Winning Omnichannel Asia

Module 2
Riding the eCommerce wave

October, 2021
MODULE 2
Riding the Waves of eCommerce

01
The evolution
02
Fragmentation
03
Incrementality
04
Implications
of and Ripple of Online for manufacturers
eCommerce and retailers

2
Foreword and Acknowledgement

Welcome back!

It’s a pleasure to introduce Part 2 of our Retail & Shopper Insights series for Asia. But first, I want to start by saying a big “THANK YOU” to
everyone who downloaded Part 1, we hope you enjoyed reading the report and have been eagerly awaiting the next installment!

In Part 1, we looked at the macro channel landscape across Asia, highlighting the largest and fastest growing channels by market,
exploring the changes we are observing in FMCG shopping behaviors, and looking out for new opportunities for both manufacturers and
Neil Pembry retailers. We will now deep-dive further into the fastest-growing FMCG channel in Part 2 as we turn our attention to eCommerce.
Strategic Insight
Director, South East Asia The first section provides a wealth of information about the current eCommerce landscape and the journey that this channel is on across
Asia, with some great examples of how manufacturers and retailers are collaborating to drive footfall and engagement with Online
Kantar, Worldpanel
shoppers. We will then deaverage the Online shopper to understand where the “ripples” of new shoppers are coming from and how new
division
eCommerce models are emerging to meet their different needs. In section three, we will explore the very interesting topic of
“incrementality” and how eCommerce is adding value to total FMCG sales and not achieving all its growth at the expense of offline retail.
We will then close with our implications and some “food for thought” for both manufacturers and retailers.

As always, should you have any questions or feedback regarding Part 1 or Part 2 of this series, please do not hesitate to contact me or
your regular Kantar Worldpanel client service representative. And please also look out for Part 3, focusing on Brick and Mortar retail,
which will be released in November.

3
We want to thank key industry experts for their contribution

Magnus Ekbom Binayak Bose Yik Hun Lee Arsalan Khan Alda Ma

Chief Strategy Officer Head of eB2B and GTM Marketing Director Sales Director Senior Director
platforms ASEAN Food SEA
Lazada Group Nestle Philippines Demand Accelerator
Reckitt Benckiser Dairy Farm International
PepsiCo APAC

4
01
Introduction

The evolution of eCommerce

The rapid rise of eCommerce is by now a well-known eCommerce
phenomenon repeated around the world. In a recent
report we revealed that eCommerce has grown by
+45.5% globally, making it the fastest growing of all
+27.2% Modern Proximity
FMCG channels.

The findings are not so different in Asia, where Total FMCG

eCommerce is also the fastest growing FMCG channel at
a slightly more modest rate of +27.2%. This still puts it
+4.9%
well ahead of the growth in FMCG in the region, up Traditional Trade
+4.1%, and the other major FMCG channels.
+4.1%
With a share of just over 20% of total FMCG sales, Supermarket
eCommerce is not just fastest growing in percentage
+2.5%
terms but also in absolute value as well. Therefore,
Drug & Pharmacy
whether you are a manufacturer or retailer, -2.3%
understanding more about this channel is key for the
-3.2%
future. Hypermarket
-5.6%

6
 40 Urban Only In North Asia, eCommerce penetration is approaching saturation with close
to 9 in 10 households in Chinese Mainland (88.7%) and South Korea (86.6%)
35 using Online channels to purchase FMCG. This has fuelled an increase in
share with eCommerce now accounting for more than a quarter (26.4%) of
30 FMCG sales in these markets. Taiwan is not far behind, where 7 in 10
households spend 13.4% of their FMCG wallet via eCommerce.
25 South Korea
Frequency

And despite its already massive size, North Asia still saw growth of
eCommerce FMCG sales by over 25% in the latest year. As a result,
20
eCommerce is not just #1 in percentage growth terms, it is also the biggest
contributor to FMCG growth in absolute value terms too.
15 Chinese
Mainland In Southeast Asia, the penetration of eCommerce is lower but it is rapidly
10 Thailand being adopted by Urban households in frontier markets like Malaysia (46.4%
Taiwan
Indonesia penetration), Vietnam (42.9%) and Thailand (35.8%). Despite the influx of
Malaysia new shoppers, eCommerce’s share of FMCG in the region remains below 10%
5
Philippines and the 58% growth seen in the latest year translated to just a 0.5% share
0
Vietnam increase. However, an acceleration is clearly underway:
0 20 40 60 80 100 it took 10 years for eCommerce to reach 1% share of FMCG in Southeast Asia,
Penetration but just the latest 1 year to gain another 0.5%!

