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Market research company Nielsen recently published insights about Asia’s retail landscape during the digital disruption. Two words were consistently used: ‘change’ and ‘uncertainty’.

How have the last five years affected Asian consumers, and in turn, retail performance?

1. Increasingly comfortable consumers

Almost three out of four Asia Pacific consumers believe they are financially comfortable enough to buy things because they want them. This correlates with the upgrade in everyday items, where Asian consumers are choosing more premium versions of daily necessities like milk and shampoo.

Asia Pacific benefits from vast opportunities within its own borders. This is a region with burgeoning population growth, a predominantly young workforce, improving living standards and a growing middle class with an increasing desire to spend.

Two out of three consumers across the region feel they are better off than they were five years ago, the global average is 55%.

2. More access to technology and products 

61% of consumers in Asia Pacific cite ‘improved technology’ as the key service they didn’t have access to five years ago.

More premium products, broader assortment and better technology are the key factors that have driven ecommerce forward in the region.

Access to better technology, increasing internet penetration and the rise of different online platforms mean that consumers in Asia Pacific constantly have new ways to shop, to interact with each other, and are always accessible.

37% of respondents from Asia Pacific also cite “better retail formats” as something new that did not exist five years prior.

Very simply, Southeast Asians are more financially stable than five years ago, have more access to a variety of products and technology that enables them to live comfortably. This has resulted in the much-discussed ‘ecommerce boom‘ and will continue to allow the online retail industry to flourish.

This is also the first time Nielsen has included a portion of survey results from consumers in Myanmar, an indication that the country’s developing economy will play a more significant role in Southeast Asia’s growth as a retail market to look out for. For more on Myanmar, read eIQ Insights on the country’s ecommerce potential here.


Survey results included in this article were originally published on Nielsen.

Here’s what you should know today.

1. Vietnam’s Caramo raises angel funding, wants to make buying used cars more transparent

Caramo seeks to solve problems by connecting used car buyers and sellers directly with each other, cutting out the middlemen.

An end-to-end marketplace, it helps in all stages of the transaction – from listing to after-sales services, where it connects buyers with qualified car maintenance and repair providers.

“Caramo will coordinate the paperwork and payment process, ‘till the time the buyer receives the car, and the seller gets the money,” says CEO Cong Tran.

Citing 2016 data from analysts, Caramo says Vietnam’s second-hand car market amounts to US$3 billion a year.

Read the rest of the story here.

 

2. Digital telco Circles.Life on track to capture 4-6% of Singapore mobile market

Mobile telco upstart Circles.Life entered the Singaporean market last May with an all-digital post-paid offering. Subscribers could sign up through the company’s website, monitor their usage, and switch between different plans through a sleek mobile app.

For now, Circles.Life is on track to capture 4 to 6% of Singapore’s mobile market in the next few years. At the moment, it has plans to land in Indonesia and Hong Kong by the end of 2017.

Read the rest of the story here

 

3. Recommended Reading: How fashion startup Aday came to life

Goldman Sachs analysts Nina Faulhaber and Meg He saw room in the retail market for a brand specializing in a few sturdy items made with technical fabrics that could serve as the baseline of a busy woman’s wardrobe.

Since its initial leggings launch, Aday has grown its store to also sell track pants, sports bras, tank tops, shorts and a new line of “technical tailored” clothing that includes button-down shirts and work pants.

Today, a new apparel brand throwing its hat into the e-commerce ring needs a hook more attractive than: Here’s more clothes.

Aday’s angle? Less is more. As part of its brand ethos, Aday invests in small batches of inventory at a time to gauge consumer demand.

Read the rest of the story here.

 

4. Gartner to acquire digital brand researcher L2

 IT research giant Gartner has agreed to buy New York-based L2, which specialises in benchmarking the digital performance of brands.

The company, which employs around 150 people in New York and London, will initially continue to operate independently, while Gartner focuses on integrating CEB, the HR-focused research business that it acquired.

Terms of the deal were not disclosed.

Read the rest of the story here.

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.

Indonesia Ecommerce Landscape

Mapping Southeast Asia’s Dynamic But Fragmented Ecommerce Market

In order to ‘win a market’, some online publications will say: ‘define your brand’, define your competitive advantage, ensure product-market fit, create a customer database, and/or market to the world. And while your business should encompass all these strategies, the very first step any company, old or new, should take is to identify the key players already in the field.

Southeast Asia has become a hotspot for saturation thanks to booming growth – the online sector is expected to reach more than $87 billion by 2025 and many global players such as Alibaba and Amazon are scrambling to get their own slice of ecommerce pie.

However, what new entrants often overlook or find out too late when entering the region is its fragmented nature. Every country brings with it a different set of strengths and challenges.

For any player looking to grab Southeast Asia market share, the key to unlocking its potential is knowledge. Different players exist in several market segments, and some dominate certain niche segments all hoping to solve problems or capture an untapped opportunity but the ecommerce bottlenecks vary across borders.

The ECOMScape Series by ecommerceIQ aims to bring you a complete picture of the ecommerce ecosystem in individual Southeast Asian countries from the businesses selling, to the specialists providing their online solutions, all the way to the end customer. We hope it will help you navigate the competitive space. Let’s start first with the region’s biggest and most promising market, Indonesia.

Indonesia Ecommerce Landscape: 6 Key Takeaways from Current Market Conditions

The country is on track to become one of the biggest markets in Asia with the potential to comprise 52% of Southeast Asia’s entire ecommerce value by 2025.

Despite the country’s attractive $46 billion ecommerce valuation that keeps foreign investors and companies pouring in, local players are not intimidated by the influx of global ones. What else can we tell from the bird’s eye view of Indonesia’s ecommerce ecosystem?

