May 19, 2018 | By Nicole McLennan
The online economy in Southeast Asia is on the cusp of rapid growth – a report by Google and investment company Temasek put Southeast Asia as the world’s fastest growing internet region, and its online economy is expected to hit $200 billion by 2025.
The region has enormous growth potential but is also extremely challenging for a retailer to tackle as it is highly fragmented – each market is on a different level in terms on consumer sophistication and retail infrastructure development, and from a cultural perspective each has its own language, religion and social structure.
WGSN spoke to Tito Costa, Chief Marketing Officer of Zalora Group, one of the biggest fashion e-commerce player in Southeast Asia, on his key learnings in approaching the region’s key markets.
What are the main differences in fashion e-commerce across Southeast Asia?
Southeast Asia is a vast and diverse region. With thousands of islands across the region, the markets come in an assortment of sizes and economic development stages, and its customers come with their multitude of ethnic and cultural backgrounds.
What was Zalora’s strategy as a startup in the region?
Zalora took a very localised approach from the beginning, with a local team in each country. If you are in Indonesia and you call customer service, you will be able to speak to someone in Bahasa Indonesia. We established local warehouses to cover the sprawling geography and offered local product assortment on top of our global brands to build an online brand that people know and trust across the region.
Consumers in the region are, as you mentioned, very diverse. Can you share an example of how Zalora dealt with this challenge?
The speed and scale of change in consumer behaviour, mindset and preference is unique in every market and is mainly tied to their stage of e-commerce adoption. For example, markets who are earlier in their journey are markets where we are educating consumers on e-commerce, converting traditional consumers into e-consumers. In more advanced markets, the customer expects a certain quality in assortment and speed of delivery. But all consumers in the markets expect ease of use of our website and app, seamless transaction and over-all quality of online shopping experience. Different countries and cities in our markets place a different value on access to product assortment. Second- and third-tier cities with lower penetration of traditional retail infrastructure are adopting e-commerce because it offers access to a world-class selection of fashion and beauty products. Adoption in metropolitan areas is mostly driven by the convenience and mental availability of shopping anytime anywhere.
How should international brands approach and prioritise these new markets?
Similar to what Zalora has been focusing on in the past years, brands will have to invest in localising the efforts and in fact we’ve been seeing global fashion brands launch a Chinese New Year collection or a Hari Raya or modest wear collection to appeal to consumers in the region. Brands such as Ivy Park of Beyonce and J.Crew managed to quickly enter all of Zalora’s markets, including third and fourth tier cities in the Philippines and Indonesia through their partnership with us. Fashion favourites such as Topman, Topshop and Abercrombie & Fitch which have physical stores only in larger cities, are now accessing customers in the most remote islands and towns.
Looking ahead, what will be important for fashion e-commerce in Southeast Asia?
Today, 50% of the world’s population use the internet. In emerging markets, mobile e-commerce sales is projected to grow to $250 billion by 2020, far outpacing expected sales growth through traditional brick-and-mortar retail channels. We are likely in a situation where the vast majority of fashion shoppers in the next 10 years will be mobile-first digital-only consumers, and fashion retail will leapfrog the national build-out of networks of traditional mono-brand stores.
Broken down by its key Southeast Asian markets, Zalora shared with WGSN its customer usage data for 2017, shining a light on what consumers in each market are looking for on the platform.
Top searched brands: Zalia, Nike, adidas, Vans, Mango
Top searched categories: Dresses, jeans, shoes, boots, wallets
Top trend words in 2017: Off shoulder, raya, bridesmaid, denim, floral
Top searched brands: Vans, adidas, Nike, Converse, Zalia
Top searched categories: Sepatu (shoes), tas (bags), jaket (jackets), batik, dompet (wallet)
Top trends words in 2017: Kulot (wide pants), bomber (bomber jackets), gamis (Muslim wear robe), kebaya (traditional wear clothing), jogger
Top searched brands: Nike, adidas, Vans, Mango, Havaianas
Top searched categories: Shoes, dresses, boots, bags, watches
Top trend words in 2017: Swimwear, plus size, off shoulder, low-cut (shoes), denim jacket
Top searched brands: Zalia, Nike, Lubna, adidas, Vans
Top searched categories: Shoes, dresses, baju kurungs, jeans, jacket
Top trend words in 2017: Off shoulder, denim, baju kurung moden, kebaya, maternity
For more on retail in Asia, we recommend our WGSN Insight video, Fashion Retail: What Boomers in Asia Want.
Know what’s next. Become a WGSN member today to benefit from our daily trend intelligence, retail analytics, consumer insights and bespoke consultancy services.