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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:

CategoryNumber of SKUsNumber of RatingsAvg. RatingNumber of ReviewsAvg. Length of Review (Character Count)Number of SKUs with at least one ratingNumber of SKUs with at least one reviewRatings per SKUReviews per SKURating Penetration (% of SKUs with at least one rating)Reviews Penetration (% of SKUs with at least one review)
Health & Beauty2,93871,5204.3933,002982,0061,929361768%66%
Mother & Baby96250,4764.3823,97074693688733572%72%
Bags and Travel1,2876,1853.963,165607827388461%57%
Home Appliances7075,3774.222,6076942140213660%57%
Fashion1,4833,9314.371,761505835647339%38%
Computers & Laptops5481,2694.121,5516310099131618%18%
Mobiles & Tablets361,2393.972,300762626488872%72%
Groceries1061,2184.4644138565022953%47%
Furniture & Décor8751,0674.09795542912794333%32%
Cameras357014.49309452727261177%77%
Toys & Games8015544.46253531531284219%16%
Laundry & Cleaning1404664.521075860478243%34%
TV, Audio / Video, Gaming & Wearables933724.1444581464681049%49%
Watches Sunglasses Jewellery6872353.863137493923314%13%
Bedding & Bath6551973.592105666593410%9%
Motors681784.501425945454366%66%
Tools, DIY & Outdoor33814.6612337333124100%94%
Pet Supplies74324.4875555617%7%
Sports & Outdoors5674.17854661111%11%

Key Metrics By Brand:

BrandNumber of SKUsNumber of RatingsAvg. RatingNumber of ReviewsAvg. Length of Review (Character Count)Number of SKUs with at least one ratingNumber of SKUs with at least one reviewRatings per SKUReviews per SKURating Penetration (% of SKUs with at least one rating)Review Penetration (% of SKUs with at least one review)
L'Oreal Paris (Thailand)79821,4834.388,67481597570361675%71%
BabyLove (Thailand)12915,2754.405,898471041041475781%81%
Maybelline (Thailand)46412,3174.204,62649342313371574%67%
MamyPoko (Thailand)18511,1694.533,93349160160702586%86%
Garnier (Thailand)1909,3714.443,95387126125753266%66%
FOREMOST (Thailand)216,7504.162,25650202033811395%95%
Huggies (Thailand)1776,4084.626,408138102102636358%58%
Tesco Lotus (Thailand)9965,5943.962,812587186818572%68%
Vaseline (Thailand)1184,9334.464,0741946868736058%58%
La Roche Posay (Thailand)954,5904.632,255888383562887%87%
Durex (Thailand)934,0864.601,117406262661967%67%
Enfagrow (Thailand)643,6564.261,651545049743478%77%
Dove (Thailand)1223,3324.502,5631917676443462%62%
S-26 (Thailand)812,9984.131,385597269422189%85%
Sabina (Thailand)9392,3964.39988482942949431%31%
Yves Rocher (Thailand)3652,1454.427565820920411457%56%
Tefal (Thailand)2561,9484.249017215414213760%55%
Nivea (Thailand)2351,8574.238735710910718946%46%
Dumex (Thailand)1561,7333.761,334589696191462%62%
Lesasha (Thailand)861,6464.04889647575221287%87%
Tresemme (Thailand)701,4594.45703844236352060%51%
Black & Decker (Thailand)691,4594.24705796665231196%94%
Kira Kira (Thailand)191,3604.325146219197228100%100%
Vichy (Thailand)521,2664.59949704949262094%94%
Dettol (Thailand)341,0524.44379382725391679%74%
Citra (Thailand)389654.376821841918513850%47%
3M (Thailand)3029124.26330521471427349%47%
AJ (Thailand)698254.11576614040211558%58%
Nubia (Thailand)158103.981,33010312126811180%80%
Wacoal (Thailand)1547354.403374592928460%60%
Asus (Thailand)1947314.161,243584949152625%25%
Eneloop (Thailand)246524.52295452121321588%88%
Sunsilk (Thailand)656284.2831640424215865%65%
Levi's (Thailand)2616054.27303611361175352%45%
Ensure (Thailand)405914.5420257313120778%78%
Lego (Thailand)7545394.47248541481234320%16%
Pampers (Thailand)165104.842738720202614125%125%
Inter Steel (Thailand)4784844.14310541641593234%33%
3M Scotch-Brite (Thailand)1404664.521075860478343%34%
Vivo (Thailand)144143.95785421212356686%86%
JBL (Thailand)643674.1344282454591070%70%
Huawei (Thailand)43674.132027418172112450%425%
Merries (Thailand)93194.781175788401589%89%
RF Furniture (Thailand)642914.572683337378858%58%
Physiogel (Thailand)452634.64765734288376%62%
Curel (Thailand)282354.739867202012571%71%
Kuron (Thailand)242294.4311464151516863%63%
Xiaomi (Thailand)52224.3699931211199240%220%
Ray-Ban (Thailand)2542203.902997685853433%33%
3M Filtrete (Thailand)72204.197582773211100%100%
Samsonite (Thailand)422003.9716274191911945%45%
His & Her Shopsmart (Thailand)2251663.81886030246413%11%
HP (Thailand)3081583.9781772424748%8%
ADHOME (Thailand)1771513.54988349434328%24%
Enfa (Thailand)351373.72674318178451%49%
Pediasure (Thailand)601354.681035921217535%35%
3M Scotch (Thailand)601304.49675633334355%55%
Nescafe Dolce Gusto (Thailand)181284.61444016148489%78%
EMJOI (Thailand)101244.50827777181270%70%
G2000 (Thailand)991144.13765546463246%46%
Index Living Mall (Thailand)61003.9413359771519117%117%
Platong Furniture (Thailand)116993.18779334333329%28%
Era-won (Thailand)30814.77575915156450%50%
PR Shop (Thailand)637803.0760615447228%7%
PXTools (Thailand)6534.698137181835300%300%
Panasonic (Thailand)9494.141448669367%67%
Fit Auto (Thailand)8484.557561121247150%150%
Purina One (Thailand)3294.7456233102100%100%
DG (Thailand)10264.2431413391130%30%
Energizer (Thailand)26264.76156213112250%42%
U-RO Decor (Thailand)8194.4032673371138%38%
Finish (Thailand)8194.65651445250%50%
3M Command (Thailand)12174.001730554442%42%
Eastern Trade Commercial (Thailand)3173.998713363100%100%
Fisher Price (Thailand)47154.56557553111%11%
Samsung (Thailand)7154.20185332289329%29%
Lenovo (Thailand)21134.1125175992343%43%
LG (Thailand)2114.2671445432250%200%
Essence (Thailand)37104.93523752119%14%
Oakley (Thailand)8593.57105833344%4%
Vanish (Thailand)994.90774225422%22%
3M Post-it (Thailand)5674.17854662211%11%
Koncept (Thailand)2964.8021211623%3%
Bose (Thailand)2954.8036711533%3%
Vogue (Thailand)27842.6723732211%1%
Royal Canin (Thailand)7132.0024022213%3%
Big Home Furniture (Thailand)1934.00430331216%16%
Dyson (Thailand)225.0013752217100%100%
Safetydoor (Thailand)123.00272522114200%200%
Diesel (Thailand)4911.0014411112%2%
Timberland (Thailand)2115.0012711115%5%
Ricoh (Thailand)500000%0%
Microsoft (Thailand)1600000%0%
Unbranded/Generic (Thailand)200000%0%