Bubble Size = Online % of FMCG

7
40 There are many factors that led to the growth of eCommerce in Asia, such as
38
Southeast Asia 37%
increased digital adoption (mobile phone ownership), faster/wider/cheaper
36 internet connectivity, etc.
34
32 But the COVID-19 pandemic that began in 2020 has played a role in
30 accelerating the growth of the channel. The penetration of eCommerce grew
28 44% in the latest year, when it was expected to grow by 29%. This is further
26 supported by our global barometer study where 22% of shoppers cited
24 “avoiding health risk” as a key reason for shopping online.
22
In Southeast Asia, a dip in eCommerce penetration was observed in the early
20
stages of the pandemic as shoppers needed to fulfil emergency stock-up needs
18 and opted for retailers close to home. Initially, eCommerce struggled to meet
16 the surge in demand (extended or unavailable delivery timings and out of
14 stocks) but these issues have been overcome and the penetration in Southeast
12 Asia is now close to exponential growth that could see it reach 37% in the next
10 2 years.
8
P6'19
P7'19
P8'19
P9'19

P1'20
P2'20
P3'20
P4'20
P5'20
P6'20
P7'20
P8'20
P9'20

P1'21
P2'21
P3'21
P4'21
P5'21
P6'21
P6'21
P7'21
P8'21
P9'21

P1'22
P2'22
P3'22
P4'22
P5'22
P6'22
P7'22
P8'22
P9'22

P1'23
P2'23
P3'23
P4'23
P5'23
P6'23
P10'19
P11'19
P12'19
P13'19

P10'20
P11'20
P12'20
P13'20

P10'21
P11'21
P12'21
P13'21

P10'22
P11'22
P12'22
P13'22
In North Asia, with the penetration of eCommerce already high at 87.7%, less
explosive growth in new shoppers is possible. But we can expect the number to
Actual Penetration Expon. (Actual Penetration)
edge closer to 100% in the coming years as the remaining non-eCommerce
buyers are won over.

8
Stages of eCommerce development across Asia
We can define 3 stages of eCommerce development: developing; destination; and discovery. These stages depend not only on how many shoppers are buying online
but also the extent to which shoppers are repeating their online shopping habits. During the first phase, eCommerce platforms are still developing and finding a
foothold in shopper’s habits, shoppers buy online to try the experience, and many of the shoppers during this phase will be new to eCommerce (about 60-90% with low
levels of repeat shopping). As platforms and online shopping models develop, early adopters become more accustomed to shopping online and are building their habits
and repertoire. This also means that the proportion of new shoppers reduces to 35-60%. It is important for platforms to build ease of usage to drive stickiness during
this stage. The key is to drive penetration by retaining shoppers Online as well as recruiting new shoppers, as the double jeopardy holds; higher penetration also means
greater loyalty and frequency. In markets where eCommerce is developed (like in North Asia), shoppers are already accustomed to shopping online. It is increasingly
difficult to find new shoppers in these markets – but not impossible. Instead, repeat shoppers abound; it is important to ensure that you are making it easy for them to
come back as well as convincing them to put one more product into their basket or premiumising them.

