entire ecommerce value chain – Cainiao Network Business Model

2017 ecommerce trends

3. The battle for “first-mile”: New threats to Google and Facebook

Few people realize that ecommerce giants like Alibaba and Amazon aren’t only a threat to their direct competitors such as JD and Wal-Mart but also to the likes of Baidu and Google.

With product searches increasingly moving off search engines and directly on to ecommerce sites, Alibaba and Amazon are shaking up internet advertising. In the US, 55% of people now start product searches on Amazon, up from 44% in 2015. This is a big deal because product searches are one of the most lucrative search keyword categories commanding high cost-per-clicks.

In China, the rivalry between Alibaba and Baidu has led the former to block Baidu’s search engine spiders from crawling and indexing Alibaba’s pages since 2009, effectively preventing users from going to Baidu to search for products.

Expect this battle for “first-mile” to kick off in 2017 in Southeast Asia when Alibaba migrates Lazada over to its Tmall platform and introduces Alimama, its proprietary self-service ad platform similar to Google Adwords.

Merchants on Lazada will have access to a variety of PPC (Pay-Per-Click), CPM (Cost-Per-Thousand Impressions) and CPS (Cost-Per-Sale) based advertising such as Tmall’s P4P “Express Train” PPC search ads. These ads command an impressive 25% of China’s total online search traditionally dominated by Baidu. To give an idea of Alibaba’s progress in search advertising, Google China’s search ad market share peaked at 30% before throwing in the towel and exiting the Chinese market.

Alibaba’s ad business is more than just search. In addition to Alimama, it also operates an affiliate platform called Taobao Affiliate Network, a display ad network called TANX (Taobao Ad Network and Exchange) as well as a Data Management Platform that rivals Oracle’s Bluekai and Adobe’s Audience Manager.

Media companies better brace themselves for new competition and digital agencies should start learning how to buy and optimize media on the Lazada platform in 2017.

4. Alipay’s entrance into Southeast Asia will drive consolidations in the online payments sector

The new year will mark the beginning of consolidation in the payments space in Southeast Asia. Cash-on-delivery (COD) dominance—75% of ecommerce transactions in the region—has inspired a plethora of startups like Omise and DOKU and established telcos and banks to build the next PayPal.

But most of these initiatives don’t address the core of the issue—lack of credit card penetration and a large population of unbanked in Southeast Asia. For example, LINE Pay, the Apple Pay-esque solution from one of Southeast Asia’s most popular messaging apps, only works with credit cards. While great from a PR perspective, these initiatives have yet to shift consumers away from COD.

Majority of fintech ‘solutions’ have been created to do “technology for technology’s sake”— building a faster car when what is really lacking are more roads.

Lacking what’s most important—scalable distribution channels—we expect these payment companies to struggle throughout 2017. With Lazada, Alibaba pulled off the ultimate trojan horse strategy to bring in Alipay and Ant Financial into the region. The marketplace offers a massive user base and distribution channel that most Southeast Asian payment startups envy.

2017 ecommerce trends

5. “Ecommerce 1.0” to “Ecommerce 2.0”

As previously predicted, Rocket Internet’s Zalora had to sell its Thailand and Vietnam businesses for chump change to local retailer Central Group. This same year, Cdiscount Thailand, part of French retail conglomerate Groupe Casino, was sold for $31.5 million to TCC, a local Thai company that also owns popular beer brand Chang.

Alibaba’s presence and the rumored Amazon launch in Singapore in Q1 2017 closes the window of opportunity for “Ecommerce 1.0” plays—those that peddle other people’s products to a mass audience. Even MatahariMall, the “anti-Lazada” ecommerce initiative launched by Indonesian conglomerate Lippo Group, has re-positioned itself as an online-to-offline ecommerce play rather than a direct competitor to Lazada.

As we enter 2017, the opportunity in ecommerce will increasingly shift from “Ecommerce 1.0” towards “Ecommerce 2.0” where firms will base their competitive advantage not on traditional economies of scale but on a mix of what Bonobos’ founder Andy Dunn calls proprietary pricing, selection, experience, and merchandise.

Whereas Ecommerce 1.0 is a game of brute force and strength, Ecommerce 2.0 exploits 1.0 loopholes in many creative ways to avoid the zero-sum game against the likes of behemoths like Alibaba and Amazon.

It’s encouraging to see companies in Southeast Asia already moving towards Ecommerce 2.0. Pomelo Fashion, an online-only, direct-to-consumer fashion brand, focuses on building its own brand and vertically integrating its supply chain by manufacturing its own apparel.

