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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.

What does the FMCG giant Unilever have in common with grocery retailer The Kroger and a luxury watch brand Audemars Piguet?

The answer is Retail-as-a-Service (RaaS).

Unilever worked with JD.com to distribute goods to both online and physical stores in China, while Audemars Piguet launched its pop-up store on WeChat. In the US, food store The Kroger partnered with Microsoft to increase the level of personalization and productivity in their stores.

The term ‘RaaS’ has clamoring over the headlines over the years, but what exactly is Retail-as-a-Service?

What Is Retail-as-a-Service and Why Is It Becoming a Trend?

An analyst from Kantar Retail, Stephen Mader, defines the Retail-as-a-Service model as when “retailers build open platforms and toolkits that enable brands and third-party sellers to connect with shoppers directly through a physical store”.

Having an abundance of data in hands, these retailers bundle up services, customer data, technology, and its expertise to offer brands a service.

The emergence of ecommerce has reduced the in-store retail visits by billions in the US and part of the reason is because the experience offered by a traditional physical store is no longer enough for the savvy consumers. Besides shopping for products, consumers are slowly and surely seeking an experience when they’re out visiting the store.

“Nearly 3,800 stores are expected to close their doors by year’s end, and the brands that do survive will have done so by creating engrossing experiences.”

In order for the brands to maximize the potential of offline stores effectively, they need to provide engaging experiences to keep the consumers hooked. For example, Sephora combined activities that are completely unrelated to making a purchase into its app, while Samsung’s pop-up store was set up to allows consumers test its technology and experience rather than to focus on sale.

The trend also drives the growth of RaaS platform startups that provide an easy, cost-effective solution to brands wanting to launch physical stores.

In the US, a “Retail as-a-Service” startup b8ta has helped retailers such as Macy’s, Lowe’s, and 15 other consumer brands to set up pop-up stores and physical shops, incorporating technologies and cutting-edge gimmicks to traditional physical retailers.

Chicago-based Leap recently secured $3 million in funding to offer an end-to-end service — that ranges from staffing, experiential design, tech integration, and day-to-day operations — to help digital brands to launch a brick-and-mortar store.

Meanwhile, Fourpost is focusing on providing a ready-to-use retail space for digital native brands looking to open a physical store in the US, lowering the barrier of entry in terms of both capital and time. Each of these companies is tackling the problems that usually came with setting up an offline store and elevate the consumer experience.

“If you shop in one of our stores, you will feel different because we have gone to such a great length to remove the idea of your visit being about buying a product.” – Vibhu Norby, the co-founder and CEO of b8ta.

With over 70 locations, B8ta’s store allows brands to place their merchants and train shop assistants while gaining revenue from space rental and subscription fees from brands; Retail Dive

JD.com spurns the growth of RaaS in Asia

Chinese ecommerce giant JD.com is a big advocate of the strategy.

One of JD.com’s latest initiative to establish RaaS is the partnership with Chinese retailer Better Life. JD.com was also one of the first retailers to develop a mini ecommerce program on WeChat. To date, JD.com has developed and bundled up its marketing, logistics, financial services, and big data as a service and leverage these capabilities to help over 2,000 brands and its merchants.

JD.com also partnered with Google to develop next-generation retail infrastructure solutions by combining JD.com’s supply chain and logistics expertise and Google’s technology strengths.

All of these were the result of JD.com’s mission to go forward by scaling its technology in order to outsource its developments to third-party retailers around the world. Chen Zhang, Chief Technology Officer at JD.com says that making money is not their priority at this stage as he believes that:

“With Scalability, comes profit”

Taking the burgeoning amount of investment coming from China to the region into consideration, it’s only a matter of time for RaaS to kick off in Southeast Asia.

In Indonesia, JD.com has already started the concept on its unmanned store JD.ID X Mart. The store collected data that can be used to understand shopping behavior and optimize inventory, product displays, and other aspects of store management and marketing.

With JD.com’s joint-venture in Thailand, it’s fair to assume that the market will be the next destination for the innovation. And although Alibaba’s Lazada has been quiet on the front, looking at the fierce competition between the companies in the mainland, it seems like a matter of time until Alibaba does so.