Penetration
88.7
Urban Only 86.6

67.6

43.9 46.4
36.0

15.9
10.3

Philippines Indonesia Thailand Vietnam Malaysia Taiwan South Korea Chinese Mainland

New Online
Shoppers % 60-90% 35-60% 10-35%
Repeat Online
Shoppers % 10-40% 40-65% 65-90%

Developing Stage Destination Stage Discovery Stage

10
Beauty and Personal Care categories are the top categories that shoppers buy online; even in developed eCommerce markets these categories account for half of the
top 10. Within Beauty and Personal Care, facial care products like moisturisers and make-up tend to hold the top spots, whilst baby diapers is another popular choice
for time-poor parents. We also observe that as eCommerce develops, shoppers tend to buy more Home Care categories, with bulky laundry categories such as
detergents and fabric conditioners being the first to appear in eCommerce baskets. Food & Beverage categories tend to the least likely categories to be bought online,
as the immediate need for meal preparation, shorter shelf life, and smaller pack sizes are currently proving to be a barrier. It is hence important for brands to be aware
of the development of online for their categories. If you are in Beauty and Personal Care, you already need an omnichannel strategy. As eCommerce develops rapidly,
being late to the game could mean playing catch up for a long time.

Urban Only

% of Top 10 categories Developing Stage Destination Stage Discovery Stage

Food & Beverages 10% 10% 30%

Personal Care 90% 70% 50%

Home Care 0% 20% 20%

11
Consumers are not only turning to online commerce
platforms to purchase goods, but for product discovery,
price comparisons and recommendations.

Magnus Ekbom
Chief Strategy Officer
Lazada Group

12
During the early to middle stages of development, eCommerce use is limited to occasions mostly focussed around convenience and value for money. One reason
for this is the under-developed infrastructure to support emotional occasions. But once these barriers have been alleviated, shoppers would thereafter be able to
engage with new shopping occasions – Impulse, Emergency and Discovery.
For instance, when we look at Chinese Mainland’s eCommerce evolution, Impulse occasions need to be supported by seamless payment method. Another example
would be Emergency occasions which require next- or even same-day delivery to fulfil the shopper’s immediate need for the product.

Chinese Mainland Online Penetration – total FMCG

Convenience Occasions Habitual Occasions

87.5
Value for Money Occasions Growth slowdown of Online penetration

78.5
Accelerated growth of Online penetration
69.4
64.4 Easy Mobile
Impulse Occasions
Payment
59.3
Same/Next Day
49.2
Emergency Occasions Delivery

41.2
Discovery Occasions Livestream
34.6
Reinvigorated growth of Online penetration

2013 2014 2015 2016 2017 2018 2019 2020

13
One of the realities facing the development of eCommerce in Southeast Asia is
the relatively smaller FMCG basket sizes, influenced by the demographic profile
of the region being more rural and with a higher proportion of low income
shoppers. For example, in the Philippines and Indonesia, 45 million households
are classified as DE, or 87% and 34% of the household population respectively.

However, with by understanding the evolution of the eCommerce landscape

and shopping occasions in North Asia, we can understand barriers to the growth
and acceleration of eCommerce in Southeast Asia besides the market realities
of urbanity and lower income.

We identify 3 main barriers to eCommerce growth in Southeast Asia:

1. eCommerce platform models that cater to all shoppers

2. Delivery infrastructure that ensures same/next day delivery

3. Payment infrastructure that ensures easy payment

eCommerce retailers and platforms need to help alleviate some of these issues
to ensure that eCommerce would be able to continue to accelerate growth.

14
We realised that many shoppers were looking for ways to stay connected
and engaged. So beyond just providing retail therapy in the form of
transactions, we also ramped up our “shoppertainment” strategy,
leveraging technology that included our in-app livestreaming feature
and augmented reality.

Magnus Ekbom
Chief Strategy Officer
Lazada Group

15
Traditionally, shoppers become aware of brands through the media and go through a consideration process of researching the product and comparing it against
alternatives before making a purchase, a linear journey where trust is low.
In a digital world, eCommerce is able to change the shopping journey, allowing decisions to be made at a faster pace than before: shoppers are exposed to brands
through social media or other digital platforms either shared by key opinion leaders or their circle of friends/family. This familiarity allows the barrier of trust to be
overcome and shoppers can then click a link and be direct to the purchase page on an eCommerce platform. Awareness to purchase all happens digitally and within a
fraction of the time taken via traditional linear journeys; built on the foundation of trust from the recommendation, to the platform, to payment.

