How Brands Can Thrive in a Retail 5.0 Landscape in Southeast Asia

In 2022, APAC alone generated USD 120 billion worth of digital commerce sales. These figures are hardly surprising for a region where an estimated 70 million people became digital consumers during the pandemic.

Home to a population of over 680 million, Southeast Asia welcomed an additional 40 million new Internet users in 2021. These consumers confidently made multiple purchases across the slew of online platforms, their appetite for digital commerce surpassed pre-pandemic levels of digital participation.

Access to unique products and seamless online shopping journeys are just the tip of the iceberg when it comes to modern-day consumer expectations. Brands and retailers need to cater to smart, digitally-savvy shoppers who are confident using the plethora of online touchpoints and platforms and seek highly curated online experiences.

The rise of Retail 5.0 is accompanied by disruptive retail models

The 21st-century retail landscape is shaped by an omnichannel approach where eCommerce platforms co-exist alongside physical touchpoints. A far cry from the brick-and-mortar business models of yesteryear, Retail 5.0 makes use of big data to deliver granular levels of personalization.

Disruptive retail models like quick commerce, social commerce, and third-party marketplaces are gradually coming to the fore, leaving brands to figure out how to succeed in this new operating environment.

Much of this disruption is spearheaded by the rise of third-party marketplaces. Ascential Digital Commerce’s data forecast found that these online marketplaces have the potential to earn an additional USD 1.3 trillion between now and 2027.

In Southeast Asia, Shopee, Lazada, and Tokopedia, have been pulling out all the stops to attract customers. “Shoppertainment” — an eclectic mix of livestreaming, social commerce, and gamification — has emerged as a novel way of enticing customers to keep using the app for as long as possible.

Social commerce is enhancing product discovery

Social platforms like Facebook and TikTok are captivating consumers with a steady stream of content generated by brands and influencers. Their visual nature and interactive layout — coupled with features like in-platform shoppable stores and sponsored ads — put them in an ideal position to inspire online shoppers to take action.

“A far cry from the brick-and-mortar business models of yesteryear, Retail 5.0 makes use of big data to deliver granular levels of personalization.”

And the numbers speak volumes: In Q4 2021, people spent as much as $824 million on in-app purchases on TikTok. Given their innate popularity with Millennial and Gen Z audiences, these apps have been investing heavily in their eCommerce capabilities and creating new avenues of communication between brands and audiences.

Quick commerce speaks to people’s need for convenience

Ever used an app to order products you expected to receive within the same day, or even the same hour? This is a prime example of the quick commerce model in action — a retail model championing on-demand availability.

Ridesharing apps like Grab are empowering brands and retailers with a platform to directly deliver products to consumers, in a matter of minutes. Its USP is focused on small-quantity, high-frequency product categories, where people are willing to spend on convenience or buy products on “impulse”.

How can brands prepare for the Retail 5.0 era:

Prioritize online channels that create value

Brands should focus on local leading eCommerce marketplaces, as they offer reliable growth opportunities and a chance at regional domination. However, emerging online channels should not be excluded from the channel mix plan, as they represent immense potential, and a chance to unlock untapped audiences.

Adopt digital solutions offered by mature online marketplaces

Legacy online retail channels are constantly churning out innovative methods of attracting consumers. Brands with a presence on these marketplaces are in a better position to explore these new tools and tactics, and make the most of them during important sale days. For instance, Lazada’s LazLive” event earned the platform a 7X increase in sales during 12.12, and earned 26 million views for its “SuperShow” livestream program segment.

Address “out-of-stock” status as swiftly as possible

Online shoppers don’t want to be told that their favorite product or service is “out-of-stock.” They may be compelled to find that product on third-party platforms, or even switch to other brands. To prevent this mishap, brands need to review and update online inventories by regular forecasting, or running an analysis to identify SKUs that are repeatedly out of stock.

Availability tracking tools like digital shelves or alternative fulfillment solutions also empower brands to respond to out-of-stock situations effectively.

Ensure brand visibility online

If brands do not show up early on in search results, they run the risk of losing out on valuable sales. To ensure that their priority SKUs are visible to consumers, brands need to constantly update their inventories on quick commerce marketplaces, people might prioritize these sites over the brands’ eCommerce website or third-party marketplaces.

Southeast Asia has some of the most sophisticated online shoppers and a burgeoning population of tech-savvy youth to watch out for. To remain relevant amidst this new paradigm of Retail 5.0, brands and retailers need to lean into winning strategies that redefine shopper engagement and prioritize winning on marketplaces.

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