As e-commerce growth in Asean slows down, brands shift focus to omnichannel strategy to woo consumers

[HO CHI MINH CITY] The rapid growth that South-east Asia’s e-commerce players enjoyed during the Covid-19 pandemic years has cooled considerably, and more brands are relooking their omnichannel strategies in the battle for consumers and their wallets.

The region’s e-commerce sales was estimated to be US$89.7 billion in 2022 – a 20.6 per cent increase from the previous year, the highest in the world – according to estimates from US-based market research company eMarketer.

But while online retail in South-east Asia is still thriving today, the days of such double-digit expansion seem to be over, with data from eMarketer projecting that the annual growth will fall below 10 per cent by 2026.

Brands large and small say they are under pressure to ramp up their sales from their brick-and-mortar presence, now that millions of shoppers are returning to physical stores in this post-pandemic era.

Tony Do, the founder and chief executive of Vietnam-based analytics company Palexy, said that many of his clients in emerging markets in the region have noticed this trend and are readjusting their budget allocation strategies.

“They realise that it no longer makes sense to over-invest in e-commerce, but to focus on optimising offline channels as the key revenue generator,” he said.

According to eMarketer, the volume of e-commerce in South-east Asia makes up less than 10 per cent of the region’s total retail sales, which means that the vast majority of transactions still take place at brick-and-mortar stores.

In Vietnam, for instance, the share of e-commerce revenue from the retail sector was about 7 per cent to 8 per cent last year, up slightly from 3.6 per cent in 2017, said a recent report from the country’s trade ministry.

The average e-commerce penetration rate (excluding food and beverage) in South-east Asia is 20 per cent, said McKinsey and Company in a December 2022 report on the region’s e-commerce scene. In comparison, China’s penetration rate is about 47 per cent.

New phase of omnichannel retail

In its report, McKinsey and Company noted that South-east Asia’s retail ecosystem is likely to follow in China’s footsteps and evolve toward greater omnichannel complexity.

“More businesses could establish their own B2C (business-to-consumer) online channels to engage with South-east Asian customers directly. This direct access to customers will deepen brands’ understanding of their customers’ preferences and enable them to shorten the design-to-market process,” the report said.

Palexy’s Do said the future of retail in the region is not a “black-and-white” scenario where shoppers only have a single touch point with the products and services they are interested in.

“Future retail sales will come from seamless customer journeys which unify both physical and digital experiences,” he said.

Take the rapid rise and popularity of social e-commerce as an example. This model, which enables shoppers to buy items within their social media networks, is a form of “shoppertainment”, a concept that retailers use to boost sales by creating more entertaining and engaging shopping experiences.

More brands are turning to social e-commerce over traditional e-commerce as the former is where influencers – known in the industry as key opinion leaders – help companies with product reviews or promotions to reach a wider audience.

Chris Duong, the chief executive of Vietnam-based professional training centre KOC Academy, said that influencers can also go a step further to direct their followers to brick-and-mortar stores, especially when it comes to buying higher-value items.

KOC Academy conducts training courses for staff working at physical stores to equip them with the skills to help their customers better understand the products and services in an omnichannel retail environment.

Palexy, meanwhile, is helping its clients revamp the customer experience at physical stores by analysing the camera footage at shops and malls to learn more about spending patterns, demographics and footfall.

Its clientele includes the likes of Canadian footwear retailer Aldo, South Korean hypermarket chain Lotte Mart, and Singapore-based health and beauty chain Guardian.

Combined with the point-of-sale data, retailers can get more insights on how to improve the in-store experience, maximise sales and reduce operating costs.

“If we consider e-commerce as a highway, then physical retail in South-east Asia is still a countryside rocky path. We cannot improve it if we don’t measure it,” said Do.

“We can only connect the online-to-offline experience to meet the omnichannel retail future when all channels have at least a similar level of advancement and digitalisation.”