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; Pandaily

With the ‘offline is the new online’ trend carried over to 2019, we can expect to see more traditional retailers offering their service and retail space to help online brands expanding their reach and getting more foot traffic in return.

A win-win strategy for the ever-changing landscape of retail.

As the ecommerce trend continues in Southeast Asia, a wave of the new generation of moms is joining the party. These moms are relying more and more on online to help them embrace their role as a parent.

Millennial moms expressed their dependency on online for their shopping journey, especially for the Mom & Baby category, during an ecommerceIQ panel session in Jakarta earlier this month.

ecommerceIQ surveyed 1,144 Indonesian moms with results showing that 66% have attempted to purchase Mom & Baby products online. Shopee was voted as the most popular e-marketplace for this category, followed by Lazada and Tokopedia.

Mom & Baby Indonesia Online Shoppers

aCommerce Group CMO Sheji Ho on stage presenting the findings from ecommerceIQ’s report: Digital Profile Mom & Baby Shoppers in Indonesia.

Indonesian actress and Miss Universe 2007 finalist Agni Pratishta was one of the panelists at the event. She agreed with the findings and also mentioned that most women visit numerous websites to find the best deals.

“I have a group chat with other moms where we exchange information regarding which e-marketplace is having a sale right now,” admitted Agni.

Agni was joined in the panel session with the Head of Marketing Baby Care from Softex Indonesia, Wenny Damayanti, and aCommerce Group CMO Sheji Ho to shed light on the current landscape comprising Mom & Baby online shoppers in Indonesia.

What else did we discover from the event?

Panel session during ecommerceIQ event in Jakarta with Agni Pratistha (middle) and Wenny Damayanti (right).

Indonesian moms shop cautiously online

When Indonesian moms were asked about their favorite online shopping platforms, brand websites did not feature much in their answers, with only Mothercare Indonesia appearing on the radar at a score of 4%.

Digging deeper, the result is most likely related to the type of products they are more likely to buy online in this category. Following general ecommerce trends in the country, Baby Clothing (49%) ranked as the most popular product purchased online in this category, followed by Baby Gear (23%) and Toys (18%).

Mom & Baby Indonesia Online Shoppers

Top products purchased online in Mom & Baby category in Indonesia; ecommerceIQ Mom & Baby Customer Survey in Indonesia (2018)

Meanwhile, perishable goods like Baby Personal Care and Baby Food are less popular and the cause of it is rooted in the main reasons why Indonesian moms don’t shop for this category online.

Mom & Baby Indonesia Online Shoppers

Top reasons for consumers to not shop for Mom & Baby products online; ecommerceIQ Mom & Baby Customer Survey in Indonesia (2018)

More conviction is necessary for consumers to purchase perishable goods online; moms require full assurance of product quality, and one way to avoid buying counterfeit products in the e-marketplace is to purchase only from brands’ official online flagship stores.

The top three consumer-favorite platforms all benefit from their official brand-dedicated portal inside their platform.

Mom & Baby Indonesia Online Shoppers

Tokopedia’s dedicated page for brands’ official store; Tokopedia

The importance of word-of-mouth in the digital world

Brands should always take cues from its consumers to adjust and hone their retail strategy. These include instilling customer confidence to overcome the reservations mentioned above. Wenny revealed that internet habits of millennial mothers provided the driving force for Sweety’s shift to digital.

“These moms are constantly searching for information online. TV commercials alone are no longer sufficient. Modern day moms use the internet to talk to their friends, surf for product information and read customer reviews before deciding which products to buy. Sweety took these cues onboard and redefined its online strategy,” explained Wenny.

Sweety’s official flagship store is offering online exclusive offer on ShopeeMall Indonesia.

Product reviews are a key aspect for Indonesian moms to overcome the wariness of doing their shopping online, as seconded by Agni

“Reviews are the make or break point for me when I shop online. When I see a product in e-marketplace with no review, even if the price is right, I wouldn’t risk buying it most of the time.”

Unfortunately, leaving a product review is not a habit mastered by Southeast Asian consumers yet, especially compared to consumers in developed ecommerce market like the US. And most of the time, Southeast Asians are prone to leave only bad reviews as a way to express their dissatisfaction and to caution other consumers.

