Walpole Partner Insight

Capitalising on the Direct To Consumer opportunity in Asia’s fast-growing economies By ESW

The 2021 Future of British Luxury Summit, held in September at The Londoner, provided a robust toolkit of information, insight and inspiration to help brands to navigate any challenges and take advantage of the opportunities ahead. Today we share the latest research from ESW, one of the Summit's partners, which takes a look at how businesses can capitalise on opportunities in the growing Asian markets..
27th Sep 2021
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Walpole Partner Insight Capitalising on the Direct To Consumer opportunity in Asia’s fast-growing economies By ESW

The events of past 21 months have shown British luxury brands need to mitigate risks, diversify and balance their distribution to thrive.  Speaking at Walpole’s recent Future of British Luxury Summit, Scott Lindsay, Head of Marketing, EMEA at ESW (pictured above), laid bare the impact the removal of tax-free shopping in the UK is set to have on the purchasing decisions of international luxury shopping tourists after the end of covid-related travel restrictions.

To continue the conversation, ESW's Chief Commercial Officer Martim Oliveira shares the company's latest research: Capitalising on the Direct To Consumer opportunity in Asia’s fast-growing economies.

ESW’s ‘Global Voices: Pre-Peak Pulse 2021 survey of almost 15,000 consumers across fourteen countries revealed over four in ten (46%) luxury shoppers indicated they will make fewer visits to the UK and spend less money with UK luxury brands as a consequence of the duty-free perk being scrapped.

However, demand for the quality, craftsmanship and prestige of British luxury products is still  in demand from a growing digitally native middle class, living outside the traditional luxury markets, who are both brand and status hungry.  Vietnam, Indonesia and Thailand are growing faster than China as inward investment brings wealth and a burgeoning middle class of valuable consumers. In this article, he outlines how British companies can take best advantage of demand for international brands.

China has always been a primary focus for media and analysts writing about business opportunities for western brands in Asia because of the region’s sheer size and unique characteristics, but this can obscure the huge, and in many cases untapped, opportunities that lie elsewhere.

Southeast Asia comprises 11 countries, although ecommerce in the region is dominated by six – Thailand, Vietnam, Malaysia, Singapore, Indonesia and the Philippines. Accounting for 8.58% of the global population and with a GDP of approximately US$3.1 trillion, the region is showing strong demand and significant potential for cross-border ecommerce, clearly evidenced by trading volumes through our own checkout, with 45% growth in the first six months of 2021 across these six countries.

Much of the region is characterised by large and growing populations, a burgeoning middle class, rapid urbanisation and modern spending habits such as mobile commerce, which has grown much faster in Asia generally than anywhere else in the world.  For example, Thailand’s smart phone penetration is 79% and is expected to reach 83% by 2025. Of its nearly 70 million population, 36.6 million are online shoppers, spending an average of US$243.17 each. Ecommerce shoppers are expected to increase to 43 million, spending US$283.33 by 2025; over half of this is mobile commerce.

But what are the complexities of trading through the DTC channel in these fast-growing markets and how can you take advantage of the opportunities quickly and sustainably? New data from Singapore, part of research undertaken by ESW, highlights the opportunities for brands that have local knowledge, and can tailor their online experiences to meet the diversity of local consumer preferences and expectations, and the ebb and flow of demand across different categories.

The categories ranked by highest % purchased internationally vs. locally in Singapore are clothing (36%), skincare (28%) health and beauty (27%) with strong growth in other categories including footwear and sporting goods. Looking at top categories purchased cross-border by men vs. women, women dominate in clothing (42/29%) but men have the edge in luxury goods (19/17%) and sporting goods (25/19%).

Looking at age and gender, 34% of respondents had made up to 5 international purchases in the past year, with a further 28% making 6-10. 18% made more than 20 international purchases. Interestingly, it was older shoppers that had made more cross-border purchases - 68% of 55-64-year-old shoppers made up to 10 purchases, vs 62% nationally. Women were marginally more likely than men to make cross-border purchases – 64% vs 61%. 46% spent up to $200 on cross-border purchases, 16% spent between $501 and $1,000 and 7% spent over $1,500 in total. This type of demand and appetite for international brands makes Singapore hugely attractive as a market, and brands that can deliver a direct to consumer, domestic-equivalent shopping experience will outperform those that don’t.

Local currency (33%) and transparent tariffs were top considerations that would make shoppers more likely to buy (36% each). A payments company that they recognised also improved the likelihood of conversions, 34%. Local language and clear returns policy also ranked highly (31% each). Being able to return an item in-market was key for 30%.

The need to localise extends to payments. Debit and credit cards were the most popular payment method for cross-border purchases in Singapore – 84% each. PayPal was second with 49%. 20% used digital wallets / payments while 9% used Buy Now Pay Later credit options to pay for international purchases (evidence of the growing penetration of this type of payment option). This contrasts with Thailand where paying with cash is still the predominant way to pay for online purchases (60%) with card payments next at 26%.

In terms of actually delivering the goods, there are huge variances in logistics in each country. For instance, with 17,508 islands, of which 6000 are inhabited, Indonesia presents a unique challenge for ecommerce brands to quickly and successfully deliver packages. While 56% of the population resides in urban areas, there is often duplication of street names which reinforces the need to work with local, in-market delivery experts.

It is clearly essential that brands work with a partner that understands the unique requirements and nuances of each country in terms of demographics, consumer preferences, culture, tax and regulatory regimes and logistics. The road to Asia is littered with examples of brands that tried to go it alone, which often forced them to withdraw entirely or give over excessive margin to marketplaces or local players. However, with the right partner, it is both possible and profitable to deliver a domestic-equivalent service to the shoppers of the region through a DTC cross-border model that adapts to the nuances of each country.

Martim Avillez Oliveira is Chief Commercial Officer, EMEA & APAC with ESW, the world’s largest provider of cross-border DTC ecommerce solutions.

Oliveira is a former Executive Vice President at global supply chain and logistics specialist, Li & Fung, has 15 years of industry experience in retail and global sourcing, having worked with the world’s leading fashion brands and retailers, including Inditex, Marks & Spencer, J.Crew and Galeria Karstadt Kaufhof, managing end-to-end supply chains.

During his time at Li & Fung, Oliveira, who lived in Hong Kong for 10 years, held full P&L responsibility for business units to excess of $800 million cost of goods and achieved a strong track record of generating year-on-year growth and revenue. He also coordinated the group business development activities in Europe and the US.

In addition to his role at ESW, Oliveira is also non-executive and an advisor to Tiger Chark, a New York based strategic Advisory firm, and a member of the board of the Portuguese - Hong Kong Chamber of Commerce and Industry.

esw.com

 

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