Digital, Direct-to-Consumer Transformation (DTC), July 23, 2020
This is the first article in our two-part series “Digital Transformation in Turbulence” published in Brandberries.
Undoubtedly, COVID-19 has caused unprecedented disruption with profound effects on economies, businesses and customers, turning the way we live, paint and buy. While no one can expect what will be the new imaginable, it is transparent that the savings will not come out unscathed. Not to mention that customers’ daily routines and lifestyles, redefined through social estrangement and a new contactless economy, will replace customer behavior, some permanently.
While customers continue to fight the spread of the virus, blockages and new daily diets, they are also affected by emerging unemployment and deteriorating incomes. In Southeast Asia, where more families belong to low-income segments, an anxiety is developing that is undermining customer confidence. Many plan to delay or give up larger purchases and have greater value. We’ve also noticed a change in logo loyalty.
A major phenomenon that emerged from the COVID-19 pandemic is the increased demand for e-commerce and virtual payments. However, this poses a major challenge, as of the 400 million adults in Southeast Asia, only 104 million are fully “banked” and have full access to monetary services. 98 million more are “inadequately banked,” while 198 million remain “unbanked” and do not have a bank account. Nearly 70% of all businesses in Southeast Asia are managed through small and medium-sized enterprises with millions of parent and popular retail stores in scattered cities and rural areas. These market segments are fully affected by the demanding virtual situations of the contactless economy.
Despite years of immediate urbanization and industrialization with a young and developing technophile population, the state of virtual transformation in most Southeast Asian countries has been slow. The pandemic has forced corporations to embrace the concept of telework, pushing brands and shops to move from the virtual. However, the large substitution caused by the pandemic is also driving consumers to think again about their life priorities, resulting in new values and spending criteria. Many behavioral replacements, adding the focus on the family or community circle, fitness and virtual solutions, are expected to last a long time, even after the crisis, especially if the crisis itself continues.
For retailers, the starting point counts in the event of a crisis. Organizations that can temporarily reconsider their omnichannel technique to create a unique visitor they enjoy will leave the pandemic more temporarily. Analysis of the 2008 currency crisis shows that visitors’ delight with leaders recovered more temporarily, rejoiced with a slower slowdown, and occasionally achieved 3 times the overall return to shareholders relative to the market average.
Although the effect of the pandemic varies throughout Southeast Asia, we see 4 emerging trends as customer behavior takes hold in a new normal:
As consumers find the site of a widespread era of monetary uncertainty, they intend to continue to shift their expenses to essential items such as groceries and family items, cutting maximum discretionary categories. While the purchasing goal is expanding into a number of categories for more evolved markets such as Singapore, the region will remain weak in discretionary categories such as clothing, footwear and travel.
As in the latest monetary crisis, EEA consumers are reflecting on value and quality, with greater value sensitivity and closer scrutiny of non-essential spending as countries reopen. However, in surveys through McKinsey and Nielsen, AES buyers intend to spend more on long-term skin care and clothing than before the outbreak, which is almost similar to “revenge purchases” due to prolonged home lockout.
We are also seeing a trend towards more consumers in the region distinguishing between value and cost. While many change their preference to a low-cost proposal to be cautious, they still expect superiority in terms of quality and performance. Sustainability (reusable and recyclable) will continue to grow, as will hygiene requirements.
For some products and brands, COVID-19 has caused interruptions in the source chain. And when customers couldn’t locate their favorite product at the retailer they liked, they replaced their buying behavior. Many customers have tried other brands, bought in other stores or even explored new buying strategies (many are looking online for the first time) the crisis. Value, availability and quality (or biological products) were the main drivers for customers looking for another brand. We anticipate that these adjustments will shape customer habits, even beyond the effects of COVID-19. Many customers who have tried a new behavior plan have already expressed a preference to follow it after the crisis.
The pandemic has pushed back a new “contactless economy,” accelerating digital technology, such as increased online click-through collection, frictionless retail, direct-to-consumer (DTC) sales, and a new delivery partnership model. Through SEA, many categories are experiencing massive expansion into their online visitor base. Many consumers plan to shop online even when they reopen physical outlets. Social distance measures, which will remain in place for the long foreseeable term after the market position is reopened, will likely mean that the buyer traffic (in-store) in the new popular will be lower than before COVID. More people will want to buy from the comfort of their own homes.
At SEA, where most micro-enterprises (family stores) basically run on coins and an almost zero online presence, the pandemic has proven to be a difficult time. To help these micro-enterprises, a new initiative through the Singapore government’s Media Development Authority (IMDA) is helping to bring rainy market stalls online. The initiative is being tested lately through Tekka Market in Serangoon. Market stalls will use Facebook Live to sell their products and interact with their customers. The theme of the task is ‘Why do they pull (a familiar term to go out) for your kailan (Chinese broccoli)? Customers can order products from posts during the Facebook Live video, verify their touch data via Facebook Messenger, and make payment through PayNow, a local instant currency movement service. Those who spend more than S$20 will also be able to get a loose shipment to the island and the products will be delivered to them during the day. We see that the live streaming of “sales” gambling has a more vital role in AES, either through consumer engagement and product promotion.