In Indonesia, another startup has taken a cue from the Facebook and Instagram seller playbook, and put it on steroids. Sale Stock, a fast-fashion startup based in Jakarta, has taken a similar path to Pomelo Fashion with its own unique, experiential angle.

With an increasing amount of Sale Stock orders coming from chat sessions on its mobile website, the company has invested in and launched the region’s first ecommerce chatbot to process mobile chat orders on Facebook Messenger, built by former Google, Palantir, and NASA engineers.

2017 ecommerce trends

6. Expect more casualties from a potential Alibaba and Amazon face-off

2016 was a big year for consolidations in the Southeast Asian ecommerce space:

  • Zalora Thailand and Vietnam sold for scraps to Thai retail conglomerate Central Group
  • Cdiscount was picked up by Thai tycoon Charoen Sirivadhanabhakdi’s TCC Group
  • Female-focused ecommerce player Moxy re-emerged as Orami after merging with Indonesia’s Bilna
  • Japan’s Rakuten shut down its Indonesia, Malaysia and Singapore marketplaces as well as returning its Thailand business to its original founder
  • Singapore-based online grocer RedMart sold for less than it raised to Lazada on the heels of a rumored Amazon entry into the market with AmazonFresh

And they will continue throughout 2017, especially in the hyper-competitive “Ecommerce 1.0” space. One of the big victims could be Thailand-based Ascend Group, which owns a portfolio of ecommerce and fintech assets such as Wemall (B2C) and WeLoveShopping (C2C). There have already been signs.

Its Philippines entity, launched in late 2015, shutdown this year. And with the company’s focus on fintech—it sold a 20% stake in Ascend Money to Ant Financial this year—Ascend may pull out of retail ecommerce for good come 2017.

7. Brands skip the marketplace bait-and-switch and go direct-to-consumer or multi-channel

There are many benefits for brands to sell on the likes of Lazada, MatahariMall and 11street—relatively quick setup and access to “free” traffic generated by the host marketplace. And that’s why 2016 saw many brands like L’Oreal and Unilever setting up shop on these platforms.

However, brands are gradually discovering that the cons outweigh the pros. Marketplaces collect huge amounts of data that pinpoint exactly which product categories and brands sell well, at what time and which location, and to whom. Amazon has leveraged this valuable information to introduce its own private labels to compete with its merchants.

In 2017, we will see brands getting smarter and leveraging a marketplace presence as an initial and short-term strategy. The long-term strategy is to sell direct-to-consumer via their brand.com sites where they own all the customer data, control of brand image and can offer features like subscription commerce.

2017 ecommerce trends

Others might adopt a multi-channel approach instead and use marketplaces to sell lower-end and lower price point products while reserving the brand.com channel for a more premium experience.

8. Hyper-competition will drive entrepreneurs and established firms to explore insurance, finance and healthcare

With ecommerce being hyper-competitive and capital heavy, entrepreneurs have started to look beyond physical retail for new opportunities. Following a similar trajectory as the US and China, startups in Southeast Asia will gradually move into insurance, finance and healthcare. The underlying concepts are the same—use the internet and technology to create marketplaces or go direct-to-consumer for non-physical products such as loans, life insurance and even data.

2016 saw new fintech startups such as EdirectInsure—with frank.co.th in Thailand and frankinsure.com.tw in Taiwan—trying to change the way car insurance is being sold as well as incumbents such as Asia Insurance offering Pokémon Go and mobile phone micro-insurance direct-to-consumer and exclusively online.

Alibaba’s acquisition of Lazada wasn’t so much about growing retail gross merchandise volume as it was about getting a scalable distribution channel for Alibaba’s other, higher-margin products. Jack Ma publicly alludes to it in his 2015 letter to shareholders:

“Alibaba group’s strategy is to build the infrastructure of commerce for the future. Ecommerce is only the first step. […] Around half of Alibaba Group’s workforce and our affiliated companies, including Ant Financial and Cainiao, are working on important areas of our ecosystem, including logistics, Internet finance, big data, cloud computing, mobile Internet, advertising and the so-called double H industries—Health and Happiness (the big data-based healthcare and digital entertainment businesses which will take 10 years to become data-driven).”

2017 ecommerce trends

Expect a roll-out of Alipay and Ant Financial related services (banking, credit scoring, mutual funds, etc.) towards the end of 2017. In addition, we will see more incumbents such as traditional banks, insurers and healthcare businesses moving online.