Entertainment

Traditional Shopping Journey

Awareness

Awareness Consideration Purchase Trust

Purchase

Interest

Social Media Payment

16
Propelled by the COVID-19 induced lockdowns in China, livestreaming and eCommerce has experienced explosive growth and helped many manufacturers to improve
the conversion rates of their brands in an interactive way. Initially, eCommerce was two-dimensional, but with the introduction of livestreaming, it has become three-
dimensional; a live, interactive and social experience. Alibaba’s Taobao, which started this feature, now holds the lion’s share of livestreaming. Due to this surge in
popularity, many brands are jumping in with their own shows and selling goods through influencers.

Live Demo of the product usage as

well as the effect

Real time conversation, to address

questions from consumer, and lucky
draw of special coupons

Purchase Button to buy it right now in

Taobao + Special promotion price
during live streaming to encourage
immediate order

Source: https://www.alizila.com/video/how-livestreaming-drives-retail-and-e-commerce-success/
Source: https://www.forbes.com/sites/michellegreenwald/2020/12/10/live-streaming-e-commerce-is-the-rage-in-china-is-the-us-next/?sh=6cf152436535

17
This trend is also happening within Southeast Asia especially in line with
the major events (e.g. 9.9 and 11.11). In the long run, stronger
commodity supply and after-sales service will help to support the
continued development of livestreaming.

In Southeast Asia, Lazada has partnered with L’Oreal in a Bring Beauty

Back event, showcasing livestream tutorials and creative look inspiration
to help women express themselves, helping them feel beautiful,
empowered and confident.

Additionally, livestreaming is a way for brands to gain awareness, move

excess inventory and for small local businesses to reach customers; even
more important with the COVID-19 restrictions. With that in mind,
Lazada has also worked with Elephant Nature Park and local hill
communities in Thailand to promote the elephant sanctuary by allowing
users to tour the sanctuary from their homes through the livestream and
promoting the locally produced coffee to drive income to support local
coffee farmers.

Source: https://www.forbes.com/sites/michellegreenwald/2020/12/10/live-streaming-e-commerce-is-the-rage-in-china-is-the-us-next/?sh=6cf152436535

18
Other ways to streamline the consumer journey and win online…

Utilize online platforms in creative Building Communicate NPDs online

ways to build brand loyalty Loyalty using relevant presenters and
attractive designs that draws
attention of target audience
Creative
NPDs
Content
Launch content that encourages
shoppers to consume more or Use links to direct shoppers to
inspire new usage occasions our own platform

Building Platform
CRM Linkage
Collecting shopper information to Encourage immediate
build a database for retargeting conversion by providing
Conversion linkage to online stores

19
VIETNAM

MARKETING BUILDING LOYALTY CONTENT TO INSPIRE GREATER ENCOURAGE BIG

CAMPAIGN THROUGH ONLINE PLATFORM CONSUMPTION BASKET SIZES
Encourage shoppers to consume Tofusan leveraged the LINE platform to Keep consistency of creating content Vitamilk offers free shipping when
more of Soymilk through campaigns accept delivery orders and offer points, to inspire consumers with new ways shoppers order at least one crate
by inspiring consumers with new which could drive shoppers to increase of using soymilk which encourages shoppers to
ways of using soymilk their basket size and also drive greater increase their basket size
loyalty to the brand

FB Page : @tofusan, @VitamilkThailand

20
INDONESIA

IMMEDIATE RELEVANT CELEBRITY PROMOTIONS DRIVING GREATER

CONVERSION ENDORSERS CONSUMPTION
Always provide links towards official online shopping Creating hype on social media through use of Offering price discounts for bundle deals (5 or more
channel or provide a hotline to drive shoppers to relevant celebrity endorsers. products), which helps drive larger basket sizes
make a purchase For instance, in Indonesia, Korean celebrities help
capture both younger and older shoppers, especially
with the growing popularity of K-drama