Full Raw Data:

CategoryBrandNumber of ratingsAvg. ratingNumber of reviewsAvg. length of review (character count)Number of SKUsSKUs with at least one ratingSKUs with at least one review
Furniture & DécorADHOME (Thailand)33.301949311
Bedding & BathPR Shop (Thailand)11.001645211
Computers & LaptopsLenovo (Thailand)54.1513204822
Health & BeautyVaseline (Thailand) 4,9334.46 4,0741941186868
Health & BeautyDove (Thailand) 3,3324.50 2,5631911227676
Health & BeautyCitra (Thailand)9654.37682184381918
Home AppliancesLG (Thailand)64.275178133
Computers & LaptopsLenovo (Thailand)84.08121431377
Bedding & BathPR Shop (Thailand)13.0021421711
Mother & BabyHuggies (Thailand) 6,4084.62 6,408138177102102
Bedding & BathPR Shop (Thailand)15.0011203511
Home Appliances3M (Thailand)44.752105522
Mobiles & TabletsNubia (Thailand)7534.03 1,3211041299
Bags and TravelTesco Lotus (Thailand)5113.843049815655
Furniture & DécorEastern Trade Commercial (Thailand)73.40496111
Bags and TravelXiaomi (Thailand)2034.329496398
Furniture & DécorPlatong Furniture (Thailand)993.1877931163433
Home AppliancesBlack & Decker (Thailand)3924.221629171817
Health & BeautyLa Roche Posay (Thailand) 4,5904.63 2,25588958383
Health & BeautyGarnier (Thailand) 9,3714.44 3,95387190126125
Mother & BabyPampers (Thailand)5104.8427387162020
Health & BeautyTresemme (Thailand) 1,4594.4570384704236
Furniture & DécorEastern Trade Commercial (Thailand)-0.001831--
Home Appliances3M (Thailand)63.50283422
Computers & LaptopsHuawei (Thailand)353.622183276
Home Appliances3M Filtrete (Thailand)2204.197582777
TV, Audio / Video, Gaming & WearablesJBL (Thailand)3674.1344282644545
Health & BeautyL'Oreal Paris (Thailand) 21,4834.38 8,67481798597570
Computers & LaptopsHP (Thailand)1583.9781773082424
Health & BeautyEMJOI (Thailand)1244.5082771077
Bags and TravelTesco Lotus (Thailand)544.002876151311
Home AppliancesBlack & Decker (Thailand) 1,0674.2554376624848
Watches Sunglasses JewelleryRay-Ban (Thailand)2203.90299762548585
Home AppliancesTefal (Thailand)6974.17315751146862
Home AppliancesDyson (Thailand)25.001375222
Furniture & DécorADHOME (Thailand)1483.5497751744842
GroceriesVanish (Thailand)94.90774922
Bags and TravelSamsonite (Thailand)2003.9716274421919
Computers & LaptopsHuawei (Thailand)3324.191817321111
Bags and TravelTesco Lotus (Thailand)2163.5812573182323
Bags and TravelTesco Lotus (Thailand)893.706172553333
Health & BeautyVichy (Thailand) 1,2664.5994970524949
Home AppliancesTefal (Thailand) 1,2514.29586701428680
TV, Audio / Video, Gaming & WearablesBose (Thailand)54.803672911
Furniture & DécorU-RO Decor (Thailand)194.403267833
Health & BeautyCurel (Thailand)2354.739867282020
Bedding & BathPR Shop (Thailand)63.132657642
Home Appliances3M (Thailand)1314.2049651244
Bags and TravelHis & Her Shopsmart (Thailand)854.045064791311
Health & BeautyLesasha (Thailand) 1,6464.0488964867575
Health & BeautyKuron (Thailand)2294.4311464241515
Furniture & DécorInter Steel (Thailand)413.93963876
Home AppliancesAJ (Thailand)3294.0727763221111
Computers & LaptopsAsus (Thailand)3234.5374662472929
Mother & BabyKira Kira (Thailand) 1,3604.3251462191919
Pet SuppliesPurina One (Thailand)294.74562333
Tools, DIY & OutdoorEnergizer (Thailand)264.761562261311
Bedding & BathPR Shop (Thailand)21.0026211322
Bags and TravelXiaomi (Thailand)15.00161111
MotorsFit Auto (Thailand)484.55756181212
Bedding & BathIndex Living Mall (Thailand)744.4511561344
FashionLevi's (Thailand)6054.2730361261136117
Motors3M Scotch (Thailand)884.484661362121
Bags and TravelHis & Her Shopsmart (Thailand)213.973603563
Home AppliancesLG (Thailand)54.25260121
Bags and TravelTesco Lotus (Thailand)723.992960181713
Bags and TravelTesco Lotus (Thailand) 1,4933.8975159211138134
FashionEra-won (Thailand)814.775759301515
Mother & BabyS-26 (Thailand) 2,9984.13 1,38559817269
Home AppliancesAJ (Thailand)4964.1429959472929
Mother & BabyPediasure (Thailand)1354.6810359602121
Laundry & Cleaning3M Scotch-Brite (Thailand)4664.52107581406047
Watches Sunglasses JewelleryOakley (Thailand)93.5710588533
Health & BeautyYves Rocher (Thailand) 2,1454.4275658365209204
Mother & BabyDumex (Thailand) 1,7333.76 1,334581569696
Toys & GamesFisher Price (Thailand)154.565574755
GroceriesDettol (Thailand)24.50157521
Health & BeautyEnsure (Thailand)5914.5420257403131
Health & BeautyNivea (Thailand) 1,8574.2387357235109107
Bags and TravelTesco Lotus (Thailand)184.3312574388
Mother & BabyMerries (Thailand)3194.7811757988
Motors3M Scotch (Thailand)334.551257221010
Health & BeautyPhysiogel (Thailand)2634.647657453428
Bags and TravelTesco Lotus (Thailand)63.40556654
Bags and TravelHis & Her Shopsmart (Thailand)154.0013563244
FashionG2000 (Thailand)1144.137655994646
Bags and TravelTesco Lotus (Thailand)593.833755231714
Bags and TravelTesco Lotus (Thailand)5754.0928755926363
Stationery & Craft3M Post-it (Thailand)74.178545666
Toys & GamesLego (Thailand)5394.4724854754148123
Mother & BabyEnfagrow (Thailand) 3,6564.26 1,65154645049
Furniture & DécorInter Steel (Thailand)4414.1629953465156152
Bags and TravelHis & Her Shopsmart (Thailand)393.1018531633
Mobiles & TabletsNubia (Thailand)573.30953333
Bags and TravelTesco Lotus (Thailand)1654.3910552292423
Bags and TravelHis & Her Shopsmart (Thailand)23.502521211
Computers & LaptopsAsus (Thailand)4083.86497521472020
Home Appliances3M (Thailand)1574.347652804340
GroceriesFinish (Thailand)194.65651844
Bags and TravelTesco Lotus (Thailand)5723.72271511729289
Bags and TravelXiaomi (Thailand)184.80451122
Furniture & DécorInter Steel (Thailand)24.50250411
Mother & BabyFOREMOST (Thailand) 6,7504.16 2,25650212020
Bedding & BathPR Shop (Thailand)543.2842503173431
Home Appliances3M (Thailand)224.371449766
Mother & BabyMamyPoko (Thailand) 11,1694.53 3,93349185160160
Health & BeautyMaybelline (Thailand) 12,3174.20 4,62649464342313
FashionSabina (Thailand) 2,3964.3998848939294294
CamerasPanasonic (Thailand)494.141448966
Home Appliances3M (Thailand)5924.26187481949088
Bags and TravelTesco Lotus (Thailand)6584.0826047634239
Mother & BabyBabyLove (Thailand) 15,2754.40 5,89847129104104
CamerasEneloop (Thailand)6524.5229545242121
FashionWacoal (Thailand)7354.40337451549292
Watches Sunglasses JewelleryDiesel (Thailand)11.001444911
Bedding & BathIndex Living Mall (Thailand)212.101244222
Bags and TravelTesco Lotus (Thailand)4224.1921944796764
Mother & BabyEnfa (Thailand)1373.726743351817
Mobiles & TabletsVivo (Thailand)4143.9578542141212
Bags and TravelTesco Lotus (Thailand)2563.97128411177366
Mother & BabyDG (Thailand)264.2431411033
Bags and TravelTesco Lotus (Thailand)944.2449403599
GroceriesNescafe Dolce Gusto (Thailand)1284.614440181614
Health & BeautySunsilk (Thailand)6284.2831640654242
Pet SuppliesRoyal Canin (Thailand)32.002407122
Health & BeautyDurex (Thailand) 4,0864.60 1,11740936262
Bags and TravelTesco Lotus (Thailand)174.1515381466
Bags and TravelTesco Lotus (Thailand)3174.121263853227
GroceriesDettol (Thailand) 1,0504.4437838292524
Watches Sunglasses JewelleryVogue (Thailand)42.6723727832
Tools, DIY & OutdoorPXTools (Thailand)534.69813761818
Bedding & BathIndex Living Mall (Thailand)54.00635111
Motors3M Scotch (Thailand)94.35934222
Bags and TravelBig Home Furniture (Thailand)24.003341722
Furniture & DécorRF Furniture (Thailand)2714.6025234623535
Furniture & DécorEastern Trade Commercial (Thailand)104.40333122
Bedding & BathPR Shop (Thailand)22.00133421
Mobiles & TabletsSamsung (Thailand)154.2018533722
Bags and TravelHis & Her Shopsmart (Thailand)25.001322211
Bedding & Bath3M Command (Thailand)154.1314321044
Bedding & Bath3M Command (Thailand)-0.002301--
Bags and TravelHis & Her Shopsmart (Thailand)23.501281521
Bedding & BathPR Shop (Thailand)102.556282276
Watches Sunglasses JewelleryTimberland (Thailand)15.001272111
Furniture & DécorRF Furniture (Thailand)204.151625222
Tools, DIY & OutdoorSafetydoor (Thailand)23.002725122
GroceriesEssence (Thailand)104.935233775
Bags and TravelBig Home Furniture (Thailand)14.00118111
Bedding & BathPR Shop (Thailand)23.002184711
Bedding & Bath3M Command (Thailand)23.00116111
Furniture & DécorKoncept (Thailand)64.802122911
Bedding & BathPR Shop (Thailand)13.0014411
Bags and TravelHis & Her Shopsmart (Thailand)-0.00--3--
Bags and TravelBig Home Furniture (Thailand)-0.00--1--
CamerasUnbranded/Generic (Thailand)-0.00--1--
Computers & LaptopsRicoh (Thailand)-0.00--5--
Computers & LaptopsMicrosoft (Thailand)-0.00--16--
Bags and TravelHis & Her Shopsmart (Thailand)-0.00--10--
CamerasUnbranded/Generic (Thailand)-0.00--1--
Furniture & DécorInter Steel (Thailand)-0.00--1--
Bags and TravelHis & Her Shopsmart (Thailand)-0.00--1--