9. Ignored but not forgotten, companies will focus on the last remaining vestige in Southeast Asia: Myanmar

Businesses will be exploring new markets geographically in Southeast Asia as large markets saturate making greenfield ones like Myanmar more appealing.

With 53 million people, Myanmar is the fifth largest country in Southeast Asia. The country is also very unique compared to its neighbours as the country was shut off from the world until 2011 and is currently leapfrogging straight into the mobile era. Unlike its cousins who are “mobile-first”, Myanmar is mostly “mobile-only”—an estimated 20% of the population is online, most of which happened in the last two years.

Rocket being Rocket went into Myanmar as early as 2012 launching classifieds sites like Work.com.mm and Ads.com.mm. Its first proper ecommerce venture in Myanmar called Shop.com.mm got its start in late 2014. With an average of 90,000 sessions per month for the last six months and flat growth, Shop.com.mm doesn’t exactly paint a positive picture of the ecommerce opportunity in Myanmar.

However, given that Myanmar has 10 million Facebook users in the country, perhaps marketing an ecommerce business the traditional way isn’t the right approach. With so much of Myanmar’s internet usage attributed to social channels, starting out on Facebook shops may be a better way to tap into what could be one of the most interesting future ecommerce markets in Southeast Asia.

2017ecommerce trends

(Source: Minzayar Oo / BuzzFeed News)

This has already been proven effective in Thailand where an estimated one-third to half of ecommerce transactions are happening on Facebook, Instagram and LINE. One would expect chat commerce to be even more pervasive in Myanmar.

“Facebook’s influence in Myanmar is hard to quantify, but its domination is so complete that people in Myanmar use “internet” and “Facebook” interchangeably.”—Sheera Frenkel in a BuzzFeed report on Myanmar.

10. On-demand in Southeast Asia will whittle down to a few industries where the model actually makes sense

Once hailed by pundits as the holy grail of ecommerce thanks to zero burden of costly physical assets, on-demand seems to be nearing its end in the US. Other than Uber itself, many Uber-for-X clones have shut down or are struggling such as Homejoy, SpoonRocket, DoorDash, and Postmates to name a few.

Poor unit economics, platform leakage, and a stronger economy in general are all issues that have plagued on-demand startups over the past year.

In Southeast Asia, things haven’t been much brighter for on-demand startups. Happy Fresh, a groceries on-demand service, recently shut down its Taipei and Manila offices while going through a round of layoffs. It also quietly replaced its former founder and CEO Markus Bihler with a new guy. In Thailand, Inspire Ventures-backed Tapsy, a personal services marketplace, also shut down only few months after launching.

Go-Jek, Indonesia’s bike-hailing and now on-demand everything unicorn, suffered through an exodus of founders, with both its co-founder and VP of product leaving the company in October, triggering suspicions of internal turmoil.

While general sentiment for on-demand startups has taken a hit both globally and across Southeast Asia, in reality this is only the start of a natural process of weeding out all the “me-too” players in verticals where the on-demand model doesn’t make sense.

“The issue isn’t with the concept of something being available “on demand”. It’s whether a consumer or a business will pay a premium in order to have access to it immediately. Just because you make something available on demand, it doesn’t mean people will pay for it,” said Mathew Ward, co-founder and CEO of Helpster, the Bangkok-based company that matches employers with candidates seeking blue-collar jobs.

He continues,

“Home services is one area that is ‘nice to have’ access to instantly, but not a ‘must have’.  People won’t pay a premium for it and your unit economics don’t work, this is why we have seen so many of these fail. If you focus on things that have urgency such as transport or in Helpster’s case, access to qualified staff to fill an urgent staffing need, people will pay a premium and therefore you can build a business that actually works. The “on-demand” model isn’t broken – you just have to look for areas where speed of access is incredibly valuable. If you do, you can build a successful, thriving “on-demand” business.” 

2017 ecommerce trends

With Southeast Asia’s funding sentiment shifting in 2017 from growth at all costs towards sustainability and profitability, we expect to see on-demand startups thrive in verticals where the model works while other “me-too” ones fizzle out. The process will only be exasperated by the likes of Uber and Grab doubling down on Southeast Asia with their massive war chests.

11. Amazon to enter Southeast Asia (finally)

“Keep your friends close but your enemies closer.”—Michael Corleone in The Godfather Part II

2017 ecommerce trends

BY SHEJI HO, CMO AT ACOMMERCE.