21
THAILAND

NPD EXPANDING ATTRACTIVE IMMEDIATE CONVERSION RELEVANT

TARGET GROUPS PACKAGING ENDORSERS
Launching new products online in Fun, colorful ingredients shown on Always provide links towards their Nescafe used JJ, Kritsanapoom
order to capture a new target group; packaging to grab shopper's attention official online shopping channel to Pibulsonggram & Ice, Paris
especially if the target is more as they are browsing online drive conversion Intarakomalyasut as their endorsers
digitally engaged or shops online of their new product line, in order to
often resonate with younger generations

FB Page : @Nescafe.TH, @mocconath, @KhaoShong1979 | Shopee: nestle_foodbeverage_official

22
PHILIPPINES

BUILDING CRM IMMEDIATE CONVERSION PROMOTIONS TO BULK CONTENT TO DRIVE HABITUAL

DATABASE PURCHASE CONSUMPTION
Offering free samples by filling out an Always provide links towards their Leveraging promotions to drive brand Creating content that leverages
online survey with their contact official online shopping channel to loyalty and expandability, as larger occasions to help drive consumption
information increase conversion sizes drive greater consumption

23
02
Fragmentation and Ripple

The evolution of eCommerce

Knowing who is buying online matters! At Kantar, we are able to advise on shopper demographics, enabling brands and retailers to understand if they are reaching
their target audience.
Despite almost 90% penetration on the Chinese Mainland, eCommerce is still recruiting new shoppers who tend to be lower income and have an older family
composition. This less affluent and older profile is also the same as the remaining 10% who have yet to shop for FMCG on eCommerce. A similar trend is observed in
South Korea, as online shopping initially resonated better with younger, more affluent city-dwelling households but has increasingly gained traction with older and less
affluent households. Whilst in Taiwan, eCommerce is also now attracting more older, middle income shoppers but has less reach amongst low income households.
This is how eCommerce evolves demographically; analogous to a ripple on a pond it starts off in the megacities with the more affluent and younger shoppers who are
digitally native. It then spreads out to the secondary towns and cities and into rural areas, along the way pulling in the less affluent and older/less digitally savvy
shoppers. For online retailers to grow share in North Asia, besides focusing on current shoppers and building stickiness of online retail habits, there is an opportunity to
help meet the needs of the remaining underserved shopper groups. There are still 18.6 million households in Urban Chinese Mainland waiting to be brought online!

Chinese Mainland Penetration 2020 Incremental Penetration point growth 2021

95.0

90.0 4.8 4.4

5.9 4.8
85.0 6.0 6.0
5.6 6.8
7.2
7.8 6.9
80.0
87 87
83 85
83 82 82
75.0 81
79 78
77

70.0
Chinese Mainland Income <=5000 Rmb Income 5001-7000 Rmb Income 7001-9000 Rmb Income 9001-12000 Rmb Income >12000 Rmb Young Singles & Couples Young & Mixed Family Teenager Family Adult Family Empty Nest Family

25
Over time, the fragmentation of eCommerce across multiple platforms and models has allowed it to cater to an array of shopper demands and needs across North
Asia. Traditional eCommerce platforms that cater to mainstream shoppers may not be ideal for rural, less affluent shoppers and therefore other models emerge, such
as group buying where shoppers join forces with others in their community to place larger orders in exchange for deeper discounts. Recent years have also seen the
proliferation of Online to Offline delivery services to satisfy even the most immediate needs, with some offering 1 hour shipping that brings us a step closer to instant
satisfaction.
Globally, over 66% of eCommerce shoppers rank shopping ease over saving money and this number is higher in the Chinese Mainland where fast delivery is a key factor
in selecting which eCommerce platform to use. For example, in the Household Cleaning category, JD.com is most often selected for its fast delivery even though other
sites may have a wider selection. In the mind of the shopper, each platform is able to fulfil certain needs, therefore each platform must leverage those shopper needs in
order to differentiate themselves from the competition.
Virtual Platforms Emerging O2O Models

EC Platforms WeChat-based Shopping Short Video Commerce Online to Offline Community Group Buy

Younger, Mid-High Income

Middle Income Households Middle aged Female Shoppers Older Shoppers Older, Mid-low income Households
Households

Recommendations Speed of delivery Discount price

Variety, quality, and price Word of mouth/Influencers
Direct Engagement Impulse needs satisfaction Influence of local captains

