Future Retail Ecosystems in ASEAN - Spotlight on the Indonesian Consumer

In 2021, online retail penetration in Southeast Asia grew 85% year-on-year. This means that while efforts to increase connectivity across the region continue, retailers and distributors must pivot and shift their methods of customer engagement. We spoke to retailers from different sectors of retail across ASEAN, from traditional retailers and distributors to digital natives, and heard the same tune: Digitalisation is the only way forward.

Many direct-to-consumer (D2C) brands have emerged in the competition for a slice of the retail industry in recent years. Players along the retail value chain are also increasingly exploring ways to reach the end-consumer directly, many of which are expanding their vertical capabilities. Stakeholders along the manufacturing, distribution and retail value chain will either have to develop and acquire capabilities to establish their presence at every part of the value chain, or form partnerships with other players along the value chain.?

Digitalisation has resulted in an endless cycle of making improvements to keep up with customer’s expectations. In the recent AIBP report on the Future Retail Ecosystem in ASEAN, we identified 3 key areas of opportunity for ASEAN retail stakeholders today:

• The physical component: Product and Distribution
• The digital layer: Big Data & Technology
• The overarching influence: The Consumer’s Experience

Zeroing in on Indonesia, one of the fastest growing internet economies in ASEAN with an estimated increase in internet economy gross merchandise value (GMV) of 49% YOY in 2021, what will it take to succeed amidst fierce competition in Indonesia’s retail and distribution landscape??

At AIBP Insights Direct-to-consumer: The Indonesian Consumption Story last week, we were able to understand how the 3 key areas of opportunity interact through some of the key concerns mentioned:

• Standing out in a sea of competition: Building the brand to increase brand awareness, and subsequently capturing customer loyalty
• Defining customer profiles to enable personalised engagements in a demographically diverse environment: Especially as the Gen-Z are more digitally savvy, but the older generations are still at the stage of transitioning and adapting to new forms of commerce
• Utilising data to explore previously uncharted territory: Data enables any business to access a wider customer base, different business models and processes

Customer experience and loyalty with digital

In optimising the customer experience with digital, retailers and distributors can stand out in a sea of competition. Retaining customer loyalty is 2-fold, which involves bringing the customer in and keeping them onboard, as mentioned by Steven Calvin Victory Tjong, President Director, iStyle. Kai Ming Lau, Director, Strategy Digital, DFS Group, highlights the role of “digital” to go beyond providing an additional sales channel, and into enabling a seamless omnichannel journey for both the customer and retailer/distributor. A single view of data obtained across multiple channels will enable adoption of AI and predictive personalisation, a process that is enhanced incrementally as more data is collected.

This is particularly applicable to the e-grocery sector which has seen wider acceptance among consumers in the past couple of years. Despite this, as Muhammad Iqbal Darma Dalel, Head of Marketing & Operations, JAPFA BEST Online Hub, mentioned, branding remains a conundrum for groceries which tend to have weak natural competitive advantages - grocery retailers depend on customer loyalty for recurring business.

Complementary offline and online experiences

The importance of omnichannel touchpoints was also observed by Steven at iStyle, an e-commerce platform offering a mall-in-mall concept, which focuses on a niche, but growing, market for beauty, fashion and lifestyle among Indonesian consumers. He believes that digital channels may complement physical channels by providing brand and product education online - in line with the tendency today to browse online before purchasing in-store or online - to instill trust in the brand, which will in turn translate into brand loyalty.

Companies are also faced with different groups of customers who will require different approaches of engagement, as Iqbal mentioned. 2 key groups are:

• Earlier generations (the Gen-X’s and early Gen-Y’s) who take more time to transition from the physical habits they are accustomed to to digital channels
• The generation born to the internet era (the late Gen-Y’s and Gen-Z’s) who are quick to adopt e-commerce shopping channels

Customers will also want the option of “physical touch” to still be available to them. For example, in-store customer support staff may be supported by data obtained from multiple channels to offer more personalised experiences for the customers.?

Digital to support physical and vice versa

Rising trends in social commerce and live commerce will bring new opportunities in customer engagement by marrying entertainment with purchase. Emerging components along the retail value chain such as online marketplaces, e-commerce enablers and e-logistics providers highlight the importance of ecosystem collaboration.?

One way the digital layer will support the physical component of product and distribution is illustrated by the key role of delivery and fulfilment, and last-mile delivery in particular (getting the product into the customers’ hands) means that logistics providers have their work cut out for them - especially in geographically fragmented Indonesia where offerings should, ideally, be hyperlocalised.?

As the retail and distribution landscape becomes increasingly interconnected, it is important to have a clear view of the entire value chain. On the back-end, datasets and information may already be readily available. The next step to take would be to have a single view of data and explore ways to derive value from these data assets. Properly managed, firms may then make data-driven, informed decisions along the entire value chain.?

With the festive season around the corner, how will retailer players perform in the last month of 2021?