WITH the booming social commerce market in Southeast Asia (SEA), live shopping and conversational commerce are the most effective ways for Filipinos to spend online, according to Singapore-based market intelligence firm Cube Asia.
Based on results of its newly released inaugural report titled “Social Commerce in Southeast Asia 2022,” social experiences are expected to directly influence $42 billion, or 25 percent, of online trade sales in the region by the end of last year.
The ensuing Covid-19 pandemic, which limits people’s mobility, has made them spend more time on social platforms. This, eventually, has opened longer-term opportunities in e-commerce.
Rather than just depending solely on advertising for high-quality traffic, virtual trade channels have also relied on social media—thanks to their strong followings—which are expected to capture a greater share of the economic value.
Marketplaces are trying to introduce social features to make their own platforms more engaging. Such trend makes different brands wonder how big, viable, profitable and effective social commerce is to their growth.
To address these questions, Cube Asia, in partnership with Sprinklr, conducted this research initiative by systematically dissecting the four different social elements in online trade that make up the social commerce market.
Social commerce on the rise
THE study projected that e-commerce on social platforms will wrap up 2022 well, bringing $34-billion sales to the region.
This largest contributor to social commerce refers to any form of sales activity that occurs directly on social channels. It is influenced heavily by social aspects of human relationships, such as real-time communication, authenticity, trust and community.
While Facebook and Instagram played earlier than TikTok on social platform commerce, they are now falling behind the Chinese short mobile video platform—a rising star in this space—that offers a number of distinctive features and solutions.
Digital conversation breeds mobile, physical sales. Cube Asia’s report, on the other hand, shows that conversational commerce directly contributes $12 billion in SEA, where customers choose a product and pay using the messaging app.
This form of social commerce is ubiquitous as it covers the whole e-commerce journey and improves customer experiences. Also, it gives buyers a new way of seeking service and clarity while buying online, thus encouraging more consumer-led transactions.
What’s more, conversational commerce indirectly transacts a much bigger volume of $50 billion via web chat and $200 billion for online-to-offline transactions. This is best exemplified by customers having initial conversations with store staff over messaging platforms like WhatsApp and, eventually, complete their purchases in the physical or brick-and-mortar outlet.
This form of social commerce is among the most promising and vibrant trends in SEA’s online trade. Expanding out of sheer organic demand from consumers, it gained impressive penetration and usage rates despite limited platform and vendor tools.
“The pandemic changed consumer behavior forever, accelerating the rapid adoption of digital products and services and boosting the importance of e-commerce across Southeast Asia,” said Florian Zenner, senior vice president for Asia Pacific and Japan at Sprinklr.
“As Cube Asia’s research demonstrates, conversational commerce is set to play a growing role among the region’s retailers. The most successful businesses will seize the opportunity to harness technology such as AI chatbots or voice assistance to deliver customers experiences that are convenient and personalized,” he added.
Actual selling streamed online
RESTRICTIONS on the movement of Southeast Asians, especially during the lockdown periods, did not stop them from seeing what they are about to buy, though virtually with actual selling activities streaming on the web, including real-time visual engagement and product demonstrations. Hence, it’s not surprising for live shopping sales in the region to increase more than tenfold to $13 billion in 2022, per the research.
Nearly half or 44 percent of netizens in the region have participated in live shopping in the last 12 months, with the most active audiences in Vietnam and Thailand where 60 percent of respondents have made a purchase. Singapore lags behind in comparison with only about 35 percent of users shopping from live streams this year.
Live shopping in the Philippines is seen as encouraging in this market since Filipinos are big consumers of entertaining online content, with 75 percent of Internet users having watched live streams in 2022, according to Simon Torring, head of growth and client service at Cube Asia.
“By introducing e-commerce into this environment, live shopping catches customers in the right mindset, at a time when they are having fun and are more emotionally available for brands to connect with them,” he told the BusinessMirror in an email interview.
Pinoys love live shopping, conversational commerce
BEYOND entertainment, trust and immediacy make live shopping and conversational commerce the most effective ways for Filipino Internet users to shop online, per the top executive.
For him, trust is a key concern in the Philippines. In fact, he cited that 30 percent of consumers polled earlier this year by another agency, TransUnion, said they had been targeted by third-party scams.
“With live shopping, buyers can see a real person using the products live before deciding to make the purchase. This helps even more if the live streamer is a well-known or trusted personality,” Torring said.
Meanwhile, immediacy, he explained, is about making sure that customers get fast responses to their questions, thus reducing the chances that they will drop out of the purchase funnel.
“A closer integration of messaging and e-commerce through conversational commerce makes available a channel for buyers to easily ask their questions and get immediate replies,” he said.
“All of these elements help to strengthen consumer comfort in online shopping, compared to more passive e-commerce channels such as marketplaces or e-retail, where often there is no human face on the other side of the transaction,” he added.
It takes a village to buy online
AT present, community group buy accounts for only 2 percent to 3 percent of the e-commerce sales in SEA, according to the study.
While it’s the smallest contributor to online trade, many new retail start-ups in the region have tried to use community or group dynamics as they take a cue from Pinduoduo in China and Meesho in India. Apart from Indonesia, this model has found footing in Singapore, wherein messaging apps like WhatsApp are helpful for small neighborhood communities to aggregate demand to get better prices.
Community group buy models are divided into two types, both influenced by the dynamics of small communities or groups. First is a Price-Led model, where people come together organically to unlock a special deal. Second is an Agent-Led model, with a reseller who provides services or value adds to the group’s members.
In order for brands to drive further community group buy among Filipino consumers, Torring suggested that building an effective network of resellers is very important. He explained: “These resellers are the most critical link between the brands and communities of end consumers who are using their products. Brands should focus on recruiting, training and incentivizing their resellers to build a strong brand image and loyalty within their communities.”
Likewise, he advised brands here and elsewhere in SEA to “also plan the logistics for this model in detail. Penetration of traditional e-commerce models lags in Tier 2/3 cities in the region partly due to the lack of logistics infrastructure for last-mile deliveries. The community model allows brands to use their resellers in a hub-and-spoke manner, allowing for the ‘outsourcing’ of last-mile deliveries to the resellers, which can be very cost effective.”
Future of PHL e-commerce
OVER the last five years, e-commerce in the Philippines has grown at 60 percent per annum. With the changing approach of key players, however, it’s projected to slow down further by 2027.
“There is still plenty of upside, as e-commerce penetration lags regional peers, but future growth will likely be slower (15 percent to 20 percent per annum in the next five years), given the big mindset shift towards profitability among major online channels this year,” Torring said.
Under the broad umbrella of e-commerce, though, social commerce is expected to grow faster, the head of growth and client service at Cube Asia pointed out. He noted, for instance, that TikTok saw a remarkable growth last year.
“According to our surveys that covered over 15,000 respondents, Filipinos are now ranked third in the region after Vietnam and Indonesia in making purchases on TikTok Shops. Eighty-six percent of Filipino consumers who made purchases through live shopping this year also said they will continue to buy the same or more through this format over the next 12 months. These are very encouraging signs for social commerce,” he stressed.
Cube Asia’s report compiled estimates from multiple sources, including online surveys with such number of respondents across Singapore, Indonesia, Malaysia, the Philippines, Thailand and Vietnam. Additional sources also include web crawling to collect thousands of data points across public sources, primary research of company literature and financial reports, as well as interviews with industry experts and stakeholders.
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