E-Commerce in Southeast Asia: Developments and Implications for Consumer Brands

Despite a high mobile phone penetration and a total population of 650 million people of which more than half are below 30 years of age and 400 million belong to a growing middle class, e-commerce sales in South-East Asia are reported to be only 3.2% of the total retail sales. This can largely be attributed to challenges in market fragmentation, logistics, connectivity, and national financial systems.

The SEA market is fragmented due to different maturities and consumer preferences, requiring a market-by-market play which takes up local resources. Large parts of SEA are still scarcely accessible, presenting a unique last-mile challenge.

For example, Indonesia has around 6,000 inhabited islands, and 45% of its population live in rural areas. Internet penetration in Cambodia is 48.6% compared to 84.5% in Singapore. Cash-on-delivery is the dominant payment method as millions are still unbanked or underbanked. High import taxes further impede cross-border e-commerce.


Nevertheless, these numbers should be taken with a grain of salt as the customer-to-customer (C2C) e-commerce market is unregulated and mainly takes place on social media platforms, such as Facebook and Instagram, which could take up half of all e-commerce Gross Market Value (GMV).

Although e-commerce in SEA might take longer to kick off, it has the potential to become bigger than predicted as several factors are often underrated:

  • Prohibitive import taxes will force countries to develop a strong local e-commerce presence similar to what China did a decade ago
  • The lack of offline retail in regions outside of the major SEA cities will also drive the development of e-commerce
  • The nascent digital advertising environment in SEA will leave companies with no choice other than to look at e-commerce
  • “Mobile-first” high smartphone adoption will further drive the habit of online shopping

Fierce race amongst e-commerce platforms

The factors above will lead to e-commerce platforms competing to become the biggest player in SEA since it is hard to survive as a small competitor in e-commerce alone. A couple of big players like Shopee and Lazada remain, fighting a fierce battle not only against each other but also against C2C and social media platforms. At the same time, Amazon is now entering SEA (starting with Singapore), which intensifies competition but also provides mature Western consumer brands with a familiar platform to offer their products.

   Premium brands should keep their focus on offline marketing, influencer marketing and content marketing to create a long-term brand reputation, rather than competing with low-priced products on e-commerce platforms.


In the race for the biggest slice of the pie, e-commerce platforms are burning cash to lure customers with heavy price cuts at the expense of profitability. Parent companies accept this strategy if there is profit from surrounding services in the future, e.g. banking, insurance, customer data or ads.

E-commerce platforms are also investing heavily in marketing. Examples include the K-Pop Love Shop and Shopee ads featuring soccer superstar Cristiano Ronaldo and luxury car manufacturer BMW launching its new 1 Series on Lazada; an attempt by Lazada to have more premium brands on its platform. This is a sign that premium brands are starting to realize the marketing value of e-commerce platforms in SEA, even if it is only to create awareness.

Unlike China, SEA has a catch: its diversity covers a multitude of countries, languages, cultures and behavior. This gives strong local incumbents like Tiki (Vietnam) and Bukalapak (Indonesia) an advantage over big players as they resonate better with the locals. The big e-commerce players are aware of this and approach it from two different angles: Lazada localizes some of its store features (e.g. more social in Thailand), and Shopee uses cross-cultural angles (e.g. K-pop and Cristiano Ronaldo).

Challenges faced by brands on e-commerce platforms

To consumer brands, it is important to be aware of the challenges related to e-commerce platforms and enable themselves to reap the benefits. Fierce competition, low prices, low margins and loss of brand control are the most common concerns.

E-commerce platforms are crowded “infinite shelves” built for conversion, not for brand loyalty

Like brick and mortar stores, visibility is highly important in an online store. Visibility is based on relevancy (i.e. search words), product rankings (most popular) and what the platforms want to promote. However, it gives brands a disadvantage, forcing them to sometimes pay additional fees or impose heavy price cuts to improve their visibility.
First, the most popular products are based on the biggest sellers, best reviews and most affordable prices, and less on brand loyalty.

    In the race for the biggest slice of the pie, e-commerce platforms are burning cash to lure customers with heavy price cuts at the expense of profitability.

Second, the crowded market places spoil shoppers for choice, making the fight for share of eyeballs much fiercer than in a traditional department store.

Third, market places have little incentive to push your brand over others as the best-selling brands are in the limelight. Therefore, brands may lose control of their own promotional calendars if they want to be featured on the front pages.