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I put out a survey two weeks back about ecommerce enablers to find out the sentiment towards these companies in ASEAN, if brands actually use them (why or why not), and areas where they believed partners could improve.

The answers I received were not what I expected.

60 percent of respondents reported using an “ecommerce enabler”, but given their answers, most didn’t understand the difference between a marketplace and an enabler.

ecommerceIQ

Very simply put, ecommerce enablers are service providers that help a brand execute its digital strategy through a one-stop solution. This solution encompasses content production, web platform optimization, performance marketing, technology to integrate all digital channels, all the way to customer care, fulfillment and/or delivering it to the end customer’s doorstep.

Ecommerce enablers provide a client with whatever it takes to sell successfully online.

Popular examples in Southeast Asia include: aCommerce, iCommerce, etc.

Lazada, Shopee, 11street are not ecommerce enablers, they are the platforms for businesses to sell on. Sure, they might lend a brand an account manager who periodically checks in but their goal is to push for lower product prices and exclusive channel promotions.

The marketplace is neither charging the business for this service or providing special treatment – if a better performing merchant comes along, it catches you later.

This is why Alibaba’s Tmall has its own list of Tmall Partners – specialised agencies that build functional stores for businesses on the Tmall platform. Tmall itself is not the enabler.

The same goes for marketing platforms such as MailChimp, payment gateways like Paypal and delivery companies like Kerry Express or NinjaVan – they may not be ecommerce enablers but they are important pieces of the ecommerce supply chain.

This distinction is vital to the growth of ecommerce in Southeast Asia, especially as most global brands – Samsung, Unilever, L’Oreal, etc. – are choosing to outsource their ecommerce BUs to other experts.

Why? Because inhouse teams aren’t sure how to structure themselves. Over 65 percent of global marketers feel teams are “somewhat integrated” or “broken out by channel”. For ecommerce to work, Marketing needs to align with Sales, and Service.

 

ecommerceIQ

But ecommerce isn’t a magical band-aid capable of fixing all problems – especially not corporate silos.

Aื FMCG industry leader recently asked me, “what is something you would do to improve my brand’s digital strategy?”

My reply?

“Establish internally what the business wants from ecommerce, who’s in charge of this division and the resources the business is willing to dedicate before even bothering to bring on an enabler. Without internal alignment, it becomes one inefficient mess and everyone ends up pulling hair.”

