E-commerce battles sales fatigue and hiccups in quest for consumers' wallets

ANNOYING jingles, celebrity endorsements and a sale every month have marked the e-commerce landscape in 2020 and 2021. In the lead-up to this year's 11.11 event, it seemed that all systems were primed and ready to receive the deluge of orders that would come in.

Both Lazada and Shopee reported record numbers for the 11.11 sale period. With figures like taking 9 minutes to cross S$11 million in sales for Lazada and 11 million items sold in just 5 minutes on Shopee during the period, e-commerce looks to be going full steam ahead. All despite both platforms holding a sales day monthly since 2020.

"This 11.11 has been another record-breaking event for us. Not only did we break last year's sales record by the afternoon, we also had our highest traffic ever on the platform," said James Chang, chief executive officer of Lazada Singapore in a press statement.

Cashback startup Shopback also saw South-east Asia users gain US$1.7 million in cashback for the 11.11 sale as well, with the tide appearing to lift all e-commerce boats. Merchants on Shopback like Nike, Lululemon and Dyson saw sales rising on Nov 11 as well.

The recent Temasek, Google and Bain report on the digital economy in South-east Asia is projecting a 49 per cent year-on-year growth to US$174 billion in 2021 and doubling by 2025, something e-commerce platforms are eager to continue slicing a piece of.

But there are some worrying indicators that further growth might not be as explosive as in the past. With 75 per cent of people in South-east Asia already logging on, converting new users to online retail via sales alone is going to get tougher.

E-commerce platforms are going all out to keep customers shopping, with prizes like a S$1 million condominium in Singapore. But to continue slicing that pie, e-commerce platforms have to ensure a frictionless experience from cart to checkout for any customer. While platforms have scaled to meet demands from such events, its partners might not be on the same page.

Stumbling blocks, angry users

"Stumbling blocks such as a failed payment, a lack of a preferred payment option or requiring lengthy forms to be completed could sour the customer experience and lead to what is termed, 'cart abandonment'. This is when an online shopper selects some items, starts the checkout process and ultimately decides not to complete it," Zain Suharwardy, managing director and digital commerce lead, South-east Asia at Accenture Interactive told The Business Times (BT).

A friction-inducing incident did happen in the early hours of Nov 11. Customers were unable to pay for and check out their carts; angry comments began to flood Lazada's and Shopee's Facebook pages of declined or duplicate transactions.

It seemed that DBS credit and debit cards users weren't able to clear their transactions, and Shopee acknowledged the issue in a social media post at 3 am on Nov 11. Still, it did not stop users from continuing to complain about their problems with the transactions.

"How much have I spent? $0. because your payment system is as useful as a lifeguard at the swimming Olympics," said user Azumi Yunos in a comment on Lazada's Facebook post.

With friction the enemy for any e-commerce platform, all players have spent money on bulking up their infrastructure to cater for sale days like 11.11 to ensure customers don't abandon their carts.

But while their platforms might have the bandwidth, a point of failure might emerge from their partners.

Outsource checkout or build your own wallet?

A way to avoid checkout snags could be to work with the best payment service providers to offer a fully integrated checkout service.

"Payment partners should also be looped in at the very start of planning for large campaigns so that stress testing and other preparations can be made to handle the expected surge in payment activity," said Suharwardy.

Shopee acknowledged the importance of a smooth experience for customers, especially during big sale periods. Regarding the payment snag on 11.11, the e-commerce platform said that it had worked to resolve the payment issue with its partners.

But when the incident involves a bank, payment service providers have to rely on the bank itself to sort out the issue with their cards, like what happened on Nov 11.

Perhaps then it is no surprise that both Shopee and Lazada are trying to introduce their own wallets, following in the footsteps of Alibaba. Taking the payment option in-house enables e-commerce platforms to fix problems that pop up rather than relying on third parties to do so. Another plus point is that it also reduces friction at the point of payment for customers as well.

"If you keep everything within your own ecosystem it is much easier for you to cater for it. From a technology point of view it is less likely to go wrong and you have full control, allowing you to fix it on your own," Li Jianggan, founder and chief executive of venture builder Momentum Works told BT.

Shopee's ShopeePay wallet has been incentivising users with its Shopee Coins and outreach to offline merchants to be used as a payment option. Lazada has been nudging users towards their Lazpay wallet with rebates and easy one-click payment.

Sale fatigue

While reducing friction might get customers to spend, having a sale every month since 2020 has some people wondering if customers are getting sales fatigue.

Sales traditionally have been thought of as a special event to convert customers, but when they come round at least once a month and in Shopee's case, twice in November, running sales as a conversion tactic is looking to be slowing down.

"As online marketplaces and shopping festivals become increasingly homogenous, it might be time for brands to rethink the value of these e-commerce events and the experience they deliver for consumers," said Accenture's Suharwardy. "Sales fatigue amongst consumers purely on the back of offering discounts campaign after campaign is almost inevitable in such a crowded space."

For instance, Shopee's numbers of 2 billion items sold for its 11.11 event are based on a period of between 2 and 3 weeks depending on the market. It seems that to grow more sales, categories had to be expanded to include groceries as well as cruises and staycations.

"Multiple sources, sellers and friends are telling me that growth in Indonesia is slowing down, because most people want to buy stuff and any increment will be hard unless you encroach into categories like groceries," said Momentum's Li.

Muscle memory

Still, platforms are incentivised to keep up these promotions to move people's offline purchases online, making it almost muscle memory for customers to go on an e-commerce platform to buy something.

"If you look at Shopee's slogan, 'buy everything on Shopee', that's what they want to achieve," said Li.

E-commerce platforms, having spent all that cash in acquiring customers, are now in a cycle of needing to keep their customers on board, and spending to have the critical mass to get better deals, to keep the cycle going. Still, Shopee thinks that sales are likely the way to retain customers and fuel spending.

"At Shopee, we are committed to delivering a hyper-localised and personalised approach for our users. We work closely with our sellers and brand partners at each double-digit sale campaign to bring shoppers the best deals and non-stop entertainment. On top of our year-end campaigns, we have a variety of thematic, localised campaigns that cater to local needs and experiences," said a Shopee spokesperson.

On Lazada's end, there are plans to differentiate itself with promises of more new services. "We are also looking at ways to improve the online shopping experience such as offering more delivery options to cater to different needs. We have launched same-day delivery service, with an initial pool of pilot sellers. We look forward to continue innovating and scaling new services for our customers," said Lazada's Chang.

While the monthly sales - and the ads - are unlikely to stop, each online purchase by a customer is slowly building the habit to turn online rather than offline and perpetuating the cycle for e-commerce platforms.

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