Brands must concentrate on encouraging satisfied consumers to be more proactive and do the same. Some brands have utilized user-generated content platforms like ReviewIQ to help with the problem. Nivea, for example, achieved an increase in the number of positive reviews with the help of ReviewIQ from real consumers for its flagship store on Lazada Thailand.

“At this stage, brands still need to incentivize satisfied consumers to help generate good, organic reviews,” says Sheji.

How should Mom & Baby brands go about online?

Sheji stresses the importance of brands understanding the nature of their products and their primary objective to determine the optimal online strategy.

“If your products fall into the luxury category, you might as well sell it on your brand website to retain the full control of your channel. However, this strategy requires you to invest extensively in bringing in traffic,” advised Sheji.

But having a website also means owning a proprietary media channel that can be used for marketing and educational purposes. Brands like Sweety and Frisian Flag, for example, use their sites to connect offline promotion with the online audience as well as equip consumers with detailed product information.

For most brands, however, if the objective is to diversify sales channels, then opening an official flagship store on an e-marketplace like Shopee or Lazada is sufficient and also easier to maintain, while providing access to a broader online consumer base.

Drawing on her extensive experience in promoting Sweety to e-marketplaces, Wenny opined that prioritizing e-marketplace sales avenues is paramount for success. Especially in Indonesia where consumers are presented with many options, and competition between e-marketplaces is high, brands often feel the needs to have ubiquitous footprints.

Wenny summed up, “Choosing the right e-marketplace is an important step in the online expansion. Selection must consider the available audience, while also ensuring that the e-marketplace’s infrastructure is compatible with the business.”

Get the full report of Digital Mom & Baby Shoppers Profile here.

We conducted an online survey (“Mom & Baby Shopper Survey”) in February 2018 to understand the shopping behavior of Indonesian females (N=1,144), specifically mothers, when buying items in the Mom & Baby product category i.e. diapers, milk formula, toys, etc.

The results revealed whether these women preferred to buy baby products online or offline, how much they spent on average per order, what item they purchased on a frequent basis, their age, the family household income and what would convince them to increase shopping frequently.

The survey sheds light on the following topics:

  • What factors are causing consumers in the Mom & Baby category to continue to buy offline rather than online?
  • What aspects of ecommerce marketplaces are most important to Indonesian female shoppers and which marketplaces are most popular?
  • What items do Indonesian female consumers prefer to shop for online in the Mom & Baby category?
  • How do Mom & Baby category consumers start their online purchasing journey?
  • What is the shopper profile and annual spend of Mom & Baby shopper in Indonesia?

Chapter 1: The Online Potential for Mom & Baby Brands in Indonesia

The birth of a baby is a life changing event for a household in regards to its finances, hours of sleep received per night, and especially, the ongoing adjustment to becoming parents.

For every minute that passes, approximately 250 babies are born into the world.

Indonesia is a country with a population of more than 260 million and on average, 2.44 births per woman in 2015/2016 – the fourth highest among all Southeast Asian nations. It is approximated there are 1.6 million births per year in the country.

Figure 1: The average number of live births per woman in Southeast Asian nations. Source: Statista

To care for each new life, parents need to invest heavily in categories like diapers, milk formula, toys, clothing, education and especially, time. Over the next eight or ten years as the child grows older, starts school and requires different products and nutrition, certain shopping habits in the parents have already cemented.

This includes what brands they trust, what products they will recommend to friends and family and which channels to buy them from.
As the median age of new mothers in Indonesia at first birth is 22.8 years of age, younger than found in Thailand, Singapore and the Philippines, she is commonly already digitally savvy.

Indonesia is predicted to have the fourth largest middle-class consumption on a global scale by 2030.

ecommerceIQ

Figure 2: Middle class consumption around the world. Source: The Emerging Middle Class in Developing Countries, Brookings Institution

Considering the country’s middle-class household count is also expected to rise to 23.9 million in the next 12 years from 19.6 million in 2016, retailers are looking to capture common characteristics of middle class consumers – more spend on travel, holidays and family.

The purchasing power of Indonesians will also rise for the next two years as the country’s gross domestic product is expected to reach US$1.7 trillion by 2020 (Figure 2).

ecommerceIQ

Figure 3: Forecasted GDP of Indonesia is expected to reach US$1.7 trillion in 2020. Source: The Economist, World Bank, Badan Pusat Statistik Indonesia.