Tackling brand dilution as a result of exposure to low pricing

Aggressive discounts are frequently used by e-commerce platforms (e.g. sometimes up to 90% with Lazada’s “Slash It”) to lure customers, as this is the most effective method to grow the online customer base. However, for premium brands, this can undermine their carefully curated brand equity.

Therefore, premium brands should keep their focus on offline marketing, influencer marketing and content marketing (e.g. social media, blogs, and videos) to create a long-term brand reputation, rather than competing with low-priced products on e-commerce platforms. However, low to mid-tier brands aiming for sales growth should also focus on search optimization, ad optimization and discounts for short-term wins.

Losing control of customer ownership and online customer experience

Brands will inevitably have less bargaining power than market places as they become suppliers and lose direct customer ownership. Without customer interaction and traffic to their own websites, brands will quickly lose influence, data and customer insights.

As our world becomes increasingly digitally dependent, an online presence is mandatory for all consumer brands. However, the format of e-commerce should be carefully considered.

To rectify this problem, e-commerce platforms are selling customer data to brands. One example is Uni Marketing which aggregates data from the entire Alibaba ecosystem. However, this creates an even greater dependency on e-commerce platforms. Brands also risk having a disjointed and siloed brand experience (one that is online, and one that is offline) because they cannot control the online experience. They, therefore, risk missing the trend of experience-driven retail or omnichannel retail which advocates a more integrated brand experience.

Why most brands should still be present on e-commerce platforms

Despite the fact that e-commerce platforms pose challenges to brands and still need more sophistication in SEA with shifting consumer preferences, most brands still benefit from being on online market places.

Requires fewer investments

Market places are an attractive way to enter e-commerce for consumer brands. This is due to the fact that it is time-consuming and resource-intensive to have a market-by-market play with an ‘owned and operated’ (o&o) e-commerce shop in order to overcome the infrastructural challenges and to educate the less sophisticated consumers in SEA. E-commerce platforms make it easier and less risky for brands to enter new markets as it requires less investment and produces faster results, which is especially helpful considering the fragmented SEA market. Since customer sophistication in most SEA countries is still nascent, it can also serve as a tool for brands to test the market for new product lines before a full launch.

Be where the customers are

For maximum exposure, brands should be present where the traffic is, just as they already are in shopping malls. According to iPrice, Shopee and Lazada have 184.4 million and 179.7 million (and growing) visits respectively in SEA per month. Visitors are also spending longer time on these platforms due to new innovations. One example is Lazada’s new ‘shoppertainment’ model (inspired by Chinese e-commerce players), which is an integration of shopping and entertainment with incorporated live-stream and games to increase the time customers spend on its platform.

Being on popular e-commerce platforms gives brands exposure to their massive customer bases, creates brand awareness and promotes sales, thereby generating new revenue streams. In many cases, it is no longer a choice but rather a must to be present on these platforms in order to retain current customers, simply because customers visit these platforms instead of individual brand websites.

However, being present on e-commerce platforms is not enough. Smart companies use the platforms as a way of introducing their brand to new customers, carefully considering which products to put there, at what price and how to collaborate to create meaningful campaigns. They also actively manage content on their official stores on Lazmall or Shopeemall, while also monitoring feedback and engaging in direct customer interaction through the chat function.

Most brands must play a dual strategy of ‘owned & operated’ and third-party e-commerce platforms

As our world becomes increasingly digitally dependent, an online presence is mandatory for all consumer brands. However, the format of e-commerce should be carefully considered. Having ‘owned & operated’ e-commerce platforms will help tackle many of the challenges mentioned above, but it also comes with lower exposure and at a much higher investment cost. Only a few large brands can afford to market themselves solely through their webshop. One example is IKEA that is big enough to function as an ecosystem in which customers can find just about anything for their homes.

Most brands, however, must hedge their bets and make themselves available on big e-commerce platforms as well as their own webshop. In order to be successful and avoid pitfalls, they need to develop a clear strategy that takes into account the opportunities and challenges of both types of e-commerce.

The strategy should be guided by the company’s overall business objectives and customer value proposition. Key elements of an e-commerce strategy include which role the company wants to play on different channels, which audience it wants to target, how to protect and leverage brand value as well as how to market itself towards its audience.


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