As digitization reconfigures Asia’s consumer landscape, the interaction of online and offline channels is redefining the retail supply chain.
Ten years ago, the prospect of the world’s largest IPO being a Chinese e-commerce company seemed fantastical. In September 2014, Chinese e-giant Alibaba raised USD 25 billion in New York, and forever changed the online purchasing parameters, not only in China and Asia, but worldwide.
The colossal deal continues to influence the way brands and consumers think about purchasing and selling, and three key themes have emerged: 1) how will technology drive omni-channel retailing; 2) what will be the impact on logistics and distribution; and 3) how will offline and online channels be integrated to benefit both retailers and customers?
In Asia, these questions are being considered against a backdrop of spiraling internet penetration rates, aggressive adoption of new technologies, interactive multiplatform content and promotions, and, crucially, the widespread availability of affordable, wifi-enabled smartphones. The result is an insatiable appetite for click-and-collect consumption.
It may be the largest and most influential, but Alibaba is not Asia’s only important online sales aggregator. JD.com in China, Flipkart and Snapdeal in India, Rakuten in Japan and Lazada and Zalora in South East Asia are highly visible and successful. Some of these platforms enable individual brands and retailers to establish their own online store-in-stores. At the same time, local and multinational retailers are busily refining their own bespoke internet stores to utilize the technological and physical tools at their disposal to compete for customers who prefer e-carts to cash counters.
As the balance between online, mobile and traditional retailing is recalibrated, an omni-channel approach will redefine the pathways to success in Asia’s informationdriven retail landscape. Yet, while the seemingly unstoppable trend of mobile shopping (m-commerce) is discernible across the map of Asia, each country must be considered both on its own merits and in a regional context.
At present, comparing online shopping mega-markets, like China, India, Japan and Korea, with fledgling e-sales volumes in Cambodia and Laos is counter-productive. In between these two poles are the midrange South East Asian markets of Thailand, Malaysia and Indonesia, where online purchasing is gaining traction in the major urban centers and in remote locations, while Singapore has built highly impressive technical infrastructure combined with regional logistics capacities.
Cost-efficient technologies are helping to drive online consumption growth elsewhere, too. China’s Huawei Technologies, for example, expects to ship eight million smartphones to South East Asia in 2015, up 160 percent on 2014, boosted by strong demand in Myanmar.
Another factor to consider is the crossborder click-and-shop model, with retailers expecting the establishment of the ASEAN Economic Community at the end of 2015 to influence greater intra-regional purchasing – which brings into play different ethnic and cultural product and service considerations.
“Online has created a revolution for retail, making shopping available anywhere, any time. At the beginning, online was a channel to buy things, but this is changing as e-commerce becomes more intelligent and more focused on real-time information,” says Pawoot Pongvitayapanu, CEO of efrastructure group, Founder & MD of Tarad.com and President of the Thai E-commerce Association.
An e-commerce pioneer in Thailand, Pawoot Pongvitayapanu launched his first company in 1999 when internet connectivity was still a luxury. He founded Tarad. com, the nation’s leading online marketplace, which was later purchased by Rakuten. Having been a frontline participator of industry change, he believes that m-commerce adoption is creating new opportunities for information-driven retail.
As retailers learn more about customer behaviors, they will be able to more accurately devise bespoke benefits, privileges and promotions. In essence, consumer marketing will move from the mass market to the individual. “Technology and data analytics have developed fast, and as people use mobile more and more, technology knows consumers better than they know themselves,” says Pawoot Pongvitayapanu. “The future of e-commerce will not be about consumers looking for products, but about a product looking for a consumer.”
Data-enabled retail will apply new thinking and new solutions. “The omni-channel is coming, for sure. There is huge investment in big data, to better integrate and leverage consumer information in ways that enhance the user experience,” says Pawoot Pongvitayapanu. “We need to look more at customer journeys, and at the points consumers connect with and touch online platforms and the product categories that they prefer. We will see more cloud retail, and customer demand is forcing suppliers to improve delivery speeds all the time. It used to take two or three days for goods purchased online to arrive, but now customers expect them immediately.”
Retailers in Asia must also be prepared for a greater regional overlap of product demand. In the early days of e-commerce, many shopping sites were set up to serve domestic purchasers. Today, multilanguage and multi-currency adaptation, allied to regional logistics partnerships, enable faster, more efficient cross-border selling. “China is moving very fast in this aspect. Websites that used to sell only in Chinese now offer more than 25 languages and can sell to customers anywhere in the world. This is a huge change in the last two years,” says Pawoot Pongvitayapanu.
Service delivery in e-commerce logistics
“I think online shopping now goes beyond changing the retail landscape in Asia. It’s transforming the way people live,” says Dr. Wolfgang Baier, Group CEO of Singapore Post (SingPost). “It happened in the US and Europe, and it is happening in a big way in Asia. The fast adoption of smartphones across Asian markets means there is a lot of leapfrogging in terms of technology. Many consumers go straight to mobile, they don’t think about online in any other way. So, everything we do now starts with mobile, then we roll out to other platforms.”
Singapore’s national postal service has transformed itself in recent years to become a specialist e-commerce logistics provider. Around a decade ago, SingPost noticed the growing penetration of ecommerce was connecting online traders with local customers. Over the past four years, this trend became both regional and international, but logistics remained a challenge due to the high costs and complexity of moving goods across borders.
