Technology has changed the face of retail, shifting the power from brands to consumers who are well informed and have more options. Management consulting firm Accenture highlights how it has shaken up the marketplace, allowing the most determined competitors to emerge as the new leaders.
By 2020, digital commerce in ASEAN is expected to grow exponentially to reach US$32 billion in the next three years. But what is driving this exponential expansion?
Demographics play a key role in driving this growth: 50% of ASEAN’s population is under 30 years of age and are coming into their prime spending years.
High usage of mobile devices and the Internet continues to grow unabated, with 800 million mobile connections and 480 million Internet users expected by 2020. Increasing affluence, supported by rapid GDP growth in excess of 5%, will see 70 million households become new consumers.
Governments across ASEAN are projected to invest US$200 billionbetween 2015 and 2020 in digital infrastructure, putting pressure on the private sector to step up its game. Between 2014 and 2016, companies in ASEAN invested US$3 billion in digital commerce and in the next four years, this amount is forecasted to increase by more than triple, to US$10 billion.
The changing Asian consumer
The driving force behind all these changes is the consumer. As life in Asia gets more hectic, consumers want to be rid of time-consuming activities and engage in activities they value most, for instance, spending time with their families.
With the best technologies literally in the palm of their hands, consumers expect seamless customer experiences online and offline. Almost one in four online purchases are now made on smartphones and by 2020, 65% of all transactions will be carried out online.
Falling bricks-and-mortar sales are also testament to how savvy shoppers have shifted to using smart devices. Consumers seek information and make informed buying decisions by reading crowd-sourced reviews and comparing prices across apps and websites to find the best deals.
This form of e-commerce is expected to change in 2020, as technologies evolve to prepare us for the next stage — shoppers’ nirvana — where consumers can get what they want, before they even want it.
By then, the marriage of the Internet of Things (IoT) and artificial intelligence will finally make smarter homes. Smart refrigerators will automate the entire shopping process as they anticipate and provide alerts when the stock of food items is low. Voice-assisted devices will serve information predicatively and help complete purchases via seamless payment methods.
Shopping can then be fully integrated into current life moments, allowing consumers to spend time however they want it without being bogged down with tedious chores.
The new age of digital commerce
So why is e-commerce dead? This is because what has worked in the past no longer does. Simply featuring your products on an online platform and spending money on marketing is not enough to attract the evolving Asian consumer.
This semi-active mode based on the current e-commerce paradigm is lagging behind what consumers want. Leading companies have shifted away from such traditional methods of online selling in the past 18 months as it offers limited activations, customer experience and data.
Many have embraced digital commerce as a more holistic way of doing business online. Digital commerce allows them to generate demand, control the supply chain, enhance the customer experience and provide sufficient data to analyse how to more effectively direct their marketing efforts in an integrated way.
Fashion house Ralph Lauren has adopted this integrated strategy while creating a deeper emotional connection with its customers. At its Manhattan flagship store, interactive fitting rooms recognise the items that customers bring in to try through radio-frequency identification (RFID) technology. The smart mirrors automatically render the items on the screen, as well as available sizes, colours and recommendations.
Other features of the mirror include six language options and a tap on the “call an associate” button to summon a sales associate. At the backend, the RFID data are analysed to aid retailers with future merchandising decisions, such as information on items that are frequently tried on but not purchased.
To catch up with the needs of today’s and tomorrow’s consumers, companies need to build up their digital commerce and marketing playbook and evaluate their current online strategy and level of technology, Accenture said. This can be achieved through technology enablers such as data analytics, product and Eeb content management systems, payments, order management and logistics planning to deliver a best-in-class customer experience.
The company claimed the current way of doing e-commerce is passé and businesses need to embrace the new age of digital commerce to meet the growing demands of the evolving Asian consumer
Digital commerce trend in Indonesia
Indonesia is Asia-Pacific’s digital laggard, with relatively low levels of Internet penetration among its 264 million-strong population. However, with that population set to increase by 13.4 million by 2022, its Digital Consumer Index score should rise considerably, as half of the population gains access to the Internet.
Of those who are already connected, 43.5% are digital buyers. And their numbers are expected to surge to 65.4% of Internet users by 2022. Per capita spend on digital purchases remains at a fairly low level, just USD 31.70 per buyer. But expect that to more than double in the next five years.
Additionally, 72% of Indonesian consumers shop online to save time rather than money. The predicted significant increase in digital commerce will be powered by Indonesia’s general economic expansion. GDP growth is expected to continue at an annual average of 5%, providing a solid foundation for new investments in the country and increasing the disposable income of the growing middle class (already among the world’s largest).
Other important drivers include the relative youth of its population, with 50% qualifying as millennials. With smartphone users already spending an average of 181 minutes on their devices each day (the highest amount of time anywhere in the world), there is clearly a huge opportunity for mobile commerce.
Based on the market potential in Asia-Pacific, specifically Indonesia, Accenture said it is very important to have the understanding about who buy what by when in where and how, because the winners in this new world will be companies that have an “RTM strategy” that is fit for purpose in this changing landscape. Route-to-Market (RTM) is basically the knowledge to understand the behaviour of the certain typical buyer to certain typical store types.
The five key questions on (RTM) analysis are:
- Who are the consumers:
How best do we reach and engage this new consumer/shopper in store?
- Where are they:
How do we ensure that we have the right product where they are when they need it while balancing revenue growth and cost to serve?
- What will they buy?
What should we sell them that will optimise our margin mix?
What should we sell them that is in line with their preference?
- Where will they buy:
What should our “channel mix/options” be by category and consumer cluster given revenue potential and cost to serve?
What should RTM mix be to deliver what they need when they need it?
- How will they buy:
How do we deliver an omni-channel experience that is reflective of consumer’s path to purchase?
To start doing the RTM analysis, the very first thing that need to be done is categorising or clustering the typical trader and consumer: Market needs to identify the archetypes and the needs that are to be catered to. Then the next action is mapping of each type of the consumer with the trader.
Last year, for example, in order to better understand the Indonesian consumer shopping patterns, Accenture carried out a consumer research study in the country on shopper behaviour and preferences using data and analysis from Snapcart covering more than eight million consumer transactions at more than 6,500 modern trade outlets across Indonesia. Snapcart’s innovative methodology, which uses shopping receipts uploaded by users to the Snapcart app, captures individual consumer transactions including purchase time and basket composition.