Amid rising rents in South-east Asia, brands could see a renaissance from e-commerce

[SINGAPORE] The boom for e-commerce in South-east Asia might be finding a second wind from an unlikely source: brands.

E-commerce in the region exploded during the pandemic. With people forced to stay home, digital penetration surged as they turned to e-commerce apps and ordered online.

For the companies operating these e-commerce platforms, however, profits have not increased in tandem with the rise in number of users.

For one, basket sizes – the number of items a customer buys in a single transaction or the total monetary value of those items – have trended lower.

Average e-commerce basket sizes in South-east Asia have fallen sharply to US$13-15 per transaction in 2024, from US$18-23 in 2012, based on the latest e-Conomy report by Bain, Google and Temasek.

This is a trend that Shopee has capitalised on. Targeting price-conscious consumers in the region with free shipping and low prices, the Sea-owned platform has taken the lead in South-east Asia.

It stands to reason that in a region with small average basket sizes and price-conscious consumers, brands would struggle to find a footing.

Less-trodden path

Lazada, however, appears to be taking the less-trodden path and pivoting to focus on brands.

For example, the Alibaba-backed platform’s LazMall offering allows brands such as Pop Mart, Sony and Adidas to sell directly to consumers.

Sure, Shopee has an equivalent offering. But it has not paid as much attention to brands, which is something its rival Lazada has done. Instead, Shopee has been concentrating on smaller merchants to populate its platform.

As consumers in South-east Asia now get comfortable with buying on e-commerce platforms, there could be some merit in betting on brands.

Indeed, the recent 9.9 sale – a major online shopping event that takes place annually on Sep 9 – showed some promising signs.

According to Lazada, average order value on its platform jumped 30 per cent in this year’s 9.9 sale.

While there is no base figure to compare this increase to, bigger basket sizes could suggest that consumers are now willing to spend more. And this bodes well for brands on e-commerce platforms.

Lacking penetration

Unlike in more mature markets such as China, brands still currently lack penetration on e-commerce platforms across South-east Asia.

Based on a Momentum Works report, brands account for less than 30 per cent of total gross merchandise value in the region. This falls far shy of the about 50 per cent share that brands in China enjoyed in 2018.

Sure, the argument could be made that you are unlikely to buy a Birken off Lazada or Shopee. But there are plenty of mass market brands that could see an uplift from selling on these platforms.

There is also a group that has been identified – so-called “high value users” – that could fuel e-commerce spending for brands.

An earlier e-Conomy report in 2023 estimated that this demographic accounted for 75 per cent of the digital economy spend. These users also spent more online than offline – 54 per cent to 46 per cent.

Meanwhile, one sub-segment is also driving the e-commerce surge: idol merchandise.

Sales of various types of goods related to celebrities soared a whopping 6,930 per cent across South-east Asia in the recent 9.9 event. This was spearheaded by a 43,198 per cent increase in Vietnam and a 9,860 per cent rise in Thailand.

The growth in online spending is not limited to just electronics and accessories, where customers might be less fussed about how the product feels or fits. Clothing – which has long been the domain of offline retail, as people want to see and feel how the clothes fit before making a decision to purchase – has also seen an increase in sales on Lazada. At the recent 9.9 event, men’s clothing sales jumped 2,010 per cent in Thailand and 670 per cent in the Philippines.

These point to potential new customers for brands to reach without having to invest in offline retail stores. With brand penetration nowhere near the levels of mature markets, it could present a good opportunity for brands to tap amid rising retail rents in Singapore.

This is something even Lazada pointed out in its press release on the recent sale period in September. Iris Wei, president of Lazada Group, said: “With brand-driven sales still accounting for less than 30 per cent of e-commerce gross merchandise value in South-east Asia, we see a tremendous opportunity ahead.”

As brands seek to tap South-east Asian markets for growth, it might serve them well to consider online channels in their quest to boost sales and recognition here. This could spur e-commerce players to even greater heights.