This is why companies are allocating massive budgets to build credibility with customers early in the journey of motherhood and more importantly, influence the behavior of future generations.

Not only does Indonesia house 132.7 million internet users, 1 out of 4 of the internet users in the country is a mother (Google & Kantar WorldPanel Indonesia). The number is expected to rise over the next three to five years as the majority of the population are females aged 10 to 19 years of age (Figure 3), meaning Indonesia can also expect a rise in new mothers.

ecommerceIQ

Figure 4: Indonesia’s demographic by age and gender. Source: Central Intelligence Agency

All of this makes the Mom & Baby category a highly attractive and rampant industry in Indonesia in the coming years.

How can companies capture new mothers and help them adapt to parenthood?

Sign up here to receive the full report of Digital Mom & Baby Shoppers Profile in Indonesia.

The big deal about Ramadan in Retail

Once a year, approximately 2 billion Muslims worldwide observe a month of fasting to commemorate their Islamic beliefs. This year, Ramadan will start on May 16 and end June 14, 2018.

In Southeast Asia, more specifically the pre-dominantly Muslim countries Malaysia and Indonesia, family members scattered across the region travel home to celebrate the holy month together. In addition to fasting every day from dawn to sunset, there are other consumer behaviors that have awoken retailers and ecommerce players alike.

Eid al-Fitr, the three-day celebration of breaking fast at the end of Ramadan is similar to Christmas in the West. And what is commonly associated with these holidays? Gift giving, new clothes, and feasts.

While the month is a joyous celebration among loved ones, it’s also one of the largest shopping events in the retail calendar – think of Black Friday and Cyber Monday in North America. It pays to pay attention to the Muslim buying power.

ecommerceIQ was invited to speak at Facebook Indonesia’s event a few weeks ago to share its findings about Indonesian shopping behavior during Ramadan based on its new segment Consumer Pulse. This is what we learned.

The average Ramadan shopper profile

Regardless of online or offline shopping preference, majority of Indonesians will buy more during Ramadan.

Based on our survey results, the average Ramadan shopper in Indonesia is a female, between 31 – 40 years of age and spends the most on items in the fashion and groceries categories.

Ramadan 2018

The more indulgent spending may be explained by the fact that prior to the start of Ramadan, working Indonesians have a major influx of disposable income as they receive their bonus for the year.

Unsurprisingly, the more income made, the more they will spend during Ramadan as shown by our survey.

Ramadan 2018

What is important to note is the middle-class household count in Indonesia is expected to rise to 23.9 million in the next 12 years from 19.6 million in 2016.

The country already holds the fourth largest middle-class count on a global scale.

A growing middle-class means emergence of middle class characteristics – more spend on travel, holidays and gifts for family. This is why companies are spending to build credibility early on as reliable brands and influence the behavior of future generations.

This is also what makes the archipelago such an attractive and exciting market.

Shopping peaks during Ramadan

Given the growing popularity of ecommerce across the mobile first region, what trends can we identify in online buying behavior during Ramadan such as what device are they shopping with and at what times?

As soon as the sun goes down, the spending spree begins. Data from aCommerce Ramadan in 2017 show that mobile browsing on ecommerce sites peak at 4-5am and 5–8 pm when people are sitting in traffic.

Ramadan 2018

While the average web session length is longer on desktops, there is more traffic coming from mobile during Ramadan making a great mobile UX important to encourage conversions.

The data also shows that males tend to browse more than females, but females have a higher conversion rate. While marketers should tailor campaigns appealing to both, converting males can be a bit trickier.

Ramadan 2018

Males tend to appreciate a straightforward and simple online shopping versus social and comprehensive experiences. They also buy based on logical steps (versus emotional) and like to research before buying, which can account for the increase in browsing activity.

Capturing the Ramadan shopper

Based on our survey, the most popular online channels for shopping during Ramadan are Shopee and Lazada Indonesia.

While the top players have moved past the question of whether they should have an official online presence, having a shop-in-shop isn’t enough given the number of sellers available.

