eCommerce brands today operate in a highly competitive landscape in Southeast Asia.
Firstly, the diverse range of cultures, languages, and customs in the region can make it challenging for eCommerce brands to create a unified marketing strategy that resonates with all consumers. Additionally, brands may face delays and added costs due to poor infrastructure and complex customs regulations. Payment processing can also pose a challenge since many consumers in Southeast Asia prefer cash or alternative payment methods over traditional credit cards.
Furthermore, fierce competition exists in the region, with many local and international players vying for market share.
In order to succeed in this competitive landscape, brands must be agile and make strategic decisions to reach as many potential customers as possible.
In our experience working with clients in the region, we have seen brands that successfully expand their marketplace presence achieve 3X or more growth in the first quarter of operations, and a 200% increase in revenue year on year.
However, the process of actual expansion can be fraught with difficulties that working with the right partner can help solve.
When is a good time to consider marketplace expansion?
Firstly, it's important to assess the competitive pressures, such as whether competitors are entering your target markets or categories. If there is a significant first-mover advantage that you already possess through existing online sales channels, it may be necessary to expand quickly to avoid being left behind.
Secondly, revenue is a crucial factor to consider when planning for marketplace expansion, as brands must balance their existing cash flow with their growth goals.
Thirdly, the impact on existing supply and demand should be evaluated, considering how the expansion will affect suppliers and consumers, and whether it provides new opportunities for growth. In general, growth on multiple marketplaces is ideal for brands that have achieved reasonable success on a few sales channels, and now want to increase their revenues even further.
How to design a successful marketplace expansion strategy in Southeast Asia
1. Consider the type of expansion that makes sense for you
Are you looking to tap into a new consumer base in a different geography? Have you hit saturation with a certain audience category, and now want to market to a different user group?
There are several ways of growing your eCommerce presence on marketplaces, and not all of them are relevant for your brand at all times. When expanding geographically, considerations such as supply chain operations take higher precedence. When expanding to a new customer group, however, you will need to optimize your offering to what that audience likes to see.
Some brands consider geographical expansion only after they have saturated their marketplace presence in an existing geography, or in some cases where a merger or an acquisition of another brand opens up a new market for operations.
The decision to expand, in any case, should always be driven by numbers and data- expansion demands time and money, and having a plan for what success means would help you protect your business interests.
2. Customize your approach in each marketplace (SEA)
Here’s the thing about marketplaces- the larger and more popular they get, the more thoughtful brands need to be about how to launch on them. Lazada, for example, is known as the Amazon of Southeast Asia for a reason- while it offers an extraordinary amount of visibility and the ability to service more than one geography at a time, launching here can also throw up fulfillment issues if the brand is not yet familiar with local laws and regulations in these countries.
For brands entering a new market, it is often best to start with one country and use the insights gained to expand into other markets in the region. Even though you may have cracked the code in one country, cultural differences and preferences can mean that the same strategy cannot be copy-pasted across regions.
Another aspect where marketplaces differ is in how they approach product discovery. Some marketplaces are category-led, such as Tokopedia, which offers flash sales across categories and makes product discovery easier.
Shopee on the other hand is geography-led and showcases its USP of being omnipresent more prominently, making this the ideal channel if you expect to launch in multiple markets in a short period of time.
3. Consider commission calculations for every marketplace
If not considered beforehand, commissions on sales made on marketplaces can quickly add up and eat into revenue margins- especially sensitive a topic when brands have to spend a significant amount of money on ads just to stand out.
The Shopee marketplace for example is meant for small and independent retailers. If fewer than a hundred orders are fulfilled, there is no commission charged on the sale. Shopee Mall, on the other hand, is meant for brand principals or authorised distributors hoping to build a distinct presence, and the commission here can start at 2% and go up to 9% depending on category or country
Tokopedia, on the other hand, does not charge a commission on sales but charges a 2-15% security deposit for new sellers- quite a steep charge, especially for high-value goods.
Lazada's platform consists of three distinct parts. The first is a marketplace that caters to local sellers and does not impose any commission fees. The second is LazMall, which is intended for brand owners and distributors and charges a commission of 5%. The third one is meant for global sales and commissions vary based on the geography being served. This makes sense if one considers the extensive investments Lazada made into warehousing and distribution capabilities.
What’s the takeaway here? It helps to know what we’re getting into, so we can plan our marketplace expansion based on how many SKUs are on offer, what is the most important business priority, and so on.
4. Invest in a great multichannel listing solution
Once steady growth kicks in, the last thing brands want to do is go back and optimize across various operational aspects when they can instead focus exclusively on sustainable growth. Marketplace expansion solutions such as the Graas Marketplace Store Management solution are designed to smooth out the logistics with minimal intervention. With such a solution, brands can
Manage their listings and campaigns in real-time across as many marketplaces as needed
Synchronize their inventory so they never risk running out of stock, or selling items that are out of stock
Manage order fulfillment from a single dashboard, and allow local teams to think about their entire eCommerce operation as a single unit
Manage their warehouse operations more efficiently
Additionally, teams of eCommerce experts with experience in launching and running marketplace operations are available to manage expansion with the big-picture perspective it deserves.
For brands ready to go big but unsure of where to truly begin, the Graas Marketplace Store Management solution is just the right fit.