Tapping into the Emerging Southeast Asian Market

Despite the retail slump caused by the pandemic, e-commerce sales in Asia Pacific exceeded expectations - which makes it an attractive opportunity for online expansion. But the region is highly complex, and requires a tailored approach when penetrating the market. This report breaks down how.

Written by Ashley LooiAugust 21, 2020

Introduction

Key Insights

  • A Tailored Approach: When penetrating a region like Southeast Asia (SEA), a tailored approach is vital due to the multicultural events that influence shopping behaviour.
  • Key Players: Regional retailers with above average sell-out rates demonstrate value creation for consumers.
  • Segment of Growth: Although modern styles are becoming more common in modest wear, Ethnicwear continues to drive high sell-out.

While sales in the UK dropped, Asos experienced growth in international sales. Additionally, amid the retail slump, US e-commerce grew 10.2% year-on-year from January to mid June 2020. A significant portion of this growth came from cross-border commerce, which was lifted by 42% in May from the previous year. This signals presence of market expansion opportunities that can be seized.

The Asia Pacific region demonstrated the highest growth in e-commerce sales at 25%, surpassing the world average of 20.7%. Among the top 10 countries with the fastest growing e-commerce were Philippines, Malaysia and Indonesia from the SEA region.

E-commerce in SEA is expected to exceed US$ 150 billion by 2025, 400% growth from 2019. The region comprises digitally mature countries like Malaysia, where the digital economy contributes to 20% of the country’s gross domestic product. Indonesia and Thailand also have higher levels of e-commerce adoption compared to the global average of 75% (Chart 1).

The growing middle class in SEA, with its median age at 29 versus 37 in China, coupled with high e-commerce adoption make the region an attractive opportunity for online expansion.

This report highlights how brands and retailers can navigate the local nuances of the region with Omnilytics.

Over 1,790,850 data points of prominent regional and local retailers and marketplaces in the SEA region from January to July 2020, were analysed for insights. The markets covered were Malaysia, Singapore, Thailand, Philippines and Indonesia.

 

All data used in this report comes from products retailing online as tracked by Omnilytics, unless otherwise mentioned.

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The Key Players

A competitive retail landscape, Southeast Asia is home to key retailers of extended presence across multiple countries, local small-medium enterprises (SMEs), and a growing pool of independent retailers who focus on private labels.

Retailers with regional footprint, namely Love, Bonito, Zilingo and Zalora offer good value to the consumers at the median price range of USD 20 – 30, with above average sell-out rates.

On the other spectrum of median price, local independent retailers and popular modest wear specialists, Whimsigirl and Mimpikita, exhibited strong value proposition by delivering high demand at premium pricing. While Malaysian consumers are willing to pay a higher price for niche designs, consumers in Indonesia and the Philippines are more price sensitive with higher preference to purchase from the value segment.

Philippine retailers largely fall behind their counterparts in terms of brand perception and meeting demand accuracy.

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Adapting the Assortment

Local Festivities, Unlike Global Holidays

The top three major events in SEA that influence demand are Chinese New Year, Eid and Singles’ Day.

Rich with cultural heritage and multiple races, the local consumer demand is greatly influenced by the region’s important festivities, namely Chinese New Year and Eid. It is traditional custom to purchase new clothes to wear on the first day of these celebrations.

A major challenge for retailers in fulfilling demand for these key events is determining when to launch festive newness and when to pull back after the festivity has ended. This is because, unlike Christmas and New Year, these festivities do not follow a fixed annual date but rather the Lunar and Islamic calendars, in the case of Chinese New Year and Eid, respectively.

Chinese New Year, Always Auspicious

This year, Chinese New Year fell on January 25. The new-in assortment for the weeks leading to the festivity were analysed and compared to the first seven months of the year (Chart 3b).

Pink and red consistently made the celebration’s top five fashion colours at Pomelo Fashion and Love, Bonito (Chart 3a). These auspicious colours that were seen on new arrivals as Chinese New Year approached revealed the influence of such colours in SEA.

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Adapting the Assortment (cont’d)

Same Eid Festivity, Different Style Demand

Malaysia and Indonesia demonstrated contrasting style preferences in this year’s Eid celebration compared to last year.

Using the keyword filter in Omnilytics dashboard enables brands to identify styles with the specific keywords mentioned in the product name or description.

Keywords related to trend-led and elaborate styles such as lace, ruffle, glitter and embellishment saw negative YoY growth in product count in Malaysia. This shift in demand was largely due to the enforcement of government restrictions for the Eid celebration in order to prevent the spread of Covid-19. Instead, the leading styles in Malaysia saw minimalistic designs and relaxed fits.

On the other hand, Indonesia saw positive growths for elaborate styles with keywords like glitter, lace, ruffle and embellished despite the ban on Eid set by the government.

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Adapting the Assortment (cont’d)

Singles’ Day

Singles’ Day in China is the world’s largest shopping event – bigger than Black Friday and Cyber Monday combined in terms of spending and has gained strong momentum in SEA.

In 2019, Zalora gradually increased the number of discounted products across the assortment as Singles’ Day drew near. The daily sell-out rate began to lift and peaked on November 11.

Products that went out of stock in the days leading to Singles’ Day were mainly driven by discounts. On the day of November 11, the number of sold out SKUs increased by nearly 5 times to 7,768 from a daily average of 1,570 since November 1.

The discount frenzy was largely based on the use of promo codes, provided through visual merchandising on the retailer’s website.

Though unparalleled to the scale of Singles’ Day, similar shopping events such as 8.8, 9.9, and 10.10 are also slowly gaining momentum in the SEA region.

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Meet the Author

Ashley Looi

Ashley Looi combines her major in econometrics with her interest in fashion to help brands and retailers uncover actionable insights. She currently produces in-depth reports on the fashion industry and its changing retail scene across the United States, United Kingdom, Australia and Southeast Asia.

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