The report obtained consumers' views on where they
spend their money online, how much they spend, factors
that influence them, as well as their consumer journey. Additionally, senior executives from more than 30 companies across a diverse range of industries weighed in on the opportunities they see, the challenges they confront and their approach to digital commerce business in Southeast Asia. While the survey was conducted in June 2019, prior to the covid-19 pandemic, the findings are valuable for companies planning to enter Southeast Asia's rapidly growing digital consumer market.
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
Below are the survey's top ten insights:
I agree with the report's conclusion that "[t]he rise of the Discovery Generation presents a huge opportunity. But navigating this landscape remains a challenge, especially for large brands. Brand owners need a clear, multi-channel strategy while simultaneously learning from the successful digital-first insurgents. These insurgents have been highly successful and are leading the way on innovative online brand building and becoming large regional brands in their own right. What can large brands do to overcome uncertainty?
"To address the challenges, large brands looking to engage the discovery generation can consider pursuing a ground-up approach instead of a patchwork of solutions. Some areas to think about include":
- Increase in affluence and internet access have led to the rise of digital consumers. Digital consumers in Southeast Asia have grown exponentially, from 90 million in 2015 to 250 million in 2018. This number is expected to grow 1.2 times by 2025.
- Online spending will outpace the growth of digital consumers. Digital spending is estimated to grow 3.2 times from 2018 to 2025, far bigger than the 1.2 times growth in the number of digital consumers.
- Clothing and personal care will drive the growth in online spend. Southeast Asia's online retail penetration is still low compared with other markets. It presents an opportunity for brands to step up and offer a dominant business model that can expand the market for themselves and their peers.
- The future of digital spending is discovery driven. Seventy percent of shoppers don't exactly know what they want when they shop online. This leads digital consumers to keep browsing till they find what they like.
- Omni-channel comparison shopping is part of the purchase journey. The purchase journey is rarely purely online or offline. Eighty-six percent of consumers surveyed compare products online, offline or both before making a purchase. About a third still check physical stores and other websites before buying.
- Discounts help acquire customers but don't necessarily promote loyalty. Discounting helps introduce customers to your brand, but it's not an effective differentiator over the long term. More than 50 percent of respondents don't necessarily wait for sales or deals.
- The primary driver of discovery is social media. More than 50 percent of consumers surveyed in Southeast Asia say they often discover new products via social media. In comparison, 22 percent often discover them via other online channels and 24 percent via offline channels and other means.
- Loyalty programs can create stickiness. Respondents with a loyalty program spend more and buy more often across categories. They are also more likely to be Promoters, who spend three times more across categories. Asked why they take part in loyalty programs, members said they primarily do so because of long-term savings.
- Fragmented market means companies have opportunity to win customer loyalty. A dominant ecommerce player has yet to establish itself in Southeast Asia. The market share between the largest and second-largest player is still largely head to head, unlike in the United States and China where the leading player's market share is several times larger than its closest competitor. The region's Net Promoter Score®, a measure of customer loyalty, is also still relatively low. This lack of loyalty in the market offers huge potential for brands in Southeast Asia to grow.
- Large brands need to build new muscles and examine potential for direct-to-consumer model. Brand owners need a clear, multi-channel strategy while simultaneously learning from the successful, digital-first “insurgent” companies. Some of these insurgent brands have found success by pursuing direct-to-consumer business models.
"As people go online, they move from being
simply internet users to being digital consumers," the report notes. "Digital consumers are internet
users who purchase online at least
once in any of the following categories":
- Consumer electronics and accessories
- Household appliances and furnishings
- Clothing, footwear and accessories
- Personal care and beauty
- Toys and baby care
- Groceries and food delivery
- Airline tickets and accommodation
- Gaming apps and music
"To address the challenges, large brands looking to engage the discovery generation can consider pursuing a ground-up approach instead of a patchwork of solutions. Some areas to think about include":
- Reimagine your brand discovery. What is your zero-based budgeting approach for marketing spend?
- Rethink your route-to-market strategy. What is your online strategy and how does it vary across categories?
- Redefine partnerships. How do you partner effectively with ecommerce platforms and leverage their customer insights?
- Redesign your organizational model. What capabilities should your organisational model have in order to win online?
Lastly, the report presents the following recommendations on how "large brands make their next move their best move":
- Leverage ecommerce channels as it's estimated that majority of growth for consumer-packaged goods will come from that platform.
- Ensure your brand is visible and available across all channels. If your brands aren't visible and available, people can't buy them.
- Brick-and-mortar tactics will not work; ecommerce requires different capabilities and approach.
- Pick your battles, place your bets. Consider business models outside of ecommerce. Some of these insurgent brands have found success by pursuing direct-to-consumer business models, so their potential for disruption can't be ignored.
This blog has covered Southeast Asia's recent economic advancements resulting from improvements in the region's mobile communications network and transportation infrastructure. The former, which includes the deployment of high-speed mobile broadband and the use of low-cost smartphones, increases the number of people who transition from internet users to digital consumers. The latter provides for easier ways to deliver goods to the 423 million digital consumers residing in the six countries covered in the survey. Based on my experience of doing business in the region, I confidentially agree with the report's assertion that "[t]he opportunity has never been greater."
Do you have a strategy to capitalize on the increasing number of digital consumers in Southeast Asia?
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