1. Local players are dominating the market, especially in niche sectors

Indonesian run companies are seen selling in every sector of ecommerce in Indonesia, especially C2C, Lifestyle & Travel and smaller niches that fall under the ‘Other’ category. These include marketplaces like Cipika, Qlapa, and KuKa that sell local and handcrafted products and Limakilo, a marketplace targeted at farmers.

Indonesia Ecommerce Landscape

‘Others’ category under B2C sector is filled with niche players.

Some locally owned companies such as Shoot Your Dream and AkuLaku also better understand the country’s payment pain points and allow customers to buy products via installments through their website without a credit card.

Targeting a smaller consumer segment for local players is one way to empower local SMEs to go online. It also means less competition as foreign and big players usually try to compete over a more ‘mainstream’ audience such as Lazada, Elevenia and MatahariMall.

A reason for the success of Indonesian owned companies is due to familiarity of local trends and behavior. These companies, such as Bukalapak, customize marketing campaigns to match cultural preferences and identify better with the customer.

Indonesia Ecommerce Landscape

Bukalapak’s viral video campaign for Online Shopping Day 12-12 last year, starred their CEO creating a small-budget, home-made marketing initiative while ‘apologizing’ to the executives everywhere for distracting and decreasing their employees’ productivity with big discounts offered.

Among the top 20 websites in the archipelago under SimilarWeb’s ‘Shopping’ category, more than half are native Indonesian run companies.

Indonesia Ecommerce Landscape

Even OLX and iProperty, who have the advantage of vast resources to be at the top of their respective niches as seen in the ‘Classifieds’ section, were once local companies acquired by regional players.

2. Brand.com and the rise of omni-channel

Indonesia’s most popular ecommerce model is presently the marketplace like Tokopedia and Lazada. Even in the vertical sectors like Fashion & Apparel, Electronics & Gadgets and Local & Handcrafted products, the dominant choice is still a marketplace.

This model is popular to accommodate the growing interest of SMEs and brands that want to bring their business online but lack the capital or are unwilling to take a risk jumping online with both feet.

Indonesia Ecommerce Landscape

However, as the industry matures and brands realize the importance of having an online channel, more adopt a brand.com strategy to directly reach customers.

HP and Kiehl’s are some of the big brand names in their field that recognize the potential of going online. And it isn’t restricted only to brands because offline retailers are also joining the ecommerce bandwagon.

MatahariMall and MAPEmall are just two examples of retailers with deep pockets that recently joined the online space and it’s paying off. MAP, the parent company of MAPEmall, has stated 78% year on year profit growth in August and credit their online venture as one of the main drivers.

As more customers demand convenience to shop anywhere and at anytime, it is vital that retailers complement their offline networks with an online strategy to create an omni-channel experience.

3. B2B sector is slowly gaining momentum

B2C is not the only sector that has seen an increase in online adoption. The country’s biggest industrial retailer, Kawan Lama, is among the early players making the jump to ecommerce in this sector.

The company launched a shoppable website to cater to both a B2B and B2C audience after seeing steady traffic from consumers browsing its catalogs, indicating a change in customer behavior. Another big offline retailer that followed suit is Electronic City.

Indonesia Ecommerce Landscape

However, despite the push for B2B ecommerce in Indonesia with the establishment of Indonetwork, an online directory and marketplace for SMEs catering to B2B and B2C alike, the sector is still very scarce. Bizzy and Lippo-backed Mbiz are the only significant B2B marketplaces that launched in the past year.

Indonesia Ecommerce Landscape

4. Market research is urgently needed

Due to the infancy of the industry in Southeast Asia, there is only a handful of resources that exist to help businesses make informed decisions. Even established research firms like Nielsen are having difficulty obtaining enough market data to create a comprehensive report.

Indonesia Ecommerce Landscape

The lack of knowledge and insight affects the growth of ecommerce as executives are forced to make strategic decisions based on gut thus the reservation of conservative brands going online.

ecommerceIQ aims to bridge the gap of knowledge in Southeast Asia by providing market research to executives in the form of summits, reports, insights and data.

5. More payment options to tap into the unbanked

With more than half of the population in Indonesia still unbanked and credit card penetration at only 1.4%, payment has become one of the biggest bottlenecks to ecommerce growth in the country.

Telco companies in Indonesia are one of the key contributors that help build the ecommerce ecosystem by launching their own versions of mobile wallets, a popular payments method. And it’s not surprising, considering that each telco company has their own ecommerce website.

Other popular payments gateway include Adyen, a payments unicorn used by both Uber and most recently, Grab and aCommerce. The payment gateway offers both online and familiar offline options that locals trust, such as ATM transfers.

6. Diversifying delivery services

Infrastructure is often acknowledged as one of the top barriers for ecommerce in the region, especially Indonesia where lack of public transportation, tricky island geography and under-developed roads pose serious problems.  

Ride-hailing apps are expanding their offerings to include courier services to cater to growing demands. Gojek, for example, a traditional transportation startup has become the preferred delivery method for C2C merchants and buyers as it offers same-day delivery services and a built-in tracking system at an affordable price.

Indonesia Ecommerce Landscape

The third party logistics (3PL) category is also very saturated in Indonesia. Brands are provided with so many options that it becomes a time-consuming task to find one that suits the needs of their business and consumers. Multi-shipping tech from aCommerce or Alibaba’s Cainiao aim to save time by aggregating the best options based on the price and destination.

The potential of ecommerce in Indonesia has already tempted many players, both foreign and local, to enter the market. However, it’s still a long time before a clear winner emerges from the battlefield.

Click here to download the full, high-resolution version of ECOMScape: Indonesia and join the ecommerceIQ network for the next ECOMScape in our series.

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