After working with some of the world’s top brands – Unilever, Microsoft, Reckitt Benckiser, Payless, Samsung – I’ve been fortunate enough to see how these well-oiled machines function and why it doesn’t necessarily work for ecommerce.

The beauty of digital is that it’s instantaneous, which is the complete opposite of how decisions are made in these enormous corporations. It’s new, it’s disruptive.

Online moves quickly and requires constant care because a store that never sleeps means inventory, pricing, recommendations, customer support need to be up to date 24/7. It gets even more complicated when the ecommerce enabler needs to manage a brand.com and a marketplace shop-in-shop (SIS).

What often gets overlooked by brands is the shift in power.

Dangling more visibility over the thousands of grey market and official sellers on its site, a marketplace will push aggressively for more deals, more exclusivity, more vouchers, now, now, yesterday, while the brand pushes back with the same tenacity, touting “channel conflict”, and scrambling to squeeze funds from other departments.

The brand finally ends up throwing paperwork at the problem two weeks past the deadline.

Who wins?

No one.

Certainly not the enabler.

How is it in 2018, we still don’t know how to do ecommerce?

As a marketplace, its job is to offer the best deals and shopping experience to customers to grab market share. It does this by subsidizing prices, and by nudging its merchants to sell more and offer exclusives.

As a brand, its job is to sell to as many customers as possible, keep its distributors civil, maintain brand consistency across channels and mitigate the amount of friction between departments. It does this by offering the same promotions to each channel partner, allocating resources in a democratic fashion and following processes to a tee.

As an ecommerce enabler, its job is to work with its client and ecommerce partners (marketplace, 3PL, payment gateways, etc.) to increase GMV by optimizing digital channels. It does this by executing on behalf of the brand a strong digital strategy, which sometimes means bartering with the marketplace for more visibility for its clients.

Ecommerce enablers are by far nowhere near perfect. Imagine a marriage counsellor trying to find compromise between two hot-headed and egotistic partners refusing to budge but still looking to have a long term relationship.

Oh, and sessions aren’t once a week, it’s an uphill climb everyday. This respondent hit it on the head when describing what they did not like about its enabler.

“Not mature business yet.”

While the concept of ecommerce is not new in the world, the execution, talent and best practices are still nascent in Southeast Asia.

Customers in APAC need education on ecommerce, a company’s ecommerce team in APAC needs education on how to work with other departments, and marketplaces in APAC are still figuring out how to be more like Alibaba and Amazon, two companies with over 10 years operating experience.

An ecommerce enabler is supposed to have all the answers. While a challenge to take on, especially in Southeast Asia, it’s a hot business with a lot to gain, and probably why ecommerce enablers have popped up all over Southeast Asia and India.

And it’s been somewhat positive for respondents using an enabler as majority would recommend it to a friend or colleague.

“Getting an ecommerce enabler should definitely be considered, regardless of what stage a business who wants or is doing ecommerce is in.”

“Allows me to focus on my core business capability and rest assured online segment is still moving along.”

ecommerceIQ

Now what?

Now that the distinction has been made between a marketplace, a payment gateway, a marketing tool and an ecommerce enabler who ties them all together, a business needs to decide whether it needs marriage counselling.

Is it more cost effective to invest and build a team to manage digital channels inhouse or outsource it to a third-party partner? The survey respondents listed reasons why they work with an enabler:

“Aligned with brand principal interest and cost effective”
“Short time to market, revenue growth”
“Strong communications, effective operations”

Now you’ve identified you need one, how do you choose an ecommerce enabler?

  • Assess the experience of its leaders – do they have a strong track record in high-performing digital businesses?
  • Assess the existing clientele – are you in a similar tier/size/industry?
  • Assess the company’s own digital footprint – their performance marketing will be telling of the performance marketing they do for you
  • Assess the scope of work – is the enabler incentivized to sell more for your business?

And now take a look at your own business and decide whether it’s ready to commit to ecommerce. Is there an efficient approval process in place for resource allocation and commercial sign off for digital channels? Is there a C-level stakeholder responsible for P&L?

If not, time to move fast because in the digital world, it’s either give all or risk losing a lot.

 

Want to build an ecommerce strategy in Southeast Asia or speak to an enabler? Send an email to hello@ecommerceIQ.asia or fill out the contact form below





One of the most attractive points of listing your brand’s products on Lazada is the ability to take part in its multitude of campaigns, accessed by thousands of customers.

Such campaigns aren’t limited in size and scope: they range from huge events like its heavily marketed Online Festival, which include 11.11 and 12.12, to smaller weekly campaigns such as the current ‘Fall In Love’ event for Valentines Day.

Not only does Southeast Asia’s largest ecommerce platform promote campaigns via large banner adverts on its main landing page, it drives traffic via paid acquisition channels and email marketing.

BrandIQ

Valentine’s Day campaigns this week include ‘Valentine Day Sale’ with Unilever in Indonesia, ‘Lazada Delivers Love’ in Philippines, and ‘Fall In Love’ in Thailand

For brands, such visibility is critical; Southeast Asian consumers increasingly use online marketplaces to begin their product journey, bypassing even search engines.

ecommerceIQ

A study by ecommerceIQ found that 57% of Indonesians start their product search on marketplaces.

Lazada promises significant internet traffic during its biggest campaigns – the 11.11 sales event attracted 10 million site visits in the first 24 hours and garnered 10 times the sales volume when compared to non campaign days.

While traffic is definitely attractive to brands, an analysis of campaign promotions by data analytics platform BrandIQ found that companies have limited control over the visibility of their products during such events.

Provided brand managers meet Lazada’s conditions of discount percentage and relevant categories, they can pitch as many SKUs as they like for campaigns such as ‘Flash Sales’ and ‘Daily Deals’. However, this only accounts for a small percentage of the ‘shelf space’ available on the Lazada campaign page with the majority of product placement within the campaign categories out of the brand manager’s control.

BrandIQ

The ‘Flash Sales’ portion of campaigns are among the few ways to boost sales of brand’s products.

Marketplace and Brand relationship

Brands shouldn’t take a hands-off role after agreeing to participate in a particular campaign. BrandIQ discovered that the maximum mileage garnered from these campaigns lean more towards promoting Lazada’s own inventory and not the brand’s official shop-in-shop (Amazon, anyone?).

Lazada holds inventory of major products, and sells it via a retail model. These campaigns offer a window for Lazada to boost sales of its own inventory.

How? BrandIQ deep dived into a current category campaign, ‘IT on Sale‘, running from February 6-9 on Lazada Thailand. The sale advertises ‘up to 70% off’ electronic category products.

BrandIQ

BrandIQ

Both the ‘Recommended Items’ and ‘Mobiles on Sale’ portions of the ‘IT on Sale’ campaign lists Lazada’s own retail SKUs over brand’s Shop in Shop SKUs.