Retail restrictions on the pandemic’s position accelerated the transition to virtual distribution. SEA’s local delivery operators have adapted their facilities to meet increased visitor demand. During the Islamic holy month of Ramadan, GrabFood presented a contactless crusade that gives consumers the ability to plan delivery without contact in advance. Grab is also expanding its partnership with classic shops and restaurants, with an increase in delivery activities such as GrabFood, GrabExpress and GrabFresh boosted through HappyFresh/GrabMart. Online delivery facilities, contactless purchases, and cashless transactions will be a major topic for the long-term retail landscape, and primary retail chains are already seeing consumers opt for those facilities.
Digital bills are gaining ground in the AES, as consumers abandon money to avoid physical contact. The COVID-19 pandemic, combined with the implementation of money-free bills for utilities, led to an immediate expansion of non-monetary transactions in the first 4 months of 2020. In the Philippines, PLDT’s GCash de Mynt and PayMaya have expanded to contactless invoices at Taxis. In Thailand, AIS and Kasikornbank have teamed up to launch VIA, which especially helped micro-enterprises during the pandemic. In Vietnam, the number of transactions through cellular bills increased by almost 200% and the number of transactions by 22% respectively during the blocking period. ZaloPay supported through Tencent, Warburg Pincus supported through Momo and Mocha supported by Grab were also widely followed during this period. Grabpay (via Grab) and GoPay (via Gojek), which are already one of the largest e-wallets followed through the unbanked segments, have further strengthened their super-applications activities in delivery, healthcare and retail during the same period.
In any AES, consumers who fear the virus are more cautious when deciding where to buy. They are now looking for stores with visual protection measures, such as advanced cleaning and physical barriers. In addition, they are buying more from corporations and brands that have healthy, hygienic packaging and are involved and involved with employees.
The perception of happiness has become a more tangible entrepreneurial attitude than the pandemic. Digital and technological self-care responses have gained importance in preventive fitness, along with references to products that stimulate the immune system, de-stress and calm. The space as a gym stands out again; gym at home; Home therapy, home hygiene and healthy culinary practices are now taking over.
Although telemedicine has evolved worldwide, it has been less popular in EAE. During the pandemic, we saw an increase in demand in the region. Patients who suspected COVID-19 had become stuck may receive an initial diagnosis and recommendation on the next step. Patients with other medical desires may simply see doctors digitally when physical care services were unavailable. Two new companies responding to medical desires in Indonesia during the pandemic: Alodokter and Halodoc (both names mimic “Hello, Doctor” with a regional approach) link patients in the house with doctors for online consultations. These startups recorded a physically powerful expansion for two reasons. First, Indonesia has many citizens in remote rural areas, far from providing quality physical care. And second, the country’s government has included companies in an official list of care resources that even others in big cities deserve to use.
Food and groceries, as well as indoor training devices and gaming tools, have the most popular categories for buying food online. And the upward trend in online grocery purchases is expected to continue even after countries have eased restrictions, and experts predict that e-commerce will play an even more vital role in “new normal” than ever before.
COVID-19 has forced consumers to adapt to life at home, where we work, learn, buy, exercise, socialize, entertain and more. As retail stores reopen, they deserve not to go out to “compete” with the home, but supplement it to enable desired behavior at home. This new trend has led Tojek, founded in Indonesia as a ride-sharing company, to drive the launch of GoPlay, streaming entertainment due to the pandemic. A key detail of the GoPlay game is to offer custom-designed content, such as the release of Gossip Girl Indonesia, authorized through Gossip Girl.De similar way, many gyms have started online sessions, with the highest enrollment rates, and most likely to continue even after the markets reopen.
The largest cohort of experiential customers creates strategic opportunities in everything from luxury to wellness routines and food reports that further digitize education and entertainment.
Although many countries have lifted restrictions to stay at home, top consumers still feel they will stay home longer. Most consumers across the country still feel they are not in a position to resume their “usual” activities outside the home. With the rise of e-commerce, logo knowledge and visitor acquisition across a variety of platforms, from the presence of e-commerce to sales through their own food shopping sites and subscription models. According to a Nielsen study, AES consumers are unlikely to return to their old behavior when eating in restaurants and prefer takeaway and dinner at home after the COVID-19 pandemic. The study also found that consumers reported that their gastronomic behavior can permanently replace.
Once consumers get used to doing things digitally, it’s to go backwards.
It’s better to settle for the truth that the long term isn’t what it used to be and start thinking about how to make it work. To push the path of recovery, leaders must instill a spirit of goal and optimism and argue that even a dubious long-term can, with effort, be greater.
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This is the first article in our two-component series “Digital Transformation in Turbulence. Stay tuned to the moment and final component of our series to be more informed about the acceleration of virtual transformation in Southeast Asia.”
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