What’s Next: Traditional retailers do have an edge
By Benjamin Cher September 29, 2015
- Cultural awareness and network partnerships often neglected
- South-East Asia is a really good part of the world to do e-commerce
E-COMMERCE is a rising star in Asia, with 13 of the region’s 30 ‘unicorns’ – startups with valuations above US$1 billion – are e-commerce platforms. They are challenging the status quo and putting traditional retailers on the ropes.
But it is not all gloom-and-doom for traditional retailers because they still hold a key edge, according to Adrian Vanzyl (pic above), chairman of Bangkok-based regional logistics and fulfilment company aCommerce, and also chief executive officer of Ardent Capital.
“The opportunities for traditional retailers are still quite profoundly large,” Vanzyl told participants at Digital News Asia’s inaugural What’s Next conference in Cyberjaya today (Sept 29).
“If you are an incumbent, you still have many good years ahead of you – if you can adapt to do e-commerce and drive customers from offline to online, or online to offline. Only you have the avenue to do that.
“These are two huge areas only incumbents can play in. This is a competitive advantage they should exploit – they have supplier and brand partnerships that pure-play e-commerce players don’t,” he added.
Most traditional retailers are also local companies, which gives them another advantage against deep-pocketed foreign pure-play e-commerce companies: A cultural awareness of what can work in their home markets, whether it is a single country or South-East Asia as a whole.
“I call it the ‘sticker effect’,” said Vanzyl. “If you were a US venture capitalist four years ago, and someone came to you and said ‘I’m going to build a chat app and monetise billions of dollars by selling stickers,’ you’d have thought that’s insane.”
But a South-East Asian player would have understood the appeal, added Vanzyl, who had previously warned brick-and-mortar retailers that the clock was ticking for them to get into e-commerce.
SEA at inflection point
At What’s Next, Vanzyl also spoke about the major themes driving e-commerce in South-East Asia, which he highlighted was still in its early days, with e-commerce transactions making up only 1% of total retail sales.
“But we know with certainty that it will grow to 10% – this is a staggering increase,” Vanzyl said. “The only thing that is unknown is if we get there in five years or 10 years.”
The region is at an inflection point, but given its relative population size and gross domestic product (GDP), that 1% is an imbalance.
“That is an imbalance that is being corrected,” Vanzyl said.
“The largest growth opportunity over the next 10 years, as we grow into a US$89-billion market, is in Thailand, Indonesia and Malaysia,” he added.
South-East Asia has seen incredible change in the last five years, with the Internet population ballooning from 150 million to 225 million users, and e-commerce revenue jumping from US$1 billion to US$7 billion, according to Vanzyl.
Mobile-commerce has also increased from 0% to 30% of the e-commerce space in the same time period.
“If you were to participate in e-commerce anywhere, this [South-East Asia] is a really good part of the world to do it – all of the countries around us are in the breakout/ standout category,” he added.
Major theme: Mobile
“Mobile is not just important, it is critical,” Vanzyl said.
“We live in a part of the world where everyone has more than one phone, where mobile shopping is now becoming dominant,” he added.
Up to just a year ago, people used their mobile devices merely to browse, while actual e-commerce transactions were mainly done on the PC.
“Now more than half of all transactions are actually completed on mobile,” Vanzyl said, adding that this will further grow as smartphone penetration grows.
Major theme: Social
“One of the things that first puzzled me when I first move into the region is why someone would spend a month’s salary on a mobile phone,” Vanzyl mused.
“The answer to that is social – we live in a part of the world where everything is hyper-social.
“You cannot even coordinate to catch up with your friends for a drink if you are not on those platforms,” he said, referring to Facebook and LINE messenger.
“To get on those platforms you need a smartphone, that smartphone needs mobile broadband – and if you get these things together, you have everything you need for e-commerce,” he added.
And if, as a business, “you do not have a social media strategy for your service or product, someone who has will come in and kick your butt,” Vanzyl added.
Major theme: Demographic shifts
Millennials and Generation Y have been identified as a key driver for e-commerce, but Vanzyl also pointed out that while older generations might do less browsing, they generated higher sales.
“Baby boomers are online but are far behind – but still, it doesn’t mean they can be ignored,” he said.
Another demographic shift is the one from largely urbanite online shoppers three years ago to where more than half of all online transactions are now made outside of capital cities.
This is an “important shift,” Vanzyl said, noting that a farmer buying online was one not buying from the local retailer who might be charging more.
“If you are a big established retailer in KL (Kuala Lumpur) or Jakarta and feel confident that you own the market, think again.
“Where is that farmer buying from? Not from you, and he represents more than two-thirds of the buying audience today,” he added.
The What’s Next: The Business Impact of Disruptive Technology conference (#WhatsNextDNA) was organised by Digital News Asia (DNA).
It was sponsored by Malaysia’s national ICT custodian Multimedia Development Corp (MDeC), which oversees the MSC Malaysia and Digital Malaysia national programmes, and big data analytics company Fusionex International.
All pictures by Choo Choy May, courtesy of The Malay Mail Online.
Other What’s Next Stories:
AirAsia is an Internet company … no, really!
Disruptors will not kill off banking incumbents
Think about zero, or become irrelevant
For more technology news and the latest updates, follow us on Twitter, LinkedIn or Like us on Facebook.