Six strategies for digital growth in Southeast Asia
The digital economy is booming in Southeast Asia. With 350 million digital consumers, the region is set to leapfrog China, outpacing the latter with a growth rate that is 1.6 times higher and becoming the fastest-growing digital economy in Asia-Pacific.
According to research conducted by Bain & Company and Meta, the parent of Facebook, 78% of consumers in Asean are now digital consumers, defined as anyone who has performed a commercial transaction online.
At the same time, brands are also facing obstacles as a result of commodity price increases, raw material shortages and shipping capacity choke points that are beginning to negatively affect their top line and margins. This is reflected in a oll conducted by Bain of Asia-Pacific consumer product leaders when they were asked to identify their top three issues for 2022: supply chain, inflation and the post-Covid consumer roadmap.
While they solve problems for the here and now, savvy brands are also building strategies around post-pandemic readiness. To reach these 350 million consumers in Asean, we see six crucial strategies. These "Six Rs" can help maximise your brand's success.
Rewrite your digital-first agenda: Most consumers are set in their online buying and browsing habits. Digital channels are increasingly playing a role in how consumers hear about products, evaluate products against the competition, and make purchases. Combined, these behaviours translate into brand loyalty for consumers.
Digital is now the foundation for how the internal engine functions: core themes are supply chain, customers, consumer connection, employees and workplace. Savvy brands are setting their digital ambitions for the coming three to five years, including a bold and realistic ambition for the digital domain.
They assess "digital maturity" across different digital domains; review and benchmark ongoing efforts and outcomes; evaluate data, applications, technology architecture upgrades, assess investment requirements -- both domain-specific and transversal; determine organisational gaps that must be filled to achieve digitisation at scale (including changes in culture and capability); and establish objectives and key results.
Rewire your supply chain/business model: Consumer product companies are experiencing inflation and supply chain challenges that are expected to increase or continue. The top two issues are inflation and supply chain resiliency. Smart companies are addressing these issues pragmatically.
Regarding inflation, brands are exploring immediate opportunities to realise more net revenue per unit through a combination of revenue growth management levers, including price-pack architecture, strategic pricing, trade terms, promotion optimisation, channel mix and others. They are also exploring more structural and transformational change through design to value.
Regarding supply chain, brands are solving for the immediate problem of freight and logistics by creating innovative mobility solutions and prioritising "hero" items while establishing greater transparency through "control towers". They are also thinking about breaking the value chain by exploring local contract manufacturing operations and shipping bulk, if that is more feasible compared to container freight.
For the longer term, they are using a "future back" approach to look at supply chain resilience, taking into account geopolitics, consumer intimacy, response time, tax regimes and cost considerations.
Reimagine consumer engagement: E-commerce platforms are increasingly being used for searches, and social channels are increasingly being used as points of sale. While for digital consumers, end sales are still split between offline and online, we see digital channels far outpacing offline channels for brand discovery and consideration.
Given this phenomenon, common pitfalls for brands when it comes to commercial spending include the following:
- lack of visibility on how much is spent, and a "last-year-plus" mindset about allocating commercial spending;
- decisions not driven by return on investment;
- democratically allocating commercial spending across different sub-functions;
- a siloed approach that doesn't understand which touchpoints most influence the consumer's path to purchase and how those touchpoints influence one another.
Brands must independently reevaluate their commercial activities and reorient their marketing and trade spending to mirror this multichannel, multi-platform path to purchase.
They must also create brand loyalty and differentiation with a unique, consistent and engaging experience across their offline presence, social channels, website and app.
Finally, brands must identify differences between offline channels versus e-commerce and determine how they should guide internal processes, such as sales and operational planning, dashboards and key performance indicators, decision rights and organisational structure.
Refresh product offerings: On average, digital consumers shop across 7.9 online websites or platforms -- a 52% increase from 2020. Fifty-one percent of consumers say they switched from their most purchased brands in the past three months. Price wasn't the only reason they switched: Better product quality, better availability and faster delivery times all contributed to switching brands.
Consumers increasingly demand "right for me, right now" products, services and experiences. But this contrasts with how the pandemic drove the need for affordability. Brands need to manage the growing gulf between consumer price inflation and product cost inflation simultaneously.
Brands must manage this contrast while keeping their range simple with easy-to-understand propositions and price points, including carrying out "revenue growth management" initiatives.
Re-envision sustainability: Listen to your customers' desire for sustainability. Right now, 80% of Asean consumers will pay up to a 10% premium for eco-friendly and socially conscious products, according to the research conducted by Bain and Meta. A sustainable approach can guide all aspects of the business -- from product design to supply chain and operations.
Ensure that your brand has adequate ESG-focused options (environmental, social and governance) in your product range and proposition. It is possible to make the supply chain more sustainable without compromising on cost efficiencies. And since many of your consumers are willing to bankroll your environmentally and socially friendly practices, promote your sustainable initiatives accordingly.
Realign to consumers' new hybrid lifestyle: Some pandemic-era trends are here to stay, including flexible working arrangements. Consumers want shopping options that are closer to home, especially in Asean countries with challenging transport issues.
Your product offerings, marketing and delivery options should cater to this new wave of homebodies. Redesign and customise a subset of your offerings especially for at-home consumption.
In conclusion, the Southeast Asian market has jumped to the top of the digital-first priority list. Demand is pulsing through the region and growing. Existing digital consumer trends are ready for immediate action, along with new trends created during the pandemic.
In addition, brands need to combat supply chain-related headwinds. The time is right to implement the "Six Rs" to gain traction with these Asean consumers -- now and in the future.
Praneeth Yendamuri is a partner with Bain & Company based in Singapore, and Derek Keswakaroon is a partner based in Bangkok.