Additionally, not only are consumers looking at alternative platforms to shop on, the key focus of what they shop for has also changed. Athleisure and sleepwear are the new evening wear and bath bomb searches are on the verge of overtaking ones for beauty products.
Taking it all in, it is obvious that, even more so than during pre-pandemic times, having a clear online presence and strategy is not only necessary, but part and parcel of plain vanilla fashion retailing. That said, SEA is a diverse market to tackle in the best of days, and the current environment has made demand management and forecasting even more volatile.
I believe that a brand wanting to successfully build their online channel strategy in SEA needs to start from one key decision: “Who are my best partners?” and in taking that decision, three key pillars need to be considered:
- How can we harness data to my advantage and thrive amidst demand volatility? Who can help me understand the SEA fashion consumer?
- How do we offer the best-in-class experience to my customers on deliveries and returns in the thousands of islands that comprise the region?
- Who can help me talk to the SEA consumer with a localised and culturally-sensitive tone of voice?
Putting data to good use
In today’s world, the more flexible and adaptable brands are in their offerings, the better chance they have in attracting and retaining customers. This is especially important at a time when brand loyalty is at its most vulnerable. In a survey by Toluna, one in three digital consumers in SEA will switch brands when they do not find preferred brands; and 40 per cent of consumers in the region have already tried a new brand since the outbreak of COVID-19. As such, understanding consumers’ evolving needs and demands through the application of data, will not only enable brands to benefit from increased customer retention, but also grow their business. Any lag time between identifying a new trend and curating the right strategies to match it can place brands at a disadvantage.
E-commerce players, by definition, collect and have access to significant amounts of data. The ability to track and collect this information is widespread across all online platforms and is common to small brand.com sites created on WordPress/Shopify, as well as major e-commerce platforms. In such an environment, the true differentiators that bring about a competitive edge become:
Data significance: The sheer amount and quality of data points available on a specific subject/product/category
The ability to “metabolise data” and move from large amounts of raw data to clear, direct and actionable insights
Harnessing data for insights helps replace a lot of the guesswork. As an example, out of many, one of the major inefficiencies for shopping online, for consumers and brands alike, is the issue of frequent returns due to incorrect fit. By leveraging data, brands are able to spot key factors contributing to frequent returns, rectify them and reduce return rates. Similarly, mapping multiple sites and offerings, and mapping products across price points and subcategories can help identify gaps within supply to leverage and “conquer” with one’s merchandising team.
Aside from the abovementioned business development angles of data usage, we also often see the same data pools used for “control functions”. Practical examples are mapping the e-commerce ecosystem for fakes or copies (something that is common to the luxury and fragrances players in particular) or general copyright infringements.
Building a comprehensive logistics network
One of the most diverse regions in the world, SEA presents unique geographical challenges to e-commerce businesses, as consumers in markets like the Philippines and Indonesia are spread across thousands of islands. Obstacles in delivery processes could also be further exacerbated by the differences in custom regulations and practices between each country.
Besides using a combination of sea and air routes, closing the last mile gap and optimising warehouses are vital to building a comprehensive logistics system. As the demand from online shoppers continues to increase, businesses also realise that they face a supply problem, given the impact that COVID-19 has had on logistics – particularly for mid- and last-mile routes.
The mid-mile routes across the islands and countries of SEA used to heavily leverage the spare cargo space capacity of commercial and low-cost flights. However, with cross-country air travel reduced to a trickle, this is no longer a scalable option. Similarly, whilst e-commerce volumes exploded into multiples of their former selves overnight, it is not as straightforward to build fleets of riders and drivers to serve these orders across such a de-concentrated region.
It is no surprise then, that while significant investments are poured into the region from pureplay players such as NinjaVan or Entrego, large e-commerce players are not taking the risk on capacity allocation and have been building their own fleets in all SEA markets. This holds true for Shopee, Lazada and Zalora alike.
Partnering with players that already have a robust logistics infrastructure, dedicated in-house fleets, strong priority relationships with customs offices and 3PLs, as well as experience and understanding of the nuances of SEA, therefore seems to be the best option to enter the region.
The above is especially true for fashion, as fashion’s uniqueness is its double-digit return rate. Developing all the above can then help when returns management presents unique challenges such as:
Building reverse logistics flows that are able to pick up goods from consumer residences within determined time slots – a very different challenge from the “drop off at any time” format of last mile logistics
Tying partnerships with high density drop off points, including convenience stores
Managing the refund of cash transactions at scale – a mode of payment that is still in high use in SEA
Managing duty claims from customs for returns of cross-border transactions. If you consider complex “paying” eight different customs offices in the region in eight different currencies and languages, imagine asking them to pay you back in eight countries and languages as well!
Putting in place strong QC processes before re-inbounding the product – though this is not common in general merchandise or non-fashion focused flows
Aside from geographical differences, consumers’ preferences in the region also vary from country to country. What sells in one market might not sell as well in another. For brands looking to decode consumer trends, having teams on the ground in each market could help in identifying these subtleties.
For example, brands that have a presence in countries, such as Indonesia and Malaysia with strong Muslim populations, will find that investing in the expansion of modest wear categories or having tailored messaging and styling can be a very high ROI exercise.
Tackling challenges head on
A region as dynamic and diverse as SEA has always been a tricky market to navigate. Yet, if done right, the opportunities and benefits companies stand to reap are high, and the very complexity of the effort makes for a strong defensive moat from new entrants.
While taking these initial steps are important in gaining a head start amidst current realities, brands must recognise that, especially in the age of Covid, change will be the only constant and that the industry will continue to evolve even after the situation has stabilised. The most important thing is for businesses to stay nimble and adaptable in shifting gears in order to thrive from volatility, rather than suffer from it.
Giulio Xiloyannis is chief commercial officer at Zalora