Prevalent across categories; over- Skews to niche categories Skews towards Skews towards Food categories
Skews towards Fresh Food
index on Baby and Beauty items e.g. paper, diaper, supplements Beauty and Apparel e.g. Fresh/Frozen Food, Milk

26
Within Southeast Asia, eCommerce is still at the center of the demographic ripple, largely dominated by more affluent and younger digitally native shoppers. And the
penetration gains for eCommerce in Southeast Asia are also mostly from younger, higher income households.
Looking at urban Indonesia, the early adopters of eCommerce are highly skewed towards the more affluent (SEC AB) households and those where the main shopper is
young (aged under 35), and it is these same demographics which are also driving the more recent penetration gains. This same trend is also seen in other Southeast
Asian markets, with the exception of the Philippines where middle-aged shoppers are the majority of eCommerce shoppers and are growing the strongest.
For retailers and eCommerce platforms, it is crucial to assist the more affluent and younger shoppers to come online, but do not miss out on the huge long-term
opportunity to deliver innovative solutions that will reach the older and less affluent shoppers in the region.

25.0
Urban Indonesia Penetration 2020 Incremental penetration point growth 2021

20.0 6.1

15.0 7.0
5.3 5.2
6.1 3.9
10.0
16.6 3.4

10.6 11.4 10.9

5.0 1.8 9.9
8.9
6.7
3.9
0.0

27
Another big question that brands and retailers are looking for answers to is ”who are the next wave of new eCommerce adopters, and where are they coming from?”
For Southeast Asia, we can already see the next wave of online shoppers coming from rural regions. As the urbanization rate in many Southeast Asian markets is less
than 50%, the rural areas, in terms of absolute number of households, represent a huge untapped opportunity. In fact, the number of rural households who are starting
to buy online in Thailand and Vietnam now outweighs those from urban areas. As the next frontier for eCommerce in Southeast Asia, winning with rural shoppers is
imperative to in order to maintain and grow online market share.

Net increase in households (‘000) shopping for FMCG via Online

Indonesia Indonesia Thailand Vietnam Thailand Thailand Indonesia

Bangkok, 404 Jakarta, 278

Vietnam

Ho Chi Minh City, 217

Urban exc. BK Vietnam

Urban exc. Jakarta 2,270 Rural, 1,641 Rural, 897 Rural, 859 742
Urban 3 Cities, 112

* Indonesia excludes Online Delivery Services due to limited back-data Online FMCG in SEA: MAT Q2 2021

28
It is important to not force fit an urban thinking onto rural
realities, but to integrate insights on different segments and
develop programs that connect with the diverse array of shoppers

Arsalan Khan
Sale Director
Nestle Philippines

29
At Kantar, we are uniquely place to monitor all eCommerce purchases,
including those from non-traditional platforms such as Facebook and other
forms of social commerce. % of Online shoppers using…
What we are finding is a clear dichotomy between the urban and rural
eCommerce landscape in terms of platform penetration and share of sales.
For instance, in Vietnam it is clear that Facebook is currently the platform of 57.5
choice amongst rural households, where nearly 9 out of 10 rural eCommerce
shoppers use this platform. Similar social commerce trends are also seen in
Thailand and Indonesia. Urban Vietnam

Therefore, it is important for brands to understand the differences between 62.7

urban and rural eCommerce shoppers and tailor their eCommerce strategy
accordingly. Whether this involves driving traffic to official stores on
marketplaces such as Lazada, or attempting to tap the vast array of
unofficial sellers on Facebook, manufacturers will need to get more creative in
how they reach eCommerce shoppers. Whilst for retailers and eCommerce
87.4
platforms, sustainable long term growth will come to those who best
understand the evolving needs of all eCommerce shoppers and constantly
innovate their offer to best serve them. Rural Vietnam

21

= marketplace platforms (e.g. Lazada, Shopee etc.)

