Thailand is currently seeing a boom in online shopping. One major driver of this growth has been the Covid pandemic which has increasingly made it necessary to shop for goods and services from home. This has caused sharp increases in purchases of things such as groceries, fashion, beauty and electronics.
Another reason for this continued growth is the increasing convenience of buying online, including an increased trust in the main platforms for online shopping: the online market places. Online shops such as Lazada and Shopee have increasingly won over Thai consumers with their wide selection of goods and the convenience of shopping with them.
This has led an ever-increasing number of brands to use and rely on these platforms to reach consumers and generate sales. But how does that affect their marketing mix and which considerations should be made when using marketplaces as part of the digital marketing mix?
The Good
Let’s start by thanking the marketplaces. They have played a pivotal part in encouraging first time online shoppers to give the experience a go. Lazada and Shopee have served as key proponents of the online shopping experience and really helped turn the perception of online shopping around.
Through their focus on operations, they made it easy for customers whose past perceptions of shopping online may have been skewed towards negative impressions related to matters such as whether products they bought were genuine, whether the product would arrive or not and what would happen if there was something wrong with their order.
The marketplaces have given consumers a wealth of choice and transparency. At the same time, they allowed customers to pay for goods with methods they are already familiar with and allowed them to track the status of their deliveries via in-house and 3PL distribution networks.
For sellers, they offer almost instant access to a very large audience of shoppers. This empowered not only large brands but also struggling retailers to have an online presence with limited or no experience of setting up shop online. This gives them access to potentially thousands of willing customers and immediate sales without the marketing cost and resource otherwise needed. As such, the marketplaces have turned into a natural part of the online sales strategy in Thailand.
It is a channel you cannot ignore or at least which you ignore at your own peril.
The Bad
Not everything is rosy though.
From a customer perspective, even though the purchase touchpoints are via the marketplace, any order issues are passed on directly to the stores who have varying degrees of customer service experience. This can make it a bit hit or miss whether you receive any satisfactory resolution to an issue.
However, it is the when looking towards the seller side of things that the more glaring issues appear.
First, there is leakage. When customers browse a stores’ products, they are exposed to a large amount of leakage, meaning that the marketplaces are pushing similar products from competitors on the same page. Anyone who has visited one of these sites will be well aware of features such as ‘recommended products’ or ‘people also looked at’ listings, which may distract customers and even take them away from that sellers’ sale.
Being on a marketplace with potentially hundreds of other stores selling similar products may also dilute your listings. Not only that, if other sellers are perceived to have a much lower price, that could be an issue. There have been reports of sellers on these platforms selling fake or counterfeit products which are cheaper and because of this, the genuine retailer loses sales.
It is also not exactly free. The marketplaces charge at the very least a percentage fee on every sale that happens. Add that to the logistics cost they charge for holding and sending the product and it can all eat away at the margins. And that is not even taking into account the extra budget needed to pay for better placements to increase visibility.
Some may think that all that is needed is to get the products listed and then sit back and watch the orders come rolling in. Nope, it doesn’t work like that. As with everything, success requires effort. It can easily turn into a full-time job to just support the general operation of maintaining a presence on one or more marketplaces. But it gets worse.
The Ugly
There is another issue that weighs even heavier. From a store perspective, the most critical issue for driving all sales through marketplaces is the fact that they never own the customer, the experience or the transaction. All data gathered belongs to the market place, and any remarketing, customer engagement or the like has to go through them.
You also have no control over the purchase experience. It is entirely marketplace controlled. There is the opportunity to interact with the customer via chat, for example, but that is only possible via their ecosystem. Furthermore, if there are issues with a particular order then it can easily turn into a blame game between the marketplace and the store.
The algorithms can also be a problem. They decide what visitors see and when. One day, a brand may be appearing at the top of the search listings for a product and then the next may completely disappear off the page due to a change in the algorithm or listing structure. There is nothing the store can do and such drastic changes could potentially put stores out of business.
Linked to this is the data mining that marketplaces spend a lot of resources on. Many of these projects are pretty innocent in that they are there to learn customer behaviour on the site and help recommend products that are related to a customer’s interests. However, there are some that are analysing what products are selling and are most popular. This may not seem like a big deal but what was happening on Amazon in the US, for example, was that once they knew what was selling, they would source and manufacture the products themselves. They outprice and outplace other sellers to gain competitive advantages. In other cases, sellers were increasingly pressed on their margins as their dependence on the market place made them vulnerable.
One wonders if the same will happen in this region, especially to brands wholly dependent on marketplaces.
The over-reliance on using marketplaces eventually means that the store turns into a supplier rather than a brand. The marketplace controls the experience, the transaction and the relationship. Moreover, with increasing brand dominance they start to become destination sites for consumers. Without stores collectively competing for market share to their direct channels through their own marketing, they may struggle to get any piece of the online sales pie, or at least struggle to be the ones actually earning from it.
Where to next?
From a customer perspective, marketplaces provide a hub or an all-in-one convenience superstore to find everything one needs. Stick with reputable stores, read customer reviews and things should be fine.
From a store perspective, there are many reasons, as above, why using marketplaces as the only channel to drive sales is not the right strategy. If they do not already have, they should be thinking about developing their direct-to-customer (DTC) channel as well. Otherwise, their dependence on marketplaces will only grow, leaving them vulnerable.
As an example of diversification, marketplaces charge a percentage commission fee for each product sold. Stores that are familiar with this business model can use it to their advantage. There are channels such as affiliate marketing that allow for the same payment model but at the same time allow the transaction to happen on their own platform. In this example, the store sets the commission rate. In other words, they get to set the margin they are willing to give away in commissions for those sales.
Stores should look to grow the DTC part of their business through such marketing channels, complemented by social and potentially search activities. The store is in control, not the other way around. They own the experience, the transaction, the data and ultimately the customer. This can then be complemented by other channels like marketplaces as needed.
As ecommerce continues to boom in Asia it is essential that brands are in control of their own channels. Own the customer, not the other way round.
About the author: Anthony Quinn is managing partner of Lodestar Marketing which specialises in helping companies launch cost-effective affiliate programs to help drive sales for their direct to customer channel. He can be reached at https://lodestar-marketing.com
Anthony Quinn of Lodestar Marketing.