Service innovation was integral to SingPost’s transformed business model. It entered into a strategic partnership with China’s Alibaba Group, and launched a co-branded credit card with Standard Chartered Bank specifically designed for online shoppers. The success of the card resulted in new features being added. In early 2015, it became the first card of its kind in Singapore to offer an online price guarantee, with a 50 percent refund of the difference should a cardholder find a better price online after purchase, and 7 percent cash-back for online purchases in Singapore.
Also in 2015, SingPost rolled out its 100th POPStation in Singapore. Ideally suited for urban environments, the POPStations are automated smart lockers that enable online shoppers to collect, post or return their parcels at any time. A POPStation app was introduced to enhance the customer experience, and parcel volumes at the POPStations have increased sixfold since its launch.
The future of e-commerce logistics in Asian markets will be dominated, Dr. Baier says, by two words: “optimization” and “integration,” with digital technologies driving innovation across the entire value chain.
“We are looking at an entirely new model now, Business to Business for the Consumer (B2B4C). Intelligence is a key priority, and integrated thinking must be applied with a focus on the consumer,” says Dr. Baier. “Change is a constant. We need to continue researching and better understanding the changing patterns of mobile consumption to add more value and make our services more convenient.”
From hypermarkets to e-carts
Shopping for food in most Asian countries has traditionally been an outdoor experience. Fresh or “wet” markets in local neighborhoods offer a daily selection of produce and a social environment for shoppers to pick and choose their preferred ingredients. In recent years, the global trend towards city and suburban supermarkets influenced a change in buying behavior, particularly for time-poor urbanites. Today, the expansion of fast, reliable wifi across Asian markets offers consumers a new alternative: home shopping.
“The most important thing today for consumers is convenience. Neighborhood convenience store formats are growing in Thailand, and many are starting to compete on price. But you have to be online, too,” says Wanna Swuddigul, Digital and Online Business Director, Tesco Thailand.
“People are becoming used to the convenience of searching and browsing products online without having to leave the house, and then having those products delivered at home. Once they experience the benefits of online shopping, they tend to continue using it.”
Online shopping sales for Tesco Thailand are growing at more than 100 percent annually, but the contribution to overall sales remains in single digits. New technology is, however, driving generational change in purchasing. “Even rural customers have access to mobile internet now, and for that reason online shopping will become much more mobile based,” says Wanna Swuddigul.
“We are continuing to invest in our online and mobile infrastructure and apps that help market products and promotional offers. But we have learned that pricing and promotions are not enough for online customers, you need to deliver a seamless multi-channel experience,” says Wanna Swuddigul. “Some online retailers are set up specifically to sell online, but we must maximize the value of having our hypermarket stores and a strong online offering.”
The O2O challenge
Across Asia, mobile engagement is critical. A 2015 PwC consumer survey, for instance, revealed that 85 percent of Chinese consumers (compared to 68 percent globally) chose a digital channel first when researching a new product. PwC adds that throughout the region fast-changing online-to-offline (O2O) behavior requires brands to analyze consumer data, apply new in-store technologies, personalized services and customized store layouts. Upgraded inventory management systems help anticipate aspirational needs, and integrate physical and digital shopping platforms.
Marrying online and offline demand is challenging, but mobile service improvisation is evident region-wide. From fashion retailers in Hong Kong to bookstores in Singapore and neighborhood cafés in Kuala Lumpur, brands are utilizing apps and QR codes to engage consumers, create interactive promotions and offer targeted discounts. The objective is to stay “top of mind” with choice-laden consumers, and to retain loyalty – both online and offline.
In such fast-changing environments, thinking ahead is an advantage. “Our vision is to build e-commerce sites that are relevant to the next generation consumer. We need to be where the consumer wants to shop, available when they want to shop, and provide access to our products in the way they want to shop,” says Chip Bergh, President and CEO, Levi Strauss & Co., a brand that has continued to innovate since creating the first pair of blue jeans in 1873.
Understanding where Asian consumers prefer to shop online, and developing a significant presence in all of those places is part of the strategy. “In China we are on TMall, and in India its Myntra and Flipkart. As an omni-channel retailer, in addition to these third-party sites, we also offer the online experience on our own e-commerce sites in China, Japan and South Korea,” says Chip Bergh.
Portable access means when and how customers want to shop is no longer location-specific. “Across Asia, the consumer will be on mobile because it is a critical component of the shopping journey. As we design the next iteration of our website, we are doing so with mobile first,” says Chip Bergh.
Asian shoppers are increasingly experiential in their approach to buying, and this provides new opportunities. “We know that brands with strong omni-channel experiences are gaining more share of the consumer wallet,” says Chip Bergh. “We are launching initiatives that support this goal, such as Find in Store to help consumers find items online that are available in our retail stores. It’s our way of providing a seamless shopping experience for our consumers.”
the internet creates transparency. Brands can use data to improve their interactions with consumers, and personalization becomes accessible at a lower cost.
consumers increasingly expect both super-fast delivery and the immediate return of unwanted or faulty products.
it’s not just about credit cards, different markets have different payment preferences. Payment on delivery is popular in South East Asia, while Alipay is dominant on China’s Alibaba platforms.
as bricks-and-mortar retailers create online stores and expand their social media presence, major online players in South East Asia are reversing the trend and opening pop-up stores in malls.
online shopping transcends national boundaries, and capturing the imagination of local consumers is no longer the sole objective of e-commerce players in Asia.
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