E-commerce growth challenges APAC retail

Traditional retail adapts amidst e-commerce expansion in APAC, Zalora innovates to compete.

The encroachment of international e-commerce brands into the Asia-Pacific market has led to a degree of cannibalization of traditional retail, said May Chin, Head of Product Growth at Zalora.

According to Chin, these online entities, often at the forefront of fashion and style, offer unique products that cannot be found in regional brick-and-mortar stores. 

"There is some degree of cannibalization happening, especially with overseas international e-commerce brands," Chin stated, highlighting the direct competition posed by these platforms. 

She said the main issue at hand is the finite disposable income of consumers, which is now being divided between online and offline retail channels, affecting traditional retailers' revenues.

Despite these challenges, Chin remains optimistic about the future of physical stores. She argues that the in-store experience still holds value for consumers, who appreciate the opportunity to physically interact with products.

Innovative strategies, such as pop-up stores by companies like Sephora, aim to bridge the gap between online and offline shopping experiences. "I don't think traditional retail is going to go anywhere," Chin reassured.

She said Zalora recorded its best business performance during the peak of the pandemic, benefiting from the restrictions on physical shopping and travel. However, the return to normalcy has brought about a significant challenge in sustaining growth. 

Zalora's strategy focuses on differentiating itself from competitors through building non-transactional, genuine relationships with customers and enhancing the shopping experience through superior UI/UX design. 

"We are trying to build a more genuine, non-transactional relationship with our users," Chin explained, outlining the company's approach to fostering customer loyalty beyond price-based competition.

Facing formidable competitors, especially from China, Zalora finds itself at a disadvantage in price wars and the frequency of new arrivals. Chin acknowledges the challenges of competing with giants capable of refreshing their product lines multiple times a day, a pace Zalora struggles to match.

Instead, Zalora focuses on quality over quantity, ensuring a curated selection of products that meet high standards. The company also leverages its strong logistics network in the region to offer flexible and hassle-free returns, a critical advantage over international rivals with less efficient local operations. 

"We try to circumvent these competitive advantages in unique ways that only we can do," Chin stated, highlighting Zalora's strategic pivot to emphasise quality and customer service.