30
An example of how social commerce works in Vietnam

Consumer browses products on social media Chat with sellers via messaging Confirm order.
(Facebook, Zalo..) apps (Messenger, Zalo..) Seller arranges delivery

SAME PROVINCE, DIFFERENT PROVINCE,

URBAN RURAL
Delivery app Coach, traditional postal
service

TIME DELIVERY: TIME DELIVERY:

Within 1-2 days Within 1-5 days

PAYMENT: COD (dominant) / bank transfer/ e-wallet

For COD payment, Delivery man pay the seller for the
goods via cash and collect from buyers later
Products listed on Live streaming
page shopping

31
03
Incrementality of Online

The evolution of eCommerce

 Urban Only
Incremental Value from eCommerce
(% not from switching)
For brands, there is a lot of fear that eCommerce as a
138% channel is largely driven by deep discounts and constant
promotions. Many manufacturers believe that this drives
the mentality of shoppers who buy online.
94%
86%
However, our data reveals that eCommerce actually has
a positive, incremental impact on total FMCG value
63%
67% 67% 65% sales. In other words, households are spending more on
52%
57% 57% FMCG as a result of shopping on eCommerce, it is not
44% 47% 50% just about deals and discounts.
29% 31%
23% Therefore, it is important for brands to understand how
this incrementality plays out in specific categories and
how you can drive it to your own advantage.

Philippines Indonesia Thailand Vietnam Malaysia Taiwan Korea Chinese

Mainland
Q2'20 Q2'21

33
Looking at categories in North Asia, those with high online penetration are unlikely to only be bought online – shoppers will, over a year, alternate between buying these
categories online and offline. But there is little benefit if shoppers buy exactly the same things online and offline, therefore brands need to put in place an omnichannel
strategy that includes driving incrementality for online purchases.

How do we drive
More Buyers Buying More Spending More
Incrementality?

Getting shoppers to buy more of the

[Discretionary Category] brand by driving volume per trip (either Getting shoppers to spend more on
Brand Gaining more shoppers through online larger packs or multipacks) or buying the brand through premiumisation
(i.e. would not have bought offline) the brand more often (through (i.e. more benefits)
increased purchase occasions)

Getting shoppers to add one more

Retailer/ Getting shoppers to spend more
category or one more item to their
eCommerce Platform on the platform
basket

34
An example of driving incrementality in Chinese Mainland

Six target groups with a different “flipside” personality

Ogilvy helped Nescafe drive recruitment of new shoppers in
Chinese Mainland, accelerating online market share gains
through an online-exclusive campaign.
Foodie Thinker Perfectionist Comedian Adventurer Beauty
Previous research revealed younger shoppers aged 18-25 are
culturally diverse and do not like to generalised, and the Nescafe
campaign directly targeted this group. Working with Ogilvy,
these shoppers were segmented into 6 archetypes and a limited
edition tumbler was created for each.

As shoppers were only able to learn about their archetype and

purchase their tumbler online, the campaign created buzz and
excitement and helped recruit shoppers into the coffee category.
In addition, the exclusive tumblers helped drive greater spend
per shopper for Nescafe, driving incremental sales for the brand.

35
VIETNAM INDONESIA

Getting shoppers to spend more Colgate new launch collab with Tiki Gift with purchase(e.g. mask, Indomie offers bundling and discount
through bundle deals – helps retailers (one of biggest eCommerce players in chopsticks, etc.) only available when only available online, which helps to
drive incrementality as shoppers add Vietnam) – platforms working with buying Indomie online helps the drive increased purchase occasions
one more item or category to their manufacturers or brands to offer brand drive increased purchase for the brand
baskets exclusives – driving excitement and occasions online
possibly additional purchase occasions

36
MALAYSIA

Nestle offering free delivery across Peninsular and Unilever launching online exclusive deals – discounts MAC Cosmetics collaborating with Lazada to offer
East Malaysia through encouraging encouraging and free gifts/vouchers to help drive increased an exclusive product, the Wanderlust collection –
big baskets and driving greater consumption purchase occasions and drive bigger basket sizes Vietnam, only on the Lazada platform. This helps
online create excitement and drive additional purchase
occasions.

