5 lessons retailers can app-ly this holiday season
By Jaede Tan December 29, 2017
- The global user app base, which stood at 3.4 billion in 2016, is set to hit 6.3 billion by 2021
- Today, e-commerce in Southeast Asia is dominated by digital-first apps
WHILE fables and traditions of festivities such as Christmas and Thanksgiving may have their roots entrenched in cultures of the Western world, the commercial aspect of these celebrations have, over decades, spread globally.
More recently, this has been proliferated by the commercialisation of made-up festivities such as Singles Day (11/11) by retail giants including Alibaba, which saw US$25.3 billion (RM103.19 billion) in global sales on that one day in 2017. (US$1 = RM4.08)
Ultimately, the love for shopping and consumption bind the communities of the world during this season of giving.
Inevitably, a habit as ubiquitous as consumption would coalesce with prevailing changes in lifestyles globally. For the retail vertical, the boom of the app economy in the past decade have brought about radical changes to consumption patterns, revolutionising the very concept of shopping.
The shopping cart is merely half full - the global user app base, which numbered at 3.4 billion in 2016, is poised to double to 6.3 billion by 2021. On top of this, average spend within the same period is set to more than double, from USD$379 to US$1008.
Asia in particular has enjoyed exponential growth in retail consumption over the past decade or so - combined nominal sales for the 11 key Asian economies (minus Japan) has exploded from US$1 trillion in 2001, or 41.9% of total retail sales in the United states, to US$6.6 trillion in 2016 - completely eclipsing the corresponding figure in the US.
Inevitably, this has brought about a spillover effect to festive spending habits, particularly in Southeast Asia.
Summer 2017, for instance, saw mobile shopping giants across Southeast Asia ushering in mobile sales campaigns targeting festive consumers - which include region specific festivities such as the month of Ramadan in Indonesia and Malaysia.
The reason for the sudden e-commerce onslaught in Southeast Asia? A new rising middle class.
Southeast Asia’s nouveau riche
While this new middle class may be getting wealthier, they are spending longer hours at work at the same time, and are thus demanding a more convenient shopping experience. The combination of these factors thus brings about a boom in monthly average users (MAU) for e-commerce apps.
In this region, the disparity between festive season consumption to that of other months is particularly high - on Facebook, for instance, Southeast Asians start their festive spending earlier than most would expect, and are purchasing items 55% more during the festive season on Facebook than during other times of the year.
In Singapore, consumption ramps up from as early as September, with Singaporeans purchasing 48% more through Facebook compared to June to August on average.
However, not everyone stands to gain from the wave of e-commerce. Traditional brick-and-mortar retailers, in particular, find themselves in a David vs Goliath situation, having to compete with global e-commerce giants such as Alibaba and Lazada to stay afloat. Apart from their sheer scale, which allows them to offer a diverse range of goods, these global players are able to keep costs low by remaining digital-first.
Always darkest before dawn
There is still a saving grace for brick and mortar retailers, nevertheless.
By designing a supplementary mobile app to complement their physical stores - known as the brick and click approach - these businesses are thus able to offer the best of both worlds: a high touch approach to sales, combined with the convenience and low friction of mobile apps.
Where users of digital-first retailers take the gamble of possibly purchasing goods that may not meet their expectations when received in the flesh, brick and click users have the privilege of being able to view products in their entirety, before coming to a decision later on. Ultimately, in a cut-throat industry, the need to adapt is imperative.
Today, e-commerce in Southeast Asia is dominated by digital-first apps. These include Lazada, the top app by MAU across four out of six major markets in Southeast Asia, as well as apps with a loyal local following, such as Indonesia’s Tokopedia as well as Singapore's Carousell, the number one app by MAU in their respective home countries.
While these apps all bring something different to the display window, there are some common practices at the foundation of their successes, which both existing brick and click businesses as well as brick and mortars looking to make the transition would do well to adopt. These include:
1. Eliminate checkout friction - Tools that limit user touches at checkout can dramatically improve conversion rates and ultimately provide a smoother, more efficient experience for the customer.
Including a third-party payment app such as Apple Pay for instance can decrease friction for the user during the checkout process, driving up conversion rates by as much as two to three times. Lazada, for instance, offers multiple options for payment at checkout.
2. Prioritise search - A strong retail strategy is synonymous with a strong mobile app strategy, and data is at the core of that success. Search converts at a rate which is 2.6x higher than non-search for purchase in apps - Placement and functionality of search bars should thus be optimised.
Amazon, for instance, prioritises a dedicated page for search within the app, which includes historical searches to prompt the user to pick up where they left off, or search for items they may have forgotten
3. Leverage on cross-app usage - In other words, knowing what other apps users of a particular app are frequenting regularly.
This allows a retailer to have an idea of competitors which may be eating into their market share, and flags potential partnerships. For instance, users of Lazada in Indonesia on Android are 3.9x more likely to use PayPal than the average user. In this instance, cross-app usage analysis would flag the massive potential of incorporating PayPal into Lazada.
4. Reward engaged customers - Smartphones present an intimate and direct channel to customers. Two ways to maximise this channel are providing incentives for interacting with a brand, and to reward the user for their continued loyalty.
Major Japanese retailer Uniqlo, for instance, were able to capitalise on the unique features of mobile apps, by implementing gamification into their strategy. Users of their app are prompted to play SCAN DE CHANCE, a Sugoroku game, one day after they have bought items at the physical store
5. Make data-driven decisions - Data offers a completely objective insight into consumer behaviour. Retailers should accurately measure customer satisfaction through data and implement changes to reflect customer demand.
Ultimately, this allows retailers to benchmark against competitors and incorporate best practices that are proven to move the needle on critical engagement metrics affecting basket size and lifetime value.
For better or for worse, we are now in the age of mobile apps, where smartphones offer an intimate, direct channel to consumers. This represents a massive opportunity for brands to reach, influence and convert shoppers. Retail has gone mobile - users are increasingly opting to shop on their smartphones. As such, mobile should be prioritised as a channel to reach and retain customers.
Jaede Tan is the regional director of App Annie.
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