APAC is winning at e-commerce: Here’s how brands and retailers can win too

APAC countries like China and Korea are shaping e-commerce trends, with consumers pivoting online more quickly than the rest of the world as the pandemic fast-tracks their initiation into digital.

• More households are buying massive amounts of FMCG online, with consumers shopping more frequently online.
• Asia isn’t one-size-fits-all and local retailers will have an advantage across the region.
• While traditional trade still dominates Southeast Asian markets, online FMCG will eventually overtake brick-and-mortar stores.

Why it matters

APAC brands and retailers that want to be e-commerce winners can bank on: the massive assortment of products available online; price competitiveness; and shopper experience.

Takeaways

• The concept of range is different online, with the average e-commerce retailer having 1-1.5 million items available.
• Price competitiveness is a whole new ball game with grey market management and impact via promotions and festivals.
• Shopper experience is important and measuring success online is different from measuring it in the offline world.

Back in 2019, even before COVID-19 took the world by surprise, Asia was already accounting for more than 57% of global e-commerce sales. This year, the region is expected to generate over US$1.6 trillion in revenue.

“Asia is going to continue to grow,” Vaughan Ryan, NielsenIQ’s managing director of e-commerce for AsiaPacific, said at the recent eTail Asia Virtual Summit. “The growth will be slow as it starts to become a dominant player in retail but it is still going to be rather large."

Research from NielsenIQ – a recent rebrand of Nielsen's global consumer business – is seeing the emergence of e-commerce trends as "east-to-west".

"I hear people talk about what Amazon or Walmart in the US are doing. But frankly, countries like China and Korea are leading the way,” Ryan said, adding the other countries in other regions are simply playing catch-up.

“We are much further advanced in Asia Pacific.”

He said APAC consumers are simply faster at pivoting online as the pandemic fast-tracks their initiation into digital along with their counterparts worldwide. Changes in lifestyles and attitudes have also helped greatly.

“They are increasingly working from home and increasingly not worried about things such as logistics – whether they are going to be home when deliveries occur – or about product quality. There is far more trust then there ever was before. As a result, they are truly adopting this online behaviour."

Online sales are ringing in

More households are buying “massive amounts" of FMCG online as more consumers go online – and shop more frequently, said Ryan.

NielsenIQ data shows that in Thailand, 58% more households are buying online, while the likes of Singapore and Hong Kong have seen 47% and 46% growth respectively. In urban Indonesia, households buying online grew by 15%. In the Philippines, it rocketed to a sky-high 325%.

“The numbers just keep stacking up. Even in markets where e-commerce is more developed, such as Korea, where over three-quarters of the population buy FMCG products online, the increase in buyers over the last 12 months still grew by 5.1%.”

The frequency of online shopping also grew in South Korea, with a 29% rise in trip frequency for making purchases online.

Over in Singapore, consumers also increased trip frequency for shopping online by 11%, as well as increased the size of their online spend by 16% during the same period.

Local retailers have an advantage

Asia isn’t one-size-fits-all, said Ryan. Amid largely diverse e-commerce markets ranging from digital leaders such as China and South Korea, to developing digitalisers with fast growing e-commerce in CPG such as Singapore and Malaysia, local retailers are set to have an advantage across the region.

“Most of the biggest retailers in our local markets are local players," he said, observing that local retailers typically dominate local markets. They understand their consumers, the e-logistical challenges, the culture and behaviours. They also speak the local language and understand what consumers want to buy.

“It is inevitable that the fastest-growing players in the online world will be local, even more so than in the past. This isn’t just subject to brick and mortar; we will also have this in the e-tailing world.”

Online FMCG will overtake brick-and-mortar

Traditional trade dominates in many Southeast Asia markets but Ryan noted that this was a similar story in China just a decade ago.

“When you think about mom-and-pop stores in the Philippines and in Vietnam, these all existed in China in a major way 10 years ago. They still have strength today and traditional trade still accounts for just under a third of all sales.” But it is changing fast. Taking the FMCG category as an example, he said “In China right now, online FMCG growth is continuing to escalate. Online sales are strongest in urban areas, and outlying urban and rural areas have a lower proportion of online sales. Online FMCG now accounts for 31%."

