Retail in Southeast Asia is being transformed. Retailers urgently need to become more customer-centric if they are to avoid losing out to the online marketplaces.
E-commerce has rocketed in Southeast Asia in recent times, accelerated aggressively by the pandemic. Shopping habits are no longer solely based on browsing at destination malls: consumers now flock virtually to online marketplaces. It would seem sensible for retailers to align their online strategies with these marketplaces. However, retailers should be very wary of the impact this will have on every retailer’s greatest asset: their customer.
The pace of change in retail across Southeast Asia has been dramatic. A study by Facebook and Bain has forecast that e-commerce will double between 2021 and 2022 to US$132 billion, growing faster than China, India and Brazil. Three-quarters of the total population of 589m found across Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines are now online through mobile devices, and heavily influenced by the content they consume on those devices. A Gen Z consumer is more at home purchasing through a channel such as TikTok, based on an influencer’s recommendation, than a retailer’s website.
Digitization brings great opportunities for retailers, but also significant challenges. The digital world offers consumers more options: their purchasing decisions are no longer constrained by time and geography. A customer may discover a product on TikTok, research it online, try it on in-store, and then purchase it via the Shopee marketplace for a discount. Should they become dissatisfied with any one retailer, it’s easy for them to find an alternative. As constraints have been removed, power has shifted to the consumer. This is the age of customer centricity.
The rise of marketplaces
A huge beneficiary (and arguably a driver) of the growth in digital commerce is the cluster of online marketplaces which account for an estimated 75% of all retail e-commerce across Southeast Asia. The region has had relatively few ‘unicorns’ (companies valued at over $1bn), yet there are five among the marketplaces, such is the speed of their growth and ability to attract funding – namely, Shopee, Lazada, Bukalapak, Tokopedia and Blibli. Indeed, Shopee and Lazada drove an estimated $80bn of commerce between them in 2020. This is of undeniable value to small merchants, but it represents a quandary for the traditional retailer who looks to differentiate via more than just price and product. How much of their brand and customer relationship are they willing to yield to the marketplaces?
The primary reason retailers should consider allowing marketplaces to be their main digital route to customers is that a customer who has a positive experience is seven times more likely to purchase again than one who does not, according to Deloitte research. On the flip side, 32% of consumers globally say they would walk away from a brand they love after one bad experience.
Yet not only do retailers lose control of the shopping experience when consumers buy through marketplaces, they also lose much of the customer data. That reduces their ability to create positive experiences downstream and to understand what a positive experience actually looks like for one customer or another. This can lead to disjointed, irrelevant experiences and customer churn.
And as retailers know, traditional retail is not dead – far from it. Over 90% of all retail in Southeast Asia still takes place in the region’s extensive malls and shopping districts. Nor is it true to say that customers only buy online, or offline. The new world of retail is an omnichannel one, where different channels weave into each other and consumers seamlessly combine them throughout their consideration and purchase journey.
How can retailers seize the opportunities of this omnichannel world without completely losing control of their customer relationships?
1 Make the decision to become customer centric
Strive to align with the modern consumer who now values the customer experience almost as highly as the product they are purchasing.
2 Invest in technology that maximizes value from customer data
A retailer can only be customer-centric if they understand their customers. And to understand their customers, they must be able to unify their customer data sources to create a single source of truth. With the average retailer having 28 sources of customer data – from in-store and online sales, website and app behaviour, email engagement, customer service teams and so on – this is harder today than ever before. Enter stage left the customer data platforms (CDPs) which are rapidly rising in value for retailers as the means to meet this challenge. They unify and consolidate all data sources for a retailer and enable them to extract relevant insights about their customers rapidly. It is essential that these platforms put relevant insight in the hands of whoever needs it across a retail business, simply and quickly, so they become a business enabler and not yet another technology disabler.
3 Create the experiences that customers love
Insights from the CDP must be utilized thoughtfully across all customer touchpoints to be relevant and personalized to the customer. They should enable marketers to be curious about their customers and their similarities and differences. CDPs can help automate the execution of messaging through marketing channels or website experience, but this is where brand personality and creativity need to be used to shape great experiences for a company’s customer segments. Forward-thinking retailers are providing in-store assistants access to customer insights and lifetime value via mobile or tablet devices, so they can provide fantastic experiences in-store. Online and in-store experiences need be combined and made relevant to the customer journey. Love, Bonito – a Southeast Asian women’s fashion retailer – has enabled customers to select products online and visit a store to try on and purchase, combining online and offline channels while linking valuable purchase habits to a known customer.
Southeast Asian retailers must embrace the preferences of modern consumers and mesh the online and offline experience seamlessly. They must decide whether they want to differentiate themselves from the competition based on the experiences they can create for customers. The data that can be captured from customer touchpoints gives marketers more insights than ever to help create great experiences – assuming appropriate investment in technology solutions and leadership commitment.
Retailers must be wary of giving up their e-commerce strategies to powerful marketplaces: they should only utilize the marketplaces in ways that enable them to be customer-centric. Otherwise, they risk becoming a commodity with no viable means of changing trajectory.
Ben Moreau is vice president, South East Asia, at Lexer.