The data indicated that the products listed under ‘Recommended Items’ were sold by Lazada. This is also the case in the sub-category ‘Mobiles on Sale’ portion – for example, all listed SKUs are sold directly by Lazada, rather than the Samsung or Huawei official stores.

Directly under ‘Recommended Items’ is another portion of the landing page titled ‘Top Brands on Sale’.

BrandIQ

Clicking on the brand’s logo takes customers to the brand’s official store, but where is the user directed after clicking the individual SKUs shown to the right of the brand logo?

BrandIQ

BrandIQ ascertained that 13 out of the 20 products listed were those sold directly by Lazada itself, rather than the official store.

This is despite the fact that official shop-in-shops offer the same product; it’s a conscious decision by Lazada to sell its own retail SKU over the brands.

Brands should pay close attention to the evolving nature of marketplaces and look to them as a way to jump into ecommerce, but not the long term game. As the ecommerce landscape becomes increasingly competitive and incentivized; companies need careful monitoring of all acquisition channels if they desire sustained growth.

 

Alibaba’s entry into Southeast Asia served as social proof for many entrepreneurs and businesses that they were onto something big, which led to a year of exuberance for ecommerce in the region.

“We’re just at the beginning, [the Alibaba-Lazada deal] will kickstart the whole cycle. It will attract more global investments into the region, and attract more entrepreneurs who now see this region as a great place to start a business.” — Stefan Jung, founding partner at Indonesia-based Venturra Capital in an interview with Tech in Asia

Even as we get closer to 2018, there are already numerous casualties in one of the most promising ecommerce growth markets in the world.

Alibaba doubled down on its Lazada investment by upping its share from 51 percent to 83 percent and in a push to monopolize the market, put grips on Tokopedia, arguably one of Lazada’s biggest competitors in Indonesia.

Tencent, through JD or directly, also began executing its China playbook by investing in companies like Sea, Go-Jek, Traveloka, Pomelo Fashion and Tiki.vn.

Global attention from the US came from KKR, who through Emerald Media, put $65M into ecommerce ‘arms dealer’ aCommerce in a bid to replicate Baozun’s dominance in the Chinese “TP” (Tmall Partner) landscape.

And the plays won’t stop here.

Leveraging newly consolidated positions of strength, marketplaces will cross traditional boundaries and move into areas like private label brands and offline distribution. Brands will also feel increasingly cornered, facing a “damned if you do, damned if you don’t” situation.

Those that survive 2018 will have to find a niche for themselves, such as in fashion or home, because there isn’t much room left for another horizontal ecommerce player. Others will be tempted to take risky shortcuts like say, raising money through ICOs.

2018 will also see Tencent, not Alibaba or a local company, emerge as the winner in mobile payments in Southeast Asia.

It might be a good time to start learning Chinese.

1. Plata o Plomo: Southeast Asia ecommerce will be increasingly factionalized into Alibaba and Tencent camps, and locals will pick sides

Given its similarities to China roughly 10 years ago, Southeast Asia has become a gold rush for Chinese Internet giants looking to expand beyond the mainland. It was Alibaba’s acquisition of Lazada last year that triggered an arms race between China’s #1 and #2 in Southeast Asia, and in turn, will cause local companies to choose sides.

Image source: Sohu

Alibaba also led a $1.1B investment in Tokopedia in 2017, continuing to place its biggest bets on ecommerce. Moving forward, the company is expected to position Lazada and Tokopedia as the Tmall and Taobao of Southeast Asia, respectively.

Meanwhile, Tencent has aggressively tried to replicate a three-prong formula that was successful in its fight against Alibaba in China: gaming, mobile and payments.

The first step was becoming the largest shareholder of Sea (previously Garena), predominantly a gaming powerhouse that runs Shopee, a mobile-first ecommerce marketplace and the second was placing bets on Go-Jek to become a “super app” like WeChat and WeChat Pay.

Understandable as WeChat Pay now commands an impressive 40% market share in China vs. AliPay’s 54%, up from 11% in 2015.

“Is there a land grab right now for these kind of assets? I think in the land grab they [Tencent] are following us. They are seeing that we have positioned ourselves very well, and they’re sort of playing a catch up game. So what we want to do is, since we already have our positions, is to work with local entrepreneurs.” — Joe Tsai, Alibaba Vice Chairman, in speaking with Bloomberg.

Tencent and Alibaba share price increase over last 7 years compared to Amazon and NASDAQ composite
Source: Yahoo Finance (December 4, 2017)

With both Tencent and Alibaba market caps at all-time highs, we expect this trend to continue throughout 2018 with both sides gobbling up more local companies across the ecommerce ecosystem and upping shares in existing ones.

2. Facing slow organic growth, Amazon will acquire a company to fast-track its ecommerce expansion in the emerging region

Image source: Getty Images

Amazon’s entry into “Southeast Asia” was the biggest surprise and non-surprise at the same time.

A non-surprise because Amazon’s long-awaited and rumored soft-launch into Singapore was widely covered by the media even before the company’s Prime Now services officially became available on July 26, 2017.

A surprise because Amazon’s expected tour-de-force across the region ended before it even started.

Amazon fanboys celebrated the initial launch of a scaled down, poor man’s version of Amazon — Amazon Prime Now — offering a measly one million household items and daily essentials.

“I was expecting more things that I can’t get in Singapore, for example Sriracha or something small that’s not available in Singapore but most stuff on Prime Now are basic things you can get from Fairprice…” — Reddit User Ticklishcat

But there’s good reason for it.

It doesn’t make sense for Amazon to set up a full-blown local presence in the country-state. Singaporeans, under the Free AmazonGlobal Saver Shipping option, were already enjoying free international shipping from Amazon en masse for orders over US$125.

The country ranks #29 in terms of session/year to Amazon.com on a global scale but #4 when normalized for population size. With an average of 14.04 sessions per person per year visiting Amazon.com, Singapore takes the top spot among all the countries in Asia.

Singaporeans already buying from Amazon, without the latter’s full-fledged local presence: Singapore ranking only #29 in traffic to Amazon.com but #4 when normalized for population size (#1 in Asia)

Source: SimilarWeb, World Bank

The launch of Amazon Prime in Singapore earlier this month makes it even less likely for the firm to set up local operations beyond Amazon Prime Now. Amazon is no longer subsidizing the original free shipping for orders above US$125 to Singapore and Singaporean Prime members have free international delivery only on orders above S$60 on Amazon’s US website for S$8.99 per month in addition to other benefits.

Not much else has been heard about the company’s further expansion into the region, particularly Indonesia and Thailand, where markets are being rapidly carved up by Alibaba and Tencent.

With time running out for a full-fledged, organic entry into the high-growth markets of Southeast Asia, its stock trading at all-time highs, and not too distant memories of failure in China, we expect Amazon to attempt at least one major acquisition in 2018 to accelerate regional expansion.

3. Offline is the new online: pure-play ecommerce to launch physical stores to offset rising online customer acquisition costs and improve last-mile fulfillment

While traditional offline retailers like Central in Thailand and Matahari in Indonesia scrambled to move business online, online pure-play ecommerce is expected to make moves offline.