37
Besides traditional eCommerce with a large number of traditional trade store owners with
online shops. There are also brick and click formats of modern trade chain, where we need
to focus on retail fundamentals.
Especially for FMCG, given that these players have the resource and relevant supply chain
logistics and data in order to ensure success. They have an advantage as they are able to
offer multiple grocery categories in a single basket.
That it is important for them to leverage technology and data to manage delivery costs,
which is one of the key barriers to adoption for these platforms today. In addition, they
would also need to figure out a way to manage their inventory for online orders based on
the nearest stores rather than a centralised location.
Binayak Bose
Head of B2B and GTM Platforms
Reckitt Benckiser ASEAN

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Urban Only
Source of Growth Analysis for Hyper/Supermarkets in %
Across Asia, the Hyper/Supermarket channel is feeling the pinch as shoppers switch
Philippines a portion of their FMCG spending to other retail channels (refer to the blue portion
of the chart).
Malaysia
Splitting out the Hyper/Supermarket switching losses, eCommerce is taking the
Korea greatest amount in all markets with the exception of Indonesia, where it is second
to Traditional Trade. This means that there is an opportunity for retailers to adopt a
Indonesia
brick and click model in order to maintain and grow their market share, and our
Thailand experts believe that the potential for retailer.com growth is highest in Southeast
Asia.
Taiwan
With a retailer.com offer, offline retailers have an opportunity to better utilise their
Greatest value loss
Vietnam to eCommerce store distribution to help shorten delivery times and seek an edge versus the 3-5
across markets days delivery that is common across Southeast Asian markets today. Kantar
Chinese Mainland research has shown that approximately 30% of non-eCommerce shoppers state
that shipping times are a barrier for them to shop online.
-100% -50% 0% 50% 100%
However, whilst speed is of the essence, retailers must not neglect the
Value switched to/from other channels fundamentals. Quality assurance is a crucial factor for retailers to focus on, with
Value from shoppers spending more/less in Hyper/Super almost 50% of non-eCommerce shoppers citing quality concerns as a barrier to
Value from shoppers adding/dropping Hyper/Super from repertoire buying online.

39
No matter the format, retailers need to carry good quality products in a
range that consumers want at a price that is competitive and shoppers are
willing to pay. Adding on the online aspect, their customers need to get it a
time that is convenient for them (not only the ordering, but also the delivery)

Yik Hun Lee

Marketing Director Foods SEA
Dairy Farm International

40
One route that retailers can consider in order to ramp up their online presence is outsourcing the final delivery-to-home stage to a better-equipped
transportation/logistics company. An example of this was seen at the beginning of 2021 when Watsons and Grab announced a regional health and beauty partnership.

Source: https://www.theedgesingapore.com/news/joint-ventures-and-alliances/watsons-and-grab-announce-regional-health-and-beauty-partnership, 19th January 2021

41
04
Implications for e-tailers
and manufacturers

The evolution of eCommerce

Implications and Food for Thought

Retailers Manufacturers

How do we continuously reach more shoppers and build How do we continuously reach more shoppers, convincing
stickiness given there are no eCommerce solution that fits online shoppers who would otherwise not buy you offline to
all? buy?

Do high traffic categories create stronger stickiness to How is incrementality achieved and cannibalization
online and convert solus shoppers? minimized? What is the right occasion to tap and portfolio
that is best placed to bring in incremental sales?
How do we reach the rural consumers (especially in
Southeast Asia) who are the future source of business for What are the barriers and triggers to buying online vs
online, and address the barriers of delivery and payment? offline and how does this differ by category? What are the
key touchpoints along the path to purchase that bring the
highest returns?

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Future of eCommerce

In an increasingly connected and accelerated digital economy, the time gap

between becoming a disrupter and being disrupted has shortened. But
opportunities are born out of crisis, we believe companies that can innovate
through the crisis are able to thrive and become stronger.
What it means is that, going forward, it becomes even more imperative to focus
on understanding our customers and their needs, and embracing a culture of
disruption to innovate to stay relevant and add value to our customers.

Magnus Ekbom
Chief Strategy Officer
Lazada Group

44
Watch this space for Winning
Omnichannel Asia Module 3 focussing
on Brick and Mortar retailers.