In the dynamic Asean retail landscape, traditional strategies centred around physical stores have long been the norm, celebrated for creating tangible shopping experiences, personalised service, and immediate gratification.
However, as digital transformation reshapes consumer expectations and shopping behaviours, the sector faces a pivotal shift – one that has the potential to upend retail dynamics. This transition is underscored by the impressive growth of Southeast Asia’s digital economy, which has reached a revenue milestone of $100 billion and a 27 per cent CAGR since 2021.
In this digital arena, large online marketplaces are dominating. Research from Meta and Bain & Co showed marketplaces own a 51 per cent share of SEA e-commerce and are growing. By comparison, large retailer-owned websites are suffering with just 4 per cent market share (less than small online shops, large brand-owned sites and food delivery).
The rise of e-commerce platforms like Shopee and Lazada has introduced both opportunities and challenges for retailers in Southeast Asia. While these platforms offer crucial channels for reaching online consumers, significant increases in commission rates and strategic shifts toward higher monetisation have tightened margins for retailers selling through them. These changes have signalled the end of low-cost sales through marketplaces in the region, highlighting to retailers the risks of not having control of the online channel and urging brick-and-mortar retailers to rethink their e-commerce strategies.
Recognising the urgent need for retailers to adapt, Alexis de Fontenay, RVP at Mirakl, a leading provider of marketplace, dropship & retail media solutions, offers insights on this fast-evolving retail environment. De Fontenay emphasises the importance of retailers taking control of their e-commerce strategies by establishing their own platforms.
“The shift towards digital-first is not just a trend but a strategic imperative for retailers in the Asean region. By investing in their own e-commerce capabilities, retailers can regain control over their margins, pricing strategies, and customer relationships, ensuring their competitive edge and profitability in the digital era,” he said.
The global retail industry is littered with case studies of retailers that failed to grasp the importance of adapting to the digital-first consumer and focusing on their own e-commerce businesses. Southeast Asia is no different: Robinsons Department Stores, once a stalwart in the Asean retail sector, filed for bankruptcy after 162 years due to its failure to respond to the new digital imperative, providing a stark example of the consequences of not adapting swiftly enough to the digital retail landscape. We will likely see more iconic brands disappearing from the industry here in Southeast Asia over the coming years.
De Fontenay further highlighted the global trend towards specialised or vertical marketplaces, which have outperformed generalist marketplace platforms in GMV growth. Very often, these specialised marketplaces are launched by omnichannel retailers.
“Retailers are uniquely positioned to leverage their category expertise and brand equity to offer superior omnichannel experiences. This is crucial for competing in a market where digital transformation is rewriting the rules of retail,” he added. “Central Group and Decathlon Singapore are great examples of retailers in SEA seeing success with this model.”
Just as Shopee and Lazada are diversifying their revenue streams and expanding monetisation opportunities, retailers must do the same. It is predicted that 50 per cent of a retailer’s profits will come from beyond “traditional” trade by 2030. Globally, the tried and tested way for retailers to accelerate online sales, improve profitability and create diversified revenue streams is to take a page from the playbook of the digital giants and adopt the marketplace model for their own websites. Adding more products, from more suppliers to meet more customer needs is the first step in creating a platform from which other initiatives like retail media, personalisation and fulfilment can blossom.
Alexis de Fontenay’s comments underscore the critical need for Asean retailers to embrace digital innovation. By developing their own online platforms, retailers can navigate the challenges of digital transformation, ensuring their sustainability and success in a rapidly evolving sector.
“This strategic shift is not just about participation in the digital economy but about securing a future where retailers maintain control over their destiny in the face of the digital revolution,” concluded De Fontenay.
