Around the world with ChannelEngine: A guide to marketplaces in Southeast-Asia, with Mitch Bittermann
Mitch Bittermann is the Executive VP of APAC E-Commerce for TMX Digital, a leading business consultancy dedicated to success in the APAC region.
Boasting more than 20 years of experience across e-commerce and supply chain for some of the world's biggest brands, including Adidas, Samsung, and Microsoft, few are better positioned to offer priceless insight into finding success in Asia-Pacific.
We called upon Mitch to share some of that wisdom while discussing the region's latest developments and things to look out for in the future.
Competition, trends, and innovations in the APAC region
Unsurprisingly, Mitch emphasizes just how exciting the region is right now and how the last few years, in particular, have seen the value of marketplaces skyrocket. With the battle for the top spot still yet to be decided, that sentiment doesn't appear to be fading any time soon.
"In Southeast Asia, it's not 100% clear yet who is winning the race. We have the regional players, such as Shopee and Lazada—horizontal marketplaces, meaning they sell everything—backed by China, so a lot of money and tech is involved.
"Then you have what I call local heroes mainly operating in one market. Your Tokopedia, Bukalapak, Sendo, and Tiki—again some of them receiving quite significant funding from Chinese giants such as Alibaba and JD.com to take on the regional players.
"One particularly interesting thing from the last few years is in China you have your double-digit, massive campaigns like '11/11' and '12/12'. This came over to Southeast Asia and massively accelerated things.
"I would say brand.com is still a topic here, but brand.com alone is probably for the category leads. If you take fashion or electronics, the top three, maybe the top five, can do it successfully. Outside of that, it's just too expensive to drive the traffic you need."
Also impressive are the innovations on display by some of the region's emerging platforms, ensuring the market remains a consistently forward-thinking and ever-changing environment.
"You have names like Grab and Gojek. Grab is similar to Uber in other geographies. It's the biggest ride-hailing company here. Now you have to Grab food delivery and the Grab store where you can buy groceries and have them delivered within an hour. It also has its own redemption program, where you can turn points into vouchers for other retailers, but it's only a matter of time before they start selling the products themselves.
"Instagram has also launched shopping capabilities, and TikTok recently announced a partnership with Shopify. Social commerce brings endless opportunities as this is where people interact the most.
"Digitalisation and virtual reality are also revolutionizing the way businesses sell. Buying clothing online can be difficult, as sizes and colors don't always look how they're displayed on the website. Now we have virtual dressing rooms, allowing you to try on the latest fashion, and retailers such as Sephora offering 'beauty cams', where you can see what lipstick looks like before you buy it. Finally, Ikea has even launched a new augmented reality (AR) application that lets you see what furniture will look like in your room."
The ups and downs of utilizing marketplaces
As marketplaces become the go-to for e-commerce brands, the trend is not without a unique set of challenges. Fierce competition means marketplaces often have the power to ask more of the brands selling on the platform.
"One thing, from a brand perspective that's more of a negative aspect, is that marketplaces are becoming more demanding.
"You have millions of visitors. You have all the top brands on your marketplace already. How do you make sure everyone gets the same share of traffic? Marketplaces have a sizable second income stream besides the initial fees, and that's marketing fees—where they say, 'okay, you have to spend a certain budget to attract eyeballs.'
"On top of that, especially when talking about the mega campaigns, the way you really make your GMV explode is through enticing deals. The marketplaces only give you really good deals if you give them a reasonable price for certain products, negatively affecting your margins.
"It's not only Lazada running the mega campaign on 11/11. Every other marketplace and brand does it, so everyone is competing for traffic. That means there are more and more people bidding on keywords, meaning it becomes way more expensive than it used to be."
With so many marketplaces to choose from, your brand will almost certainly need to operate on more than one. Logistically, this brings its own hurdles as you navigate things like stock, delivery, and customer service across different channels.
"If you want to sell, you have to sell on multiple channels. If you sell on multiple channels, you have to synchronize your inventory. If not, there's a high risk of overselling. Imagine you reduce a pair of shoes by 50%, you're doing it on multiple marketplaces, suddenly there's a significant spike in orders, and there's a very high risk that you're overselling on one channel, which leads to penalties.
"To combat this, brands are looking to enablers do the heavy lifting. Enablers are basically helping brands manage their complete online appearance, and the brand only has to speak to one enabler who can manage multiple channels across multiple markets."
With that being said, as marketplace popularity grows, as does the quality of services on offer.
"In the past, it was tough, if you spent a certain amount on marketplaces, to know what your conversion was. Now there's more of an account management structure, which mirrors the client set up in a way. Planning also starts way earlier for the mega campaigns—one extreme is in China, they have 11/11, and on November 12th, they've already started planning for the following year.
"There's now an army of people looking into what drives traffic. What's the optimal market spend? Which products will participate and which artwork?
"Another thing, which is both good and bad, is that there are more campaigns. So you have your mega campaigns—like marketplace birthdays, the mid-year Sale, 9/9, 11/11, and 12/12—but now you also have local campaigns. Because all the big brands are focused on the mega campaigns, as a small brand, you have more opportunity to promote your products among less competition."
The value of enablers
Enablers are becoming an increasingly popular avenue for brands to utilize in their day-to-day operation. Like anything in business, ensuring you find the right one is vital to both short and long-term success. Mitch highlights some of the key things to keep in mind when seeking an enabler.
"First of all, what kind of services do they offer? Do they only offer channel management, meaning they only manage your shop? Or can they really do everything, including fulfillment and last mile?
"What's the channel experience? Let's say you're Adidas. Are you talking to someone who has experience handling other big sports retailers?
"Next is a footprint. We have six markets here in Southeast Asia, but you don't want six different enablers. Another is financial background, especially when you're growing fast, you want someone who can keep up with that.