Questions brand managers need to ask themselves include: how well do my products rank in search? What’s my pricing strategy? How are my product reviews? How attractive is my brand presence? How quick is delivery?

Consumers in Indonesia shared the top three reasons that would convince them to shop online more often.

  1. Special Ramadan promotions on products they need i.e. food and fashion
  2. Payments option cash on delivery
  3. Same day delivery with no additional fees

Sites that did not feature lower priced items suffered a hit in conversions. Indonesians are price conscious and even with disposable income from their bonus, thriftiness is a major factor in consumption behavior.

While it is okay to mix normal priced items on the homepage, lower priced items should be brought to the forefront. This is a great time of year to flush out inventory.

Ramadan 2018

Logistics and payments remain the toughest challenges in Indonesia ecommerce due to infrastructural immaturity and lack of financial knowledge. Most companies have been smart to outsource the two pain points to improve their shopping experience efficiently.

Ideally, fulfillment partners should have a strong local footprint across Indonesia through hubs/sorting facilities and offer multiple payment options to shorten delivery times and give customers flexibility.

Ramadan retail takeaways

During this period, retailers, brands, companies, social merchants are all vying for the same consumers making competition fierce. Everyone is spending more in hopes to catch more customers.

Because not every company has million dollar budgets to burn, marketers have to be smart with their spend and the first step is understanding consumer habits and preferences.

Talk to most experts in Southeast Asia about the potential of ecommerce in the region and they’ll find common ground: the real bottleneck towards growth lies primarily in logistics that can’t keep up.

Decrepit infrastructure, outdated customs processes, and the sprawling landscape all add up to a scenario notoriously murky to navigate. Indonesia, for example, is the largest internet market in Southeast Asia and it’s expected to drive the bulk of growth in ecommerce. Economic indicators are rosy and consumers have higher disposable incomes.

The problem? It’s a massive archipelago consisting of 17,000 islands. Ecommerce deliveries can take up to a week if delivery is even offered at all, leaving customers frustrated and uncertain whether they’d engage in a purchase again.

It’s a similar story in the Philippines, which has over 7,000 islands. Countries like Thailand may be geographically easier to navigate but it’s not without its own set of challenges: the Kingdom witnesses the second-highest road accidents in the world, just marginally behind Libya.

But simply adding more delivery vehicles and hiring people to drive them won’t instantly solve the problem. Within the logistics industry, there are issues such as fuel pilferage, lack of adherence to safety rules and regulations, and rash driving. These problems entail an inherent cost for fleet operators ordinarily passed on to end consumers in the form of delivery fees. And that’s a cost which can be avoided.

Thai company Drvr is trying to tackle these challenges head-on. It uses telematics, which allows devices to send and receive information across large distances, to track vehicle performance, driver behavior, unscheduled stops, and so on. Drvr installs an array of sensors inside vehicles to help managers keep track of the fleet and also provides a SaaS platform that displays an overall dashboard. It can be modified and tweaked according to client requirements, of which Mercedes Benz is one.

CEO and co-founder David Henderson, who hails from Seychelles, first moved to Thailand in 2014 following a stint at a telematics firm in Australia. The challenges of solving mammoth problems in Asia was the primary motive – he had originally pitched the idea to his previous employer but they were far too risk-averse for his liking. So he decided to quit and branch out on his own.

“The product we had two years ago was simply a GPS tracking product,” David tells ecommerceIQ. “We’ve matured significantly as a company since, and it’s fair to say that we have one of the most advanced fleet management and IOT platforms in the world now.”

The Drvr analytics dashboard

Why start in Thailand?

David explains that his target market isn’t just the logistics sector, but any business that owns and operates a large fleet of vehicles. This could entail players in transportation as well as construction. Such businesses need to keep a keen eye on the health of their vehicles to make sure that drivers and support staff aren’t running amok.

“Thailand is a natural market for us because there are over 3 million vehicles manufactured here annually with commercial vehicles accounting for half that number. That’s the primary reason we’re based here,” he explains.

