The biggest trend happening in e-commerce in South-east Asia is the direct-to-consumer shift, accelerated by the Covid-19 crisis that has seen mass migration of consumers online in the region, said Arun Verma, who’s leading Shopify’s growth in South-east Asia and China.
How this translates to the travel industry is a matter of personal interest to Verma who, prior to joining Shopify, worked with AirAsia overseeing its sister investments fund.
While travel is still a small category to Shopify, which enables businesses to sell direct to consumers, it has seen a handful of small independent businesses such as tours and activities or small accommodation providers come onto the platform, and given the number of travel jobs that have been affected by Covid-19, one could expect more individuals to try set up their own businesses on Shopify to seek alternative means of income.
“This direct-to-consumer shift is huge,” said Verma, who’s based in Singapore. “People used to characterise South-east Asia like China 10 years ago, but I think of it as unique on its own level. Essentially merchants are operating in South-east Asia on a number of channels – retail, marketplaces, DTC websites. In all these cases, merchants are going to have a multi-channel strategy.
“The new reality is, online presence is now critical and merchants are starting to spend efforts building DTC businesses. We have platforms like Instagram which are becoming more important in the discovery stage and so, we are seeing this big shift in e-commerce. It started three to four years ago, but it is becoming real now and South-east Asia is primed.”
Verma, in one of his LinkedIn posts based on this report, observed that growth in e-commerce in APAC will be driven by the middle class – by the end of 2020, 1.4b people will enter the global middle class, with 85% of them in the APAC region.
Six of the 10 fastest-growing retail e-commerce countries in 2019 hail from APAC, with India and the Philippines at the forefront with more than 30% growth; and China, Malaysia, Indonesia and South Korea trail closely. E-commerce in South-east Asia is projected to grow explosively and exceed US$100b by 2025.
As to whether a similar DTC shift would play out in travel, Verma said, “There could be parallels there. If you have more direct business, you have better control of cash flow. And if you build better products and better brands, you have a better opportunity to compete.”
Verma, who started his Shopify role at the beginning of 2018, said business has grown at a healthy pace in South-east Asia and China. “If you go back 100 years, we had the birth of malls that changed retail, then about 30 years ago, the first websites came online and it’s only been in the last 10-15 years ago that those businesses started gaining identity. Today, brands, created within the last four to five years, which are doing DTC businesses, are killing it.”
Shopify, founded in Canada, saw the opportunity in Asia. “The theory was these markets are going to start favouring DTC businesses, and that theory has been borne out. We are starting to see a bunch of brands emerging that are finding their own consumers via Google or Facebook.”
Verma said it was definitely seeing a lot more merchants coming onto the platform with Covid-19. “Those with e-commerce strategies are accelerating their plans. Then there are those doing it for the first time.
“A lot of retail businesses are on temporary lockdown and we are focused on helping our merchants at this time. Merchants are going through a rough time and they need to get their e-commerce strategy right.”
During Covid-19, for example, Shopify has extended its free trial to 90 days, for example. “It is the right thing to do at this time.”
Another trend being seen in e-commerce during Covid-19 are the changes in items being shopped for. In a LinkedIn post, Verma observed that eGrocery is the area that has seen the biggest growth.
Citing a study, he shared these data points which he gathered from various sources.
- 61.5% of consumers are looking to buy food items online during this outbreak. (Source)
- Globally, between March 12-15 alone, “Buy online” orders for grocery retailers increased by 210% across the board. (Source)
- In China, Alibaba’s Ele.me seeing 2x growth in online grocery orders, while JD’s Daojia saw 4x growth in the first month alone. (Source)
- US’s Farmstead saw 30% increases in delivery volume in just one week. (Source)
- Total value of products sold on alcohol delivery platform Drizly went up by 500%, with shoppers spending 50% more than usual. (Source)
- Instacart downloads have increased by 218%, with Walmart Grocery downloads increasing by 160%. (Source)
Another problem being faced by merchants during Covid-19 is running out of stock on certain products. In another LinkedIn post quoting Adyen, Verma said that “out of stock (OOS) situations are a big deal for brands, and can lead to lost revenue and reduced conversion.”
OOS accounted for US149b in up-front abandoned sales across APAC in the last year. “This behaviour is most prevalent among Singaporean consumers with 89% of them opting not to purchase due to OOS situations,” said Verma.
Shopify crossed the one-million merchant mark last year. “People use us to start their own business and we also have very large businesses that use us.”
While there is a wide spectrum of merchants, the demographic tends to be “creator/maker/curator/brand focused/identity-focused” businesses with a direct to consumer mindset.
Verma said while travel is not a massive category, “you can imagine that if you are in the service business, like an activity provider, you could use Shopify”, and he sees travel retail as a big opportunity.
He said that businesses, which were reluctant to think about e-commerce in the past, were now saying ‘we need to do it right away’.
Asked what advice he would give those who have lost income due to Covid-19 and who may be considering starting their own online business, he said, “Start to build something you know really well, that is missing in your life and that has made your life better. What you will find is that will help you sculpt the kind of company you want to build, the products you want to sell and the stories you want to tell.
“You might think, oh, it’s only me, but you’d be surprised. With ad targeting, you can find lookalike audiences, and find people that has your problem all around the world. As you zoom out, you start to realise it might be a niche thing. Then as you enter the second phase, those customers can become your fans.
“The most successful entrepreneurs turn that relationship into a conversation, and then you learn about how your products and services can evolve and extend. We have seen businesses take off.
“Often times, people feel inhibited and they are looking for that eureka moment. Don’t wait for that. Develop something you feel the world would be better for it, and build a brand around that.”
Anybody can do it these days, he said. “There are tons of educational material out there, including on our site. We have a huge partner community, we are integrated with Facebook and Google and you can learn how to create ads on our platform, and we can help you get your first set of buyers.”
• Featured image credit: Tevarak/Getty Images