With online customer acquisition channels like Google and Facebook rapidly reaching saturation and diminishing returns, ecommerce players like Pomelo and Lazada will look to offline channels to reach new customers.

Pomelo dabbled in offline over the last few years but, fresh off a $19M Series B, recently launched its biggest pop-up to date in Siam Square, the fashion center of Bangkok. The store applies “click-and-collect”, enabling customers to order online and try items in store before deciding which ones to keep or return.

Image source: Pomelo

“In fashion, the number one barrier to purchase is still the need to try product on for fit coupled with the hassle of returns. An offline footprint addresses this barrier head on. Additionally customers can be acquired offline and data from online can be used to drive higher sales and greater operational efficiencies offline. In short, a mix of offline and online is the optimal strategy for fashion retail going forward.” — David Jou, Co-Founder and CEO, Pomelo Fashion

Love Bonito, another online-first fashion brand from Singapore, officially launched its permanent flagship store at Orchard Road after seven years of being an ecommerce pure-play.

Image source: Love Bonito

Lazada, on the other hand, may follow Alibaba’s moves in China where the ecommerce juggernaut launched Hema supermarkets in Beijing and Shanghai. In addition to reinforcing a positive brand experience and customer acquisition, these new offline stores serve as fulfillment centers, effectively making up for Southeast Asia’s lack of logistics infrastructure.

Alibaba’s Hema supermarkets in China. Image source: Quartz

Lazada Group CEO Max Bittner already hinted at the possibility physical stores in Indonesia at a conference earlier this year.

Over the last decade in China, Alibaba rode 50%+ year-on-year ecommerce growth to become what it is today, however, as maturation slows, Alibaba has doubled-down on initiatives like Single’s Day (11.11), “New Retail” (smart pop-up stores around China), and market expansion to accelerate sales (Southeast Asia).

Despite the region being projected as the next big ecommerce growth story, online accounts for only 1-2% of total retail today. If companies like Lazada and Shopee want to grow faster than the market allows, going offline will be the obvious choice.

4. New ecommerce startups will use ICOs to raise funding to battle giants

With Southeast Asia increasingly being carved up by giants such as Alibaba and Tencent in a presumed winner-takes-all-market, smaller ecommerce startups will look at alternative ways to finance themselves.

Enter newly hyped Initial Coin Offerings (ICOs).

Raising funds through these means in Southeast Asia was pioneered by Omise, a fintech startup based in Thailand, that successfully raised $25M in a few hours to develop a decentralized payment system.

Given early speculation of Amazon moving into the cryptocurrency space, we’ll have fertile ground for our first Southeast Asian ecommerce ICO. Already a start up called HAMSTER is selling HMT tokens to develop a decentralized marketplace that promises “no fees, no brokers”.

Revolutionary ecommerce platform funded by ICOs or ponzi scheme?

Expect ecommerce startups to use ICOs to fund customer acquisition, new product development, and inventory financing. That is, until the bubble bursts

5. A final wave of ecommerce consolidation sweeps through as local players adjust to a New World Order

We’ve shared numerous stories of casualties and consolidation during the Southeast Asian ecommerce bloodbath in our previous annual predictions.

Japan’s Rakuten sold off most of its assets in the region when it retreated in 2015/2016. Rocket Internet dumped Zalora Thailand and Vietnam in a fire sale in 2016 and sold its Phillipines entity to local conglomerate Ayala Group the year after.

In Thailand, Ascend Group put its assets WeLoveShopping and WeMall on life support to focus on fintech.

In Indonesia, reports surfaced of SK Planet selling its Elevenia shares to Indonesian conglomerate Salim Group, which was quickly followed by news of its Malaysian entity up for bid between Alibaba and JD.

Earlier in the year, Indonesia’s second largest telco Indosat Ooredoo shut down its ecommerce website Cipika. Alfamart, Indonesia’s second largest convenience store chain also had to downsize operations to pivot its ecommerce initiative Alfacart away from a general marketplace play towards an online grocery channel.

Come 2018, all eyes will be on the health of remaining bastions of home-grown, horizontal ecommerce plays. As Alibaba and Tencent up the ante, there will definitely be more casualties in the new year.

6. Go-Pay will venture outside of Indonesia through Sea, Traveloka and JD to become the WeChat Pay of Southeast Asia

Indonesia’s ecommerce today is like what China was in 2008 — the pace of change is unimaginable. When I visited our office in Jakarta 12 months ago, hardly anyone was using Go-Jek’s mobile payment platform and wallet, Go-Pay.

Returning six months later, almost all of my colleagues used Go-Pay to transfer money peer-to-peer and pay for products and services.

In most of emerging Southeast Asia (excl. Singapore and Malaysia), credit card penetration rates are in low single digits and most people don’t even have a bank account.

Source: Global Findex, World Bank

Unfortunately, few fintech and payment startups in the region have created products to address the lack of credit cards and large unbanked population. Instead, the majority happily build payment gateways and e-wallets that rely on existing and legacy credit card infrastructure like in the US (Apple Pay anyone?).

It’s no wonder cash-on-delivery (COD) still makes up over 70% of all processed transactions according to data by ecommerceIQ.

Those that do focus on mobile wallets topped up with cash like Thailand’s True Money struggle to achieve sustainable “core product value” and reach mass.

“Community, Commerce, and Payments are inter-connected in the Digital World. Thus far, all successful mobile payment plays, globally, are centered on the commerce and community axis. PayPal started with eBay, Alipay with Alibaba/TMall/Taobao, WeChat Pay leveraged WeChat/QQ, and Amazon Pay has Amazon. Due to this very reason, standalone payments/wallet business will struggle.” — Gaurav Sharma, Founder at Atlantis Capital

Go-Pay addresses these fundamental issues by allowing users to send payments peer-to-peer (P2P) and top up by giving cash to Go-Jek drivers who act like mobile ATM machines.

Top up your Go Pay mobile wallet by handing cash to a Go-Jek driver

More importantly, with Go-Jek being part of the Tencent faction, we expect the company to push Go-Pay into other Southeast Asian countries through its community and commerce platforms such as Sea (Garena, Shopee, etc.), Traveloka and JD.

Following rumors in November, Go-Jek finally announced its acquisition of Kartuku, Mapan and Midtrans. The latter, being one of Indonesia’s top online payment gateways, will give Go-Pay additional distribution channels and use cases such as Matahari Mall, Tokopedia and Garuda Indonesia, pushing it beyond the realm of P2P into B2C payments.

A strong contender for the “WeChat of Southeast Asia” is Grab, whose 2.5 million daily rides makes it the largest ride-hailing platform in Southeast Asia. GrabPay, launched this year, is Grab’s effort to move Singapore towards a cashless society, with plans to expand across the region in 2018.

Should Go-Jek be worried? Not really.