"Then there are tech capabilities. You need someone who can connect to all the different marketplaces in real-time and exchange data. If they don't have that, then you might as well just do it yourself.
"Last but not least, and it may not always be something they're willing to disclose, but look at the key clients. Are they able to retain their clients? How long are the contracts? This gives an indication whether the enabler thinks more long-term."
Picking the right marketplace
Naturally, ensuring your brand is on the right marketplace is vital. While each business has its own USPs, Mitch points out some of the big questions you must ask yourself when making this decision.
"It depends on the audience. So you have Shopee, a very young demographic, a huge amount of female customers, and very cost-sensitive. Then, if you look at Zalora, it has AOVs almost as high as you would on your own brand.com, thanks to the older, more affluent demographic.
"There's also ease of onboarding. In Europe, you have 'fulfilled by Amazon,' the FBA model. We have something similar in Asia, so Lazada or Shopee will fulfill it. That's much easier to onboard because you just give them the inventory, and they're ready to go.
"However, if you know you have it on Lazada, and you want to sell it on Shopee, Lazada is not going fulfill your orders. So you need to multiply your inventory. For example, If you think about the footwear industry, you have a pair of shoes that come in 14 different sizes. 14 is just one pair of each. Then you have 10 different colorways, so you have 140 units. So if you start now, do you need at least 10 or 20 pairs of each? Then what if you decide to sell on another marketplace? Your inventory costs quickly mount up. This is why many big brands are moving towards having this process centralized."
The battle of the big-hitters
It's no secret that the likes of Shopee and Lazada are the region's most recognized powerhouses, but what is it they've done so well to reach that status?
"Strong account management is definitely one. They also hire a lot of people with strong industry knowledge. Another is the detailed structure and long, in-depth planning cycles.
"Shopee is super interesting, there's a lot of money flowing in from China, and it's also heading to South America, so it'll be fascinating to see if it remains in pole position.
"I think there are lots of trends being inspired by Chinese companies. The trend of KOL (Key Opinion Leaders) is definitely being adopted here. We have similar concepts—campaign days, micro-influencers, and local celebrities endorsing products.
"There is also a race to become the next 'super app.' Gojeck and Tokopedia already generate massive traffic, and now they're working together. This places so much pressure on the Shopees, the Lazadas, and the Bukalapaks.
"If you ask my personal opinion, I think each market in the future will probably have three main marketplaces, along with some specialized ones. However, all of the others, they won't be able to compete and will be acquired by the bigger names."
Preparing for entry
Preparation and planning are essential, particularly in the initial stages of entering a new marketplace. Making sure you meet all the necessary criteria and understanding what resources will be required will smoothen the transition period considerably.
"The most important part is getting everyone aligned. Get the marketplace aligned, get the enabler aligned and get the distributor aligned. When starting, the last thing you want is your distributors going mad because the freshly onboarded marketplace seriously underbids the distributor pricing in retail stores.
"Get everyone together, share your joint business plan, say: 'I want to achieve 10 million in sales, here is what I intend to put on the marketing budget, this is the way I intend to run the operation, and this is each party's role in that.' For me, this is the most important part.
"Also, understand what the marketplace or enabler requires off from your business to launch. Often you'll get a checklist detailing when and how you have to provide your content, so be sure to stick to it."
Three tips for success in the APAC region
Every business will have very different plans when it comes to entering the APAC region. However, Mitch pinpoints three pieces of advice that can be applied to just about anyone.
"The first thing has a clear strategy. If you don't set yourself a goal, you will never know whether or not you're doing well. Are you where you should be? Are you achieving adequate sales? You need to have a North Star. Then you can then say, 'okay, my North Star is this amount,' and you can plan how to get there.
"Once you have that strategy, every partner who is involved needs to be aware of what you're trying to achieve. Issue NDAs if you don't want the world to know, but ensure everyone is aligned.
"The other thing is keeping an eye out on the emerging markets. It's not just looking at the new kids on the block, either. For instance, Tiki just got $20 million from Taiwanese investors. They are filling up their war chest to play a major role in Vietnam. As a brand, you need to be aware of these developments so you can benefit from them."
Three things to avoid when selling in the APAC region
Alternatively, Mitch raised a few of the most common mistakes brands can frequently fall into when selling on APAC marketplaces.
"Avoid trying to grow too fast. This is what I'm seeing a lot, where brands are just getting into this race to the bottom. They panic because retail stores are closed and assume they need to double down on e-commerce. They then run offers like 'buy two get 20% off, buy three, get 30% and so on— I don't think they understand how much that hurts brand value.
"If you set it up in such a manner, next time you go to make a campaign, the consumer will say 'last time we got three for 30% off. This time it's only 20%? No, that's not good enough. So there is a perception which you're building. I think the most critical part is that you don't try to give it all away within the first couple of months.
"Secondly, it's not a case of the more, the merrier. If you're on 15 different marketplaces, it doesn't necessarily bring you 15 times the amount of sales. It will bring you 15 times the work, so think about which are most relevant to you.
"Lastly, a lot of services have to be provided on marketplaces, whether it's content management, fulfillment, or last mile. Whether you're doing it yourself or with a partner, think carefully, can you or your partner scale this to 100x or 200x overnight? Because that's what will happen during the mega campaign days."
The Asia-Pacific region is an eclectic cauldron of endless possibilities and one that is evolving daily. While intense competition means success is by no means an easy ride, it does play an essential role in the market's reputation for innovation. It cements its status as the global leader when it comes to e-commerce.
Does this sound like a good opportunity for your business? Request a demo and learn how to make a smooth connection to some of the most promising APAC marketplaces. Get in touch and start expanding your business globally!