A similar trend is set to play out in other parts of the region, even in developing e-commerce markets. But what’s even more remarkable is the category itself. “FMCG has always been that last pillar of brick-and-mortar and yet this is where we are going to continue to see this growth occur."

The fast growth of online FMCG means it is outpacing brick-and-mortar and, in some cases, this growth is happening even as the size of the overall pie shrinks.

“In Indonesia, you can see online growth of 52% relative to the total market growing by 11% in FMCG. In Thailand, the market grew by 52% in the online world, while the FMCG market actually declined, bucking the trend, where it was -1%.”

Post-pandemic, consumers will still embrace e-commerce

Will shoppers go back to their old habits after the pandemic?

“From the quantitative research we’ve done, the simple answer is no.”

Globally, 27% of shoppers purchased online for the first time, in the first six months of 2020. When the question “how many would continue to do this” was asked in December 2020, 75% of consumers said they would continue to buy online post-pandemic.

Closer to home, regional data from an upcoming white paper by NielsenIQ shows that for South Korea, the 60- plus age segment who bought FMCG online grew by 25% from the pre-pandemic period of September 2019- November 2019, through to December 2020-February 2021.

Not only did the number of people buying increase but they also increased their spend during this period by 5% and they shopped more frequently, increasing their shopping trips by a whopping 29%.

Again, this also applies to developing markets such as Indonesia, where a 60% increase in the number of olderpeople shopping online was also observed.

“Again, this group spent 43% more when they did shop online in the same period, increasing their shopping frequency online by 22%."

Convenience is a key driver

Convenience, as Ryan, pointed out, is “truly king” and the infinite warehouse of e-commerce retail, along with 24/7 access, has a lot going for it in terms of adoption.

“At NielsenIQ, we’ve been doing a shopper trend study for well over 20 years now. Each year, one of the top reasons why consumers shop where they do is because it’s a place where it is easy to find what they want to buy in that one shop.”

He said that statistically, brick-and-mortar stores have about 75,000 to 95,000 items on the shelves at any point in time.

“When you compare that to e-commerce retailers, they have between one million to 1.5 million items. You can also buy from e-commerce retailers any time of the day. This is a huge competitive advantage.”

A consideration checklist: How to win at e-commerce in Asia

To thrive at e-commerce in the region, brands and retailers should consider looking into these three areas.

1. Assortment

This refers to the 1–1.5 million items available from an average e-commerce retailer at any point in time.

“The whole concept of range is different online.”

• Deciding between the mix of exclusive and mass products is crucial.
• Upfront information about product availability and origins is a must.
• Consideration should also be given as to how to create trials through online platforms.

On their part, retailers can also consider private labels or in-house brands.

2. Price

"We did a really interesting study in the diaper category where we found out that consumers were shopping on a mobile phone in their hands while walking around a supermarket, checking out which was cheaper: an online pack of diapers or one in the offline world.”

Ryan called price competitiveness “a whole new ball game.”

“How you are going to price disperse and by which channel becomes really different. How do you manage this in the grey markets? How you impact via promotions and festivals, and what promotional packaging you aregoing to provide, are going to be different once again.”

3. Shopper experience

Singling out shopper experience as an area that “shouldn’t be overlooked", this encompasses every aspect from the consumer's perspective.

Relating a personal anecdote of how his fast food order was delivered by a delivery person who "turns up sweaty and doesn’t exactly have the food in the same condition [as] what I would get if I went to the restaurant" as an example of how consumers expect better experiences, Ryan said. "These are the sort of things that consumers are challenging. Satisfaction on delivery is critical,” he added.

In addition, keyword searches and brand visibility are also important in this area. "If I do a keyword search, 70% of sales occur from the first three items that come up in terms of that keyword search.

Also, whether in the commercial section or the organic section, it is critical for an ad to communicate so consumers go down the pathway to purchases.

Finally, measuring success online is different from measuring it in the offline world – the way you win online is not the same as the way you measure it in the real world because the KPIs that existed with measurements in bricks-and-mortar are not the same as in the online world.

“You need to adapt accordingly.”