Singapore is not the ideal test-bed to launch a mobile wallet because the country already has an ubiquitous cashless payment platform called “credit cards”. And GrabPay’s recent partnership in Indonesia with Lippo Group’s Ovo hasn’t garnered much attention or presented wide use cases.

“While it might seem like common wisdom to first test (an idea) in Singapore, and then take it regionally and to the world, with all due respect to the government, I think it doesn’t make sense in today’s world.” — Min-Liang Tan, Co-Founder and CEO of Razer

Go-Pay, on the other hand, is adding value to users in a country where only 36% have bank accounts and 2% have credit cards. Emerging markets like Thailand, Vietnam and the Philippines have a similar (lack of) financial infrastructure as Indonesia.

Go-Jek, by being part of the Tencent faction, has access to a much more diversified distribution channel and offers a variety of common day-to-day use cases such as gaming (Garena), shopping (Sea, JD), travel (Traveloka) and pretty much everything else (Go-Jek itself).

7. New mobile-first fashion and beauty marketplaces will fill void left by Zalora

Zalora, Rocket Internet’s once star fashion ecommerce venture, has struggled in Southeast Asia since launching in 2012. Zalora Thailand and Vietnam were picked up by Thai retail conglomerate Central Group for pennies on the dollar while the Philippines entity was partially sold off to the Ayala real estate group.

There were even rumors of Zalora Indonesia exiting to local retailer MAP, which were swiftly denied.

A few factors contributed to the company’s difficulties: 1. Price and product variety competition with merchants selling on Facebook, Instagram and LINE, 2. Control of brands by one or two retail conglomerates like Central in Thailand, MAP in Indonesia, and SSI Group in the Philippines.

These two factors made it difficult for Zalora to pivot to an ASOS-style premium brand marketplace.

A shell of its former self, Zalora’s challenges left a void that is increasingly being filled by more nimble, mobile-first fashion marketplaces that see an opportunity in a space dominated by mass-market, general ecommerce platforms like Lazada and Shopee.

As evident from Amazon’s struggle to court premium fashion brands in the US, luxury brands don’t like to sell on mass platforms, where merchandise shows up beside detergent and washing machines.

“After purchasing Whole Foods, Amazon now has access to the wealthiest refrigerators in the country but they still can’t get into our closets because the aspirational beauty and fashion brands don’t want to distribute on their platform. Why? Because they don’t have their heads up their ass and realize that Amazon partners with brands the way a virus partners with its host.” — Scott Galloway, L2 Founder and NYU Stern Professor

Over in China, both Tmall and JD had to exert a Herculean effort to attract fashion brands. In October, JD launched TopLife, a standalone online luxury platform to provide a high-end experience that high-end brands promise. Alibaba also launched Luxury Pavilion, a section within Tmall tailored to luxury brands like Burberry and Hugo Boss.

Spearheading a new wave of mobile-centric Southeast Asian fashion marketplaces are Zilingo, fresh off an $18M Series B, and Goxip, a Hong Kong based startup that recently completed a $5M Series A with plans to enter Thailand. In Indonesia, there’s LYKE, ironically founded by the ex-Zalora CMO.

With the benefits of hindsight and understanding of the importance of social commerce on driving fashion, these emerging players will offer elements like chat, content and an influencer network to offset some of the customer acquisition cost challenges inherent in scaling ecommerce.

8. Marketplaces will grow up and clean up ‘grey market’ for blue-chip and luxury brands

Over the last six years, most of the region’s initial ecommerce growth was focused on driving GMV by tapping into any merchant and brand willing to sell online.

In 2018, marketplaces like Lazada and Shopee will continue to attempt to onboard bigger global brands but their success will require them to control grey market sellers and counterfeit goods in order to cultivate an environment in which blue-chip brands will feel comfortable selling.

Alibaba went through the same process in China when discussions surrounding counterfeits and grey market goods on Tmall and Taobao peaked around the company’s IPO in 2014.

Based on data provided by marketplace analytics platform BrandIQ, 80% of SKUs from consumer product giants like Unilever, Samsung, and L’Oreal on average are sold by unauthorized, grey market resellers. These grey market SKUs are sold at a price 30% lower than official flagship stores and authorized resellers.

Why all the fuss? Because grey market sales impact the image of brands selling in official stores.

“Lately, the explosion of third-party sellers on the site has led to authentic goods from companies such as Nike, Chanel, The North Face, Patagonia and Urban Decay being sold on Amazon even though they don’t authorize the sales, undercutting their grip on pricing and distribution,” said the Wall Street Journal.

Nike, for example, refused to sell directly to Amazon for a long time, fearing it would undermine its brand. But by not selling on marketplace creates space that will be quickly filled by grey market, unauthorized third-party resellers looking for arbitrage opportunities as seen from the previous BrandIQ data.

Customers buying from these grey market resellers perceive this as buying from the brand itself and, when having a poor customer experience, end up blaming the brand rather than the unauthorized reseller.

BrandIQ data shows that the average rating for grey market SKUs are 24% lower than reviews for similar products sold through the official shop-in-shop or flagship store.

We’ll see a push from the marketplace and brands to address grey market sales in Southeast Asia in 2018. Marketplaces will employ a tighter grip on third-party resellers in order to attract better brands, while brands will set up an official presence on marketplaces as a way to pro-actively manage the customer experience and brand image.

9. Marketplaces and e-tailers will introduce its own private label products and alienate brands

As the ecommerce market in Southeast Asia matures and consolidates, marketplaces, e-tailers and ecommerce startups will be increasingly scrutinized for margin growth. Gone are the days of aggressive top line growth and market share grabs at all cost.

With Lazada post-Alibaba acquisition and Shopee post-IPO (as part of Sea), what other value-added services will these companies tap into for sustainable revenue growth?

In this instance, companies in Southeast Asia have taken a cue from the China playbook. Lazada launched a Lazada Marketing Solutions unit to monetize its 23M active annual customers through advertising similar to how Tmall and Taobao charge for ads in China.

Today, Lazada offers display ads and programmatic promoted product ads to its customers but is expected to launch pay-per-click search ads in 2018 competing with Google, Facebook and similar networks out there. Across the region, Shopee has already launched pay-per-click search ads.

Beyond advertising, we can expect more marketplaces and e-tailers to follow Amazon’s foray into private label brands to boost margins. With the data collected from selling third-party brands, these ecommerce platforms know exactly what kind of products sell best, to whom, at what time and where.

Flipkart, one of India’s top marketplaces competing with Amazon, recently announced its aim for 20-22% sales contribution from private labels in the next five years.

“When we first decided to foray into private labels in mid-2016, a ‘Tiger Team,’ for private labels was created internally to research 50-odd retailers around the world, including Europe, the US, China and India, to envisage what the private label landscape would look like for Flipkart over the next few years. Research revealed that private labels can contribute 10-20 percent of the company’s business. For instance, US-based Costco Wholesale’s private label brand Kirkland contributes 20-25 percent of its business,” said Adarsh Menon, Flipkart’s Head of Private Labels in an interview with The Hindu.

