What it Takes to Win the Southeast Asian E-commerce Market in 2018
And how start-ups can ride the wave
PHOTO CREDIT: Getty Images
In 2016, a Google-Temasek study predicted that Southeast Asia’s Internet economy could grow to a whopping $200 billion by 2025. With an existing user base of 260 million, which is expected to reach 480 million users by 2020, it’s hard not to see why. An updated version of the study released in December shows that the e-commerce industry reached $11 billion, driven by a surge of marketplaces where small- and medium-scale businesses can sell to consumers on mobile-first platforms.
No wonder the allure of this rising industry is capturing the attention of entrepreneurs and investors alike.
Want to make it big in Southeast Asian e-commerce market? Read on.
Create hybrid, omni-channel models
Amit Anand, co-founder and managing partner at Jungle Ventures, predicts 2018 is when “online-to-offline (O2O) will go mainstream in Southeast Asia. Many Internet businesses will realize that they can scale more efficiently and quickly and also provide better consumer experiences by creating hybrid, omni-channel models.”
Take Pomelo Fashion, an online fast fashion brand and one of Jungle Ventures’ portfolio investments, which recently launched an offline presence. “In the span of a couple of months, it has already experienced huge growth, both in terms of conversion and also an uptick in average order values of purchases made by customers,” shares Anand.
Late last year, Zalora announced its retail partnership with Ayala Malls, one of the biggest mall operators in the Philippines, in a bid to transform the customer journey into a more connected shopping experience. It introduced click-and-connect, where online shoppers can redirect their parcel delivery to an Ayala-owned mall and collect at their own time and convenience, and pop-up stores to integrate the online and offline worlds.
“It doesn’t matter if the business starts online and go offline or vice versa, the bottom-line is that brands will need to leverage on multiple channels to remain relevant to the consumer of today,” Anand says.
Support the ecosystem
Truth be told, it will be hard for newer start-ups to play catch up with the more established players in the market, such as Zalora or Lazada. What they can do instead is to be a part of the value chain so they can ride on the growth of the region’s e-commerce space.
“The real opportunity to come and build the kind of infrastructure that we have was a few years ago. There are pretty established big players now in the market, Zalora being one of them, so if you’re going to come in and try to replicate that model, that’s a very big investment that you’re going to have to make,” Zalora Group CEO Parker Gundersen tells Inc. Southeast Asia.
He goes on to say that there are, however, many opportunities to build into the ecosystem, especially for start-ups that are into technology.
“Find unique ways to add value to the customer, you’ll be much more relevant to the customer and other players in the ecosystem, and that’s probably a better route to success,” says Gundersen.
Anand concurs, “If a company is an enabler of e-commerce, then the ease of use for the consumer and seamless and reliable integration for the e-commerce merchants becomes the primary factor for success.”
One such company is online payments platform Kredivo, which allows users to make online purchases on credit and pay off the balance in installments. Solving fundamental problems in the Indonesian e-commerce space, such as low credit card penetration, allows it to be a relevant player in the ecosystem.
Leverage on data
According to Anand, one of the critical factors for success in the digital world is the ability to collect, track, and use data.
“Digital interactions and transactions leave a trail of insights, but data cannot be effectively utilized if it is not captured comprehensive. This is an area where I always encourage our teams to start early and get a head start over their competition,” he says, adding that there are tools and frameworks now in place to help start-ups implement this more effectively and economically.
To be sure, e-commerce is still in its nascent stages in Southeast Asia. “In this regard, we can continue to expect more investments to come from companies and government bodies to improve and innovate on everything from discovery to last mile delivery,” says Anand.