Persistent habits, digitalisation drive continuous e-commerce growth in APAC

Euromonitor reports that e-commerce operators dominated its Top 10 Fastest-Growing Retailers list in the region.

Even if consumers now have the option to go to stores for shopping, they continue to purchase items online as a habit, and this is reflected in Euromonitor International’s Top 10 Fastest-Growing Retailers in 2022.

Quan Yao Peh, senior analyst at Euromonitor, said the top 10 list is dominated by companies that run online marketplaces, with Indonesia’s GoTo Gojek Tokopedia as the leader.

As the fastest-growing retailer in the region in 2022, GoTo posted a 44.4% year-on-year (YoY) surge in sales, amounting to $19.83b. It is followed by Shopee-owner Sea Ltd., which saw a 42.5% growth to $42.58b.

“We found that marketplaces have benefited from the fact that e-commerce growth in Asia Pacific has remained resilient even after the pandemic,” Peh told Retail Asia.

“This is driven by the digitalisation of merchants, as well as the habit persistence of consumers to continue shopping online post-pandemic across various markets,” he added.

The Euromonitor report shows that e-commerce platforms are popular in South and Southeast Asia because they are easy to navigate and offer a wide range of products and regular price promotions.

Developed markets such as South Korea, meanwhile, saw the e-commerce platform SSG.com under Shinsigae launching luxury brands on the marketplace. Its competitor, Nave, launched the “Naver Guaranteed Delivery Programme.”

Peh shared more of the Euromonitor’s latest findings on retail and consumer trends in this interview.

How has the retail landscape and performance evolved in the key markets of APAC?

Generally, the retail industry has recovered well from the pandemic across key Asia Pacific markets (such as China, India, Indonesia, Japan, and South Korea) and is expected to see continued good growth over the forecast period.

Retail channels such as apparel and footwear specialists, beauty specialists and vending have benefited from the resumption of pre-pandemic lifestyles and social activities.

In e-commerce, marketplaces offer a convenient and accessible option for retailers in their digitalisation journey in developing markets. In developed markets, the focus has shifted towards innovation to meet increased consumer expectations in product range and delivery.

 
What were key findings from Euromonitor International’s latest report, Top 10 fastest-growing Retailers in Asia Pacific?

From our report, we have seen that the pandemic has accelerated retail digitalisation in Asia Pacific and that technology is now increasingly critical in enabling new retail experiences and then supporting how retailers continue to engage and sell to consumers.

In terms of the different retail channels, we see that e-commerce has largely continued its strong growth in the region. This is driven by the digitalisation of merchants, as well as the habit and persistence of consumers to continue shopping online post-pandemic across various markets.

We see that experiential retail is taking centre stage in stores. Retailers are highlighting their stores as being more than just a place to transact but also somewhere where consumers can have fun and enjoy unique and memorable shopping experiences.

What factors contributed to the performance of the fastest-growing retailers in the region?

When we look at our list, we see a large majority of companies... that own or operate e-commerce marketplaces like, for example, GoTo, which owns Tokopedia as well as SEA Limited which owns Shopee. We found that marketplaces have benefited from the fact that e-commerce growth in Asia Pacific has remained resilient even after the pandemic.

When we look at the list again, we see that many retailers have a presence in markets with a large domestic consumer base. This is important because it creates a strong and consistent level of demand for their services. And here, we are talking about countries and regions, such as China, Indonesia, Southeast Asia, and India.

In terms of the predominantly store-based retailers in the list, we can attribute their strong performance to being retail categories that have benefited from the resumption of pre-pandemic lifestyles as well as their strong efforts in outlet expansions.

What ongoing challenges do retailers face in their operations?

Generally speaking, operating challenges would differ across markets, retail categories, and the resources the retailer has available.

Developing markets face a challenge due to the still-maturing distribution and e-commerce infrastructure. For modern retail, the dominance of informal retailers that have built strong relationships with their local communities also poses a challenge. For developed markets, established market players and high degree of competition, higher business and operating costs stemming from factors such as real estate and labour are the challenges.

On the consumer side, how have customer needs evolved this year and what can be expected from them next year?

Earlier, in January 2023, Euromonitor published our “Top Five Digital Consumer Trends in 2023” — a briefing which explores the top digital shopper trends that will redefine commerce most in 2023. These include trends such as Re-Commerce, Community Group Buying, and E-Customisation which are seeing good traction across Asia Pacific markets. It remains to be seen how these trends will further evolve over the forecast period to continue driving the evolution of retail in Asia Pacific.

Retailers should focus on providing consumers with value in what they offer. This includes price and functional aspects of the product. At the same time, non-tangible aspects such as the brand experience and community building (where relevant) are equally important as well in driving brand loyalty.

Since artificial intelligence is a rising technology, what benefits do you see in integrating AI in retail operations?

AI has a variety of use cases for retailers in both customer facing and internal operations. Areas include customer service, supporting purchase decisions, demand forecasting, etcetera. Benefits are tangible and intangible. It depends on the use cases and strategic objectives the retailer wants to achieve. These include increased sales, consumer retention and loyalty, and the reduction of production, manpower and coordination costs, etc.

One of the use cases is Love, Bonito (women’s fashion) which uses AI to inform about its product range and deliver customised recommendations to consumers. This can help fine-tune manufacturing processes and better meet consumers’ preferences.

Another example is Pond’s (skincare brand) Skin Advisor Live chatbot from Unilever, which uses AI to conduct free online skin analysis and recommend the most effective skincare products to the consumer. This has resulted in over 15 times higher purchase intent, with consumers spending up to three times more time in engaging with the chatbot.

What trends should retailers watch out for this year and in 2024?

What we are seeing is that consumer preferences in this region are shifting towards brands that provide unique experiences that are supported by technology and are offered seamlessly across physical and digital channels. Specifically in the e-commerce category in developed markets, we see there being increased consumer expectations, both in terms of the product range and in terms of the time it takes to fulfil delivery orders.

So, to maintain consumer loyalty amidst this increasingly competitive retail landscape, retailers need to be able to offer value that transcends the price of the product. It is equally important that they cultivate a very strong brand identity and that they can offer a great consumer shopping experience across the entire shopping journey.