Launching private label brands in Southeast Asia isn’t something new. Zalora launched its own fashion label called EZRA as early as 2013 followed by Lazada’s LZD Premium Collection in 2014. With the focus on top line growth in the period of 2013-2016, private label brands have taken a backseat as seen from the limited number of them listed today on Zalora and Lazada.

Althea, a Korean beauty e-retailer that recently raised a $7M Series B, specifically said to be using the new funds to launch more private label products.

Althea private label product sold on their website

“Based on the vast amount of user data that we have gathered… we are now able to understand the specific needs of our customers in each market, garner feedback almost instantly through our online platforms, and quickly turn that into a product within a month or two,” said Althea Co-Founder and CEO Frank Kang. “We have deep insights into our customer base that traditional brands simply cannot match.”

In light of all this, it’s not surprising Zalora has expressed renewed interest in pushing its own private labels, “Something Borrowed” and “Zalora”, for the new year.

10. B2B ecommerce to disrupt offline distributors, blurring lines between online and offline distribution

Despite the rosy outlook for ecommerce in Southeast Asia, the reality is that B2C ecommerce today is still in the low single digit percentages. Given aggressive growth targets, brands, marketplaces and e-tailers will increasingly look toward non-B2C channels such as B2B and B2E (Business-to-Employee) channels for revenue.

Zilingo, the Sequoia-backed fashion marketplace, launched its Zilingo Asia Mall B2B marketplace to allow fashion buyers in the US and Europe buy Zilingo merchandise at wholesale prices, effectively creating an “Alibaba” for fashion.

Shopee launched a wholesale feature earlier this year, allowing merchants to set lower unit prices for larger order quantities.

 

Shopee Malaysia offering wholesale feature

aCommerce, Southeast Asia’s ecommerce enabler and e-distributor, fresh off a $65M Series B from KKR-backed Emerald Media, coined a new term for all this — “B2A” or Business-to-All.

The company is behind the B2B and B2E initiatives for brands like Samsung and L’Oreal. According to the company, B2B ecommerce now contributes to 30% of total revenues at aCommerce, up from 10% a year earlier (disclaimer, I work here).

Written by: Sheji Ho, aCommerce Group Chief Marketing Officer

Opinions expressed are solely my own and do not express the views or opinions of my employer.

Online marketplaces offer brands high incentives as it gives them access to millions of customers. However, high volumes of traffic come with a price as they are often attracted to items sold by unauthorized sellers, often referred as grey sellers.

And without official authenticity checks being implemented, grey sellers are at liberty to put whatever the price they want to appeal to Southeast Asians high aptitude to look online for low prices.

To understand how grey sellers impact authorized sellers and the brand’s official stores on marketplaces, data analytics platform BrandIQ draws comparisons between the top three sellers for Samsung on Lazada Thailand.

This data shows that Samsung only controls less than 2% of total SKUs direct or through authorized third party sellers.From a numbers game of SKUs, grey sellers dominate the distribution of Samsung products on marketplace with a total of 51,925 SKUs or 98.1% of all Samsung products available on Lazada Thailand.

On Lazada Thailand, Samsung has several official stores; Samsung Official Store (managed by Lazada), Samsung Official Shop (managed by Samsung), Samsung Official eStore – Consumer Electronics, Samsung Official eStore – Mobile; as well as authorized sellers.

Multiple stores leave Samsung unable to create a unified brand experience confusing consumers as to which channel is more reliable given there is overlap on the product offering. Each channel also offers a different policy on payment and delivery.

How about price differences?

Taking a look at the price points for several products, BrandIQ data shows that grey sellers actually offer lower prices on average compared to the official Samsung channels. They can vary between 4% to as high as 63%.

Price comparison between Samsung official stores versus grey sellers on Lazada TH

From the consumer point of view, experiences from grey sellers offer a varying standard of service unsurprisingly but looking at ratings from three Samsung smartphone products show the official store still has the more favorable opinion from consumers compared to unofficial sellers.

Review comparison between official store vs. grey seller

However, it still remains a lose-lose situation for Samsung because consumers with a negative experience from grey sellers impact the Samsung brand and if they have a better experience with grey sellers, they will continue purchasing from them, causing Samsung to lose market share.

What does this mean for brands?

It becomes important for Samsung to create a unified brand experience in order to gain more market share on marketplaces like Lazada, especially with the numerous grey sellers flooding the site with their products.

Provided that marketplaces also suffer from counterfeit issues and grey market sellers, popular brands can work with Lazada and Shopee to boost its presence on the website through front page banners and onsite ad placements offered through Shopee’s new feature Shopee My Ads.

Consumers don’t want to think twice, and usually don’t even care, about differentiating between channels as long as they get the right product at the right price.


HOW IS YOUR BRAND PERFORMING ON SOUTHEAST ASIA’S TOP MARKETPLACES?

Seeing as the sun is always shining in Southeast Asia, sunglasses are a popular item that never go out of style, especially in the Philippines. The market is lauded as the fastest growing market in the region for luxury sunglasses brand Oakley as said by Andrew McMahon, former retail manager for Oakley Southeast Asia.

To feed consumer demand, the brand utilizes online channels, in particular, an official store on Lazada to sell to the growing middle class, who is also increasingly tech-savvy. Analytics platform BrandIQ takes a look at the sentiments surrounding Oakley’s products.

Oakley Lazada Philippines

Oakley official store on Lazada Philippines.

Launched almost a year ago, Oakley shop-in-shop (SiS) on Lazada Philippines leaves a good impression for the Filipino customers as witnessed by a 83% positive seller rating provided by customers.

Oakley got a good review rated by the customers on Lazada Philippines

Taking a look at all Oakley sunglasses/products across Lazada Philippines, BrandIQ found that they generate 70% of positive sentiments from the Filipino customers on Lazada Philippines, with ‘authentic’ and ‘fast delivery’ being the keywords that most often appeared in product reviews.

Simultaneously, ‘fake’ is the most common keyword that appeared most often in reviews with negative sentiments as grey sellers are abundant on the marketplace.

Oakley Lazada Philippines

The sentiments show that for customers shopping for higher-end brands, authenticity is more important than a low price — giving brands an advantage competing with grey sellers when they open online.

Discount season generated more reviews

During the build-up to the 11.11 last month, the average discount for Oakley sunglasses on Lazada Philippines increased by 35% on November 9, compared to the week before, and stayed the same until the end of the campaign.

Oakley Lazada Philippines

Sellers for Oakley (Philippines) starts the Online Revolution discounts on November 9. Source: BrandIQ

Although the discounts during this period only increased slightly by approximately 7%, the hype and ergo, traffic, to the website resulted in double the product reviews for Oakley sunglasses post campaign.

For brands attempting to boost ranks in search results on a marketplace, offering special incentives such as high discounts will encourage customers to leave product reviews and increase relevancy of the product.

Oakley Lazada Philippines

HOW IS YOUR BRAND PERFORMING IN SOUTHEAST ASIA’S TOP MARKETPLACES?