Inside Retail: Do you think global brands have overlooked Southeast Asia in the past? And if so, why?
Ian Ho: In the past, global brands may have overlooked the potential in the region’s online
market with the perception that there is slow adoption of digital platforms and tools. However, in recent years, these brands have started to change their perception and are starting to invest more in building their presence online in the Southeast Asian market. This was especially apparent when the Covid-19 pandemic struck and retail stores were forced to close. Just in 2020 itself, Southeast Asia saw an additional 40 million new internet users, compared to 100 million between 2015 and 2019.
The massive adoption of mobile devices and increased internet connectivity presented a huge potential and opportunity for brands. However, despite the aggressive online growth of global brands, especially amid the pandemic, online penetration for most brands are still less than 10 per cent across Southeast Asia in 2020. Online penetration for fast-moving consumer goods (FMCG) brands in the region is still at 2 per cent compared to 27 per cent in China, while health and beauty is at 12 per cent and fashion and lifestyle at 44 per cent, compared to the 47 per cent and 64 per cent recorded in China for the respective categories.
This indicates that there are still tremendous untapped opportunities for brands to scale their businesses online in the Southeast Asia market.
IR: Do you think brands are taking Southeast Asia more seriously now?
IH: According to recent reports by Google, Temasek and Bain, e-commerce in Southeast Asia is projected to reach US$172 billion in 2025 with 340 million online shoppers. Each shopper is going to spend three times more online on average than they are now.
Besides the growing middle class in Southeast Asia spending more online, this acceleration of growth can also be attributed to the current pandemic. Consumers are increasingly turning to e-commerce to fulfil their purchasing needs as countries in our region are still either in lockdown or have movement control orders to contain the virus. This has created a new wave of users who are becoming online-first and cultivating new shopping behaviours, where they turn to e-commerce platforms such as Shopee to buy everything they need. Even when countries lift their lockdowns, we foresee that these consumers will continue their online shopping habits and become repeat visitors and users of the platform.
Global brands are starting to leverage this huge untapped potential of the e-commerce market in our region. We saw twice as many new brands launch official stores on Shopee from 2019 to 2020, while the Covid-19 pandemic was at its peak. There are now more than 20,000 official brand stores on Shopee Mall, a four times increase since 2017 when Shopee Mall first launched as a dedicated space for authentic brands and retailers.
We also saw more premium brands, which previously only focused on building their offline businesses in this region, open their official stores online. Last October, we officially launched Shopee Premium and we are focusing on adding more new premium brands and products, as well as further differentiating the premium experience to help brands acquire more new consumers.
IR: What are the biggest challenges for brands doing business in Southeast Asia?
IH: Brands are constantly looking at how they can acquire new consumers online to grow their businesses. They need to be able to differentiate their offerings and cut through the clutter online to attract new users. To address that, Shopee is rolling out a series of new
initiatives to expand our core user base and reach different consumer segments. To help FMCG brands capture a growing segment of online grocery shoppers, Shopee will be ramping up on Shopee Mart, a one-stop shop that allows consumers to conveniently purchase a wide variety of groceries and personal care products. We are also adding more touch points and launching more large-scale regional initiatives on Shopee Premium to help brands attract more premium consumers and cultivate them into avid brand lovers.
Another challenge brands face is in retaining existing customers and building loyalty. Understanding this concern, Shopee is introducing a new Brand Membership Program for brands to increase consumer retention by rewarding shoppers with loyalty points when they shop from brands’ official stores on Shopee Mall. The program replicates offline loyalty programs by allowing consumers to collect and redeem points, as well as enjoy exclusive benefits on Shopee, thus encouraging return consumers.
Lastly, brands are looking for better tools to strengthen their branding and marketing and to aid business operations and decisions. Besides an upgraded Marketing Solutions Portal to empower brands with more market intelligence and convenient media planning, Shopee has also launched the Regional Champion Brands Program to drive high impact projects with our top partners. This exclusive, by-invite only program offers brands an exclusive range of benefits across areas such as campaigns, marketing solutions, data and leadership exchanges. Brands that are part of the program get to enjoy priority access and support on all regional initiatives and resources to support brand growth and better engage their customers.
IR: What makes a brand successful when it comes to selling online in Southeast Asia?
IH: As consumers increasingly turn to e-commerce for their everyday needs, brands are simultaneously stepping up their digitalisation efforts and harnessing technology to engage their target audience.
Today’s users are more social than ever and they demand a more meaningful, engaging and entertaining online shopping experience with rich and unique content. Anticipating and adapting to this trend, Shopee has continuously improved on its in-app engagement features such as Shopee Live, Shopee Prizes, Shopee Feed over the past five years to make the online shopping experience more social. Brands can utilise those tools to better educate and engage their customers. Testament to the success of this strategy, the average time spent by a user in-app has consistently increased year-on year.
A deep understanding of consumer needs in each market is also crucial to make online shopping more enjoyable for consumers, while helping the brand to cut through the clutter online. Besides taking on a hyper-localised approach to tailor content and promotions to consumers in each different geographical region, brands need to pair it with strong data insights to ensure they are reaching the right target audience with customised and relevant shopping suggestions.
Lastly, brands need to provide a seamless shopping experience online that is comparable to offline or even better. For example, brands can increase their product assortment more easily online compared to offline in certain markets offering consumers more choices. Consumers also expect flexible payment options and faster deliveries when buying online, especially for bulkier items where they don’t have to bother with making separate transport arrangements. To improve consumer satisfaction on this front, Shopee is continuously expanding and enhancing our warehouse and distribution centres, as well as Shopee Xpress service capabilities to serve consumers better across the region.