By Will Greene
As online marketplaces and e-commerce services grow in sophistication, small retailers worldwide gain access to new business opportunities that boost local economies and give more choice to consumers everywhere. Even in Southeast Asia, where e-commerce markets remain underdeveloped, local brands see opportunity to achieve national, regional or even global scale. A few recent initiatives in the region highlight the possibilities.
As Southeast Asia’s e-commerce industry continues on a growth spurt that started last year, retailers throughout the region see the Internet as an increasingly viable sales channel. As in many developing markets, however, aspiring e-commerce entrepreneurs face challenges that limit their options. Low banking penetration poses barriers to online payments. Poor infrastructure can make delivery a nightmare. And many consumers, lacking exposure to technology, remain perplexed by the concept of transacting online.
Despite these challenges, savvy entrepreneurs find their way. Many small retailers, for instance, use consumer-to-consumer (C2C) marketplaces or social networks to hawk their wares. Since prospective customers often don’t have credit cards to pay for products, these retailers routinely accept bank transfers or arrange for in-person payments. The process is manual, inefficient and prone to fraud, but people make do with what they have.
As Southeast Asia’s digital infrastructure matures, more sophisticated solutions will ultimately replace those commonly in use today. Small vendors operating in C2C marketplaces and social networks will increasingly accept online payments. Those seeking greater distribution will join online retail marketplaces that aggregate products from multiple brands. Some will even manage to build their own virtual storefronts from scratch or by using site-building services.
Since many small retailers in Southeast Asia lack the skills to build and manage their own sites, online retail marketplaces often provide the best option for getting into e-commerce. Some retailers will join the massive marketplaces offered by Lazada and Zalora, Southeast Asia’s two largest B2C e-commerce companies. Others will join a growing list of boutique platforms that focus on small market niches.
Ava.ph, a curated e-commerce platform that focuses primarily on the Filipino market, provides an example of the kind of boutique online retail outlets that are cropping up across the region from Thailand to Indonesia. Designed as an invitation-only shopping community for upmarket Filipino women, it offers a wide variety of products by local brands that aren’t available anywhere else.
Oliver Segovia, CEO of Ava, believes that platforms like his are increasingly important for local brands in Southeast Asia. With the rapid growth of fast-fashion retail, which uses industrial manufacturing and advanced logistics to achieve quick turnover of products at low prices, local brands face greater competition from global chains like Uniqlo and Zara than ever before. Segovia believes that local Filipino retailers are particularly imperiled as fast-fashion giants shift production to countries like Vietnam and Indonesia that can offer lower costs.
According to Segovia, local brands can compete with the big chains by telling stories that connect with consumers. One recently launched line of products, which uses an obscure fabric called inabel, exemplifies the power of storytelling as a branding exercise. A heritage fabric made by a small community of skilled artisans in Northern Philippines, inabel is a fading tradition, with less than ten master weavers left today. Through a Kickstarter campaign that ended on May 4, Segovia successfully raised funds to preserve this ancient craft for future generations.
Ava is one of many e-commerce platforms in Southeast Asia that enable local brands to achieve greater reach in today’s connected age. For consumers, these platforms ensure that the long tail of products remains rich and varied at a time when malls throughout the world look increasingly similar.
Will Greene is Director of Research for BDG Asia, an advisory firm that helps businesses evaluate and operate in the dynamic markets of Southeast Asia. He is currently based in Saigon.
