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Battle of online shopping giants promises fun times for consumers

Jul 31. 2019
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Given the large potential of Thailand’s e-commerce market, it is proving attractive for many international players to meet on the battlefield. However many challenges lay ahead for the online shopping giants to capitalise on the huge value of the market Thai, which is worth more than Bt3 trillion a year and boasts tremendous annual growth of 20 per cent.

Larry Chao, the managing director of Chao Group, an organisational change consultancy in Bangkok and New York, pointed to three big future challenges in the Thai e-commerce market. The first is speed and convenience. While some people shop online to find specialised products they can’t find in brick and mortar stores, speed and convenience is equally important. In the US, for example, Amazon has mastered speed and convenience to build both loyalty and sales with its Amazon Prime Service, which promises fast and reliable delivery. Speed and convenience is also a trend in other areas of e-commerce as evidenced by the rise of Netflix, which provides instant entertainment and by-demand fast delivery services, such as instant meals.

“Those players who can deliver their products and services quickly and reliably will have a competitive advantage,” said Chao.

Larry Chao, the managing director of Chao Group

The second challenge according to Chao is customer service. A glance at public comments about Lazada’s online shopping platform, for example, quickly reveals that it is poor service that most irks consumers.

Common complaints include difficulty contacting Lazada, issues about returning products or confusion over refunds and exchanges. Winners in the e-commerce market will be those who figure out how to manage customer service effortlessly.

“Paying for products with trusted payment platforms will also be critical,” said Chao. “While big advances have been made by banks to provide consumers with easy to use, trustworthy payment platforms, Thailand still lacks the juggernaut app such as WeChat in China, which allows consumers to simply and effectively manage banking, on-line shopping and on-line payments all in one.” 

Finally, said Chao, the successful e-commerce players will be those able to inspire consumers through linkages with social media, influencers, celebrities and friends. Consumers used to be swayed to make purchases by what they might have read in a magazine or seen on TV.

But “nowadays, people make more buying decisions based on what they research themselves or what they hear and see from friends on social media. E-commerce players will also have to figure out how to manage feedback on performance, so that consumers can read about how products and services have performed in the past. This information is invaluable in persuading consumers to choose which E-commerce player to use”. 

Punyapon Tepprasit, the chief executive officer of MVP Consultant, said that the e-commerce market in Thailand is interesting due to its obvious growth in the opposite direction to the economy, which many people claim has been underperforming. The market size of e-commerce in Thailand in 2019 should worth up to US$4.375 billion (Bt30.768 billion). It is expected to grow at an average of over 10.1 per cent per year during 2019-2023 and is likely to have a market value of $6.433 billion, he noted.

“The direction of the market therefore has a relatively clear value. Therefore, the challenge lies in the major players in e-commerce markets, including Lazada, Shopee and, having to fight through their marketing strategies and techniques,” said Punyapon, who is also a lecturer in the MBA industrial management programme at Ramkhamhaeng University.

Punyapon Tepprasit, the chief executive officer of MVP Consultant

He said that Shopee is clear in using the “customer analytics” strategy by determining the “persona” of their target customer, clearly from the female group aged 18-24 years. This can be observed by using a Korean artist as a brand ambassador to particularly appeal to and attract this demographic.

“They [Shopee] aim to occupy this segment, university age and early working age, in order to secure this base before increasing the opportunity to generate sales from this group in the future as the customers become older and have more income. It is to play with the customer lifetime value (CLV) idea in keeping the customers with Shopee for a long time and gradually finding the ways to make money from having a large number of customers in hand, such as from cross-selling or up-selling,” said Punyapon.

Meanwhile, he said, JD Central has focussed on creating the new user experience (UX) for consumer behaviour by collecting insight data and analysing customer pain points. Knowing the problems that consumers and customers need solved allows JD Central to respond by creating targeted marketing campaigns. 

“The JD Central’s approach seems to be the creative marketing approach that focuses on creating the marketing campaign that meets each target group, especially on the online market, to create engagement and to collect data on consumer behaviour in order to make predictive marketing in designing the marketing campaign. In the future, we will see JD Central having a data monetising strategy similarly to,” said Punyapon.

Lazada, for its part, has been labelled the big player in the Thailand e-commerce market, and is where customers age 25 years and older can be found. However, Shopee’s strategy that focuses on the 18-24 age demographic will force Lazada to also develop strategies to grasp their share of this market. The customer lifetime value (CLV) idea has been proven to be successful in the US retail market and other countries.

“Staying with customers and all growing together is the way to put the company on the sustainable growth path,” said Punyapon. “However, as a big leader, Lazada has a specialised focus on women, because they see their potential and ability to buy, especially in terms of their ‘share of wallet’ – female consumers are ready to divide the money in their pockets to buy products such as cosmetics or fashionable products.”.

He said the recent Lazada Women’s Festival clearly proved that Lazada is creating another overlapping world of women – and it is a world full of shopping. The use of technology supports shopping while also making the festival-like experience more fun. When leaving the festival, the participants find that the world of Lazada is still waiting for them via an application that links both transportation and convenient payment through a user interface designed to be simply and conveniently used. This all comes together to make the shopping world of women fun. Lazada understands the “SHEconomy” as almost growing in the opposite direction to the declining economy.

“If the approaches of the three operators achieve their goals, we will see digital marketing in Thailand’s e-commerce marketplace become fun, challenging and reveal new strategies and techniques. We will be able to watch a long series of [battles] for all to see. Anyone who falls down is possibly completely overtaken,” said Punyapon.

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