Drvr’s core solution aims to make fleet operators operate efficiently. It achieves this via a number of ways – the first, as mentioned earlier, is via the predictive analytics platform it offers. The driver version of its app also combines gamification elements to help coax drivers into following the rules. There are rewards every time they adhere to a certain standard such as the maintenance of an average speed or keeping unscheduled stops to a minimum – these could be in the form of cash bonuses or enhanced performance reviews, but is agreed mutually between the fleet manager and driver. The company says this helps reduce the element of confrontation between them and HR.

“One of our immediate use cases that we can prove to our customers is in the case of fuel theft. Fuel theft is a major issue, not just in Thailand but right across the world in fact. It takes on different forms in different areas – [in Thailand] it tends to be siphoning but in Australia and other places […] people tend to fraudulently buy fuel or fill up their own car with the company credit card. We can detect these scenarios and prevent them from happening,” says David.

Before Drvr came along, the common solution to this issue was that companies would simply pay their drivers lower. These would lead to distorted economic incentives – drivers would simply shrug their shoulders and pilfer more fuel from the vehicle in order to sell it for cash. And the cycle would worsen.

David doesn’t disclose how many customers he has but does say that the startup turned a profit last month. While they’re based in Thailand, the largest market is currently Myanmar in terms of volume. However, both Indonesia and the Philippines are high on his list of priorities.

“We see Indonesia as the critical market in Southeast Asia – volume-wise, it’s just one with huge potential. Margins are a bit lower, admittedly, but there are big opportunities there,” he adds.

“At the same time it’s very tricky to get a foothold – we’ve failed a couple of times because of the difficulty of finding a reliable local partner. If you’re successful in Indonesia, it’s a massive tick on your profile.”

What trends does he notice?

Fleet analytics companies aren’t exactly mindblowing tech and there’s a few of them around already such as Cartrack and Coolasia. For David, however, they’re trying to set themselves apart in terms of the sophistication of their platform and the clients.

Mercedes Benz trucks, one of their key clients, actually ships all vehicles in Myanmar with Drvr sensors pre-installed. This provides a certain degree of validation when pitching to other companies. Drvr is also helping facilitate the growth of a subscription vehicle model – whereby fleet owners ‘rent’ vehicles from manufacturers as opposed to simply buying it outright and then allowing it to depreciate over its lifecycle.

This scenario – which David claims is already happening in markets like Australia – necessitates razor-sharp analytics so manufacturers know how to charge on an hourly or monthly basis. Analysts need to understand costs specifically and it’s simply not possible to do that without carefully monitoring existing vehicles to figure out when it’s liable to break down, what the fuel costs are, and other predictive analytics.

He claims Drvr is working with manufacturers interested in this model – the sensors and analytics will help them build a financial model – but doesn’t name names.

Will IOT engulf Asia?

Some people might scoff at the idea of high-tech commercial vehicles plying the backwaters of Asia given how cheap labor costs are, but David doesn’t believe it’s so far-fetched. He agrees on the fact that the economic imperative, for now, is missing but says the costs of devices and provisioning the service is “much lower than what it was in the past.”

“If you’re in ecommerce or logistics, the reality is that customers expect goods to be delivered the same day or as quickly as possible. In order to facilitate that you can’t have drivers sleeping on the side of the road or stealing fuel. It damages your brand and the perception of your service. Even the most old-fashioned Thai companies are beginning to realize that,” he explains.

Events

InternetRetailing Expo Indonesia 2018 is your opportunity to transform your retailing business. Taking your business ‘online’ promises increased sales, international customers and a more engaged, loyal customer base.

If you are looking to progress from offline to fully-fledged online retailer, then you need to learn the lessons from retailers across ASEAN that have tried, failed and succeeded in a wealth of aspects of online retail.

Ecommerce Indonesia 2017 will be the first event in the region to bring together policy makers, BFSI experts, startup community, ICT technologists together to present you with the latest in:

 

Key Topics & Case Studies:

  • Upcoming ICT Projects and Policies
  • Startups : Driving the  digitization of Indonesia
  • Data Analytics To Cement Customer Loyalty
  • Building Trust in Online Payments
  • Personalizing IOT for mcommerce
  • Beefing Cyber-Security to increase confidence in online payments

 

It’s all about helping startups and the community. Get direct access to tech leaders transforming the digital landscape, meet potential customers and investors, network with fellow tech junkies and more – taking your startup to the next level starts here.