Lynk Insights: eCommerce

The eCommerce industry is quickly revolutionizing the retail habits of shoppers across the world, becoming one of the largest global industries around. Heads are beginning to turn towards the seemingly unstoppable growth and unlimited potential that the eCommerce industry holds. Lynk Knowledge Partner and industry professional Jack Moy holds a similar sentiment, especially when it comes to eCommerce in Southeast Asia.

“Southeast Asia’s eCommerce is still very much in the nascent stage, with penetration across markets ranging between 0.5% and 2.1%. However, the market is fast approaching a tipping point.”

The industry as a whole is expected to continue on its already impressive growth trajectory over the past decade of  23% year-on-year. With projections like this, it’s not hard to see why sales are expected to total US$27 trillion by 2020 for retail alone. Understandably this has drawn significant interest from investors and consumers alike. Jack explores this exciting growth in more detail.

“The demand is certainly showing signs of exponential growth. Mobile penetration and mobile internet time spent in Southeast Asia are rapidly growing and leading versus other parts of the world, including China. According to a 2017 Google survey, 100 million consumers in Southeast Asia have made a digital purchase, but 150 million have researched products or engaged with sellers online. Some industries are already starting to score big. For instance, 24% of all clothing and footwear as well as and 18% of all travel are purchased online (The Wall Street Journal, 2016). These industries are typically the leaders in online shopping adoption so it can be expected that an eCommerce boom in other industries will soon follow.   

The supply side of things is even more positive. Amazon’s entry into Southeast Asia and Alibaba’s continued focus on Lazada will up the game and spoil consumers’ for choice when it comes to buying online. We also see logistics infrastructure being built to cope with increased orders, from better roads to better last-mile solutions to meet a future where there are denser orders within a particular area, serving both urban and rural markets. Innovative payment methods are also being introduced to better the current interim solution of Cash-on-Delivery being offered by many players at the moment. Personally,  I can’t see any reasons why this trend wouldn’t continue considering the supply and demand factors that are in place.”

This popularity and growth have in many ways been enhanced by both Amazon and Alibaba, both of which were quick to realize the power that eCommerce held. In 2018 they are the two biggest retailers in the world and are battling for domination, especially in Southeast Asia. However, whether a clear-cut winner will emerge is yet to be seen and according to Jack, we may never see a victor.

“I don’t think a winner takes all scenario will emerge. Alibaba’s marketplace model creates a massive online shopping mall of independent shops that will give it an assortment that consumers can only dream of. Yet, curation would be important to avoid choice overload or shoppers feeling lost. Shoppers who have found golden deals amongst the vast array of shops, and are used to “bargain hunting” do enjoy the mess though. Those who enjoy easy shopping experience might just prefer Amazon, so I would say the expectations and what shoppers prefer are diverse.”

Yet, it’s not just the big players looking to further utilize the advantages that eCommerce brings to a business. Smaller businesses and startups are also benefiting from this new opportunity, allowing the little guy to benefit from the increasing digitization of commerce. While obviously beneficial, Jack is keen to point out the additional challenges that come with this increase in customer accessibility.

“eCommerce promises to be both an opportunity and a disruptor for small businesses. With eCommerce, small businesses can now open a new channel for revenue online, to their consumers within the vicinity and serve as a rural neighbourhood’s point for collection for eCommerce orders. Being able to set up shop within high traffic online marketplaces would also provide an additional virtual shop front.

Yet, the fact that eCommerce brings business in from all over the country and world to any internet-accessible mobile phone means consumers would increasingly be exposed to a wider, more interesting assortment that would pose a challenge to small businesses.”

Clearly, this channel will become more and more vital for businesses big and small. Yet instead of completely taking over the traditional brick and mortar shopping experience, it’s more likely that eCommerce will form an important part of a wider multi-channel strategy. This, in turn, will allow for a more well rounded customer experience.

“eCommerce could provide an invaluable part of the overall experience for customers. For shopper insights, it would allow businesses to gain an analytical edge. For example, it may help them identify which customers shop in the following ways:

– Routine shoppers (Shoppers who only top-up essentials on a regular basis)

– Experiential shoppers (Shoppers to want to be engaged and entertained)

– Convenience shoppers (Shoppers who purchase small items to fulfil an impulse or emergency needs)

  • It’s very likely we will still see an array of retail channels to serve the different needs of shoppers.”

This enhanced customer experience will only be made better when Artificial Intelligence (AI) and machine learning is introduced. From customer service, to chatbots, to inventory management, all can be enhanced by the introduction of AI, as is agreed to by Jack.

“AI will certainly play a big role in helping businesses cope with demand and enhance shopper experiences as they search for what they want. Alternatively, it can just create a discovery journey that is customized to what the shopper prefers. It’s also likely to help the supply part of eCommerce too, with an understanding of data being important to build the right infrastructure to cope with demand at the right time.”

The future is clearly bright for eCommerce, but that doesn’t mean that it will be a completely smooth ride. As Jack points out, there are still some hurdles for the industry to overcome before it becomes perfected and fully integrated into the commercial industry.

“Cash-on-Delivery is currently a good method to get people to try eCommerce, but it presents a big risk to sellers. At the same time, fraud is a significant problem with many other methods hence a viable solution to build confidence in online payment needs to be found. Supply Chain infrastructure is also an important aspect to assess how much eCommerce can grow. Finding the right warehouse facilities, the building of regional hubs, connectivity and roads are all important to ensuring eCommerce can feasibly physically deliver the goods on offer to the consumers.”

 

 

 

 

 

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