How creative commerce can protect brands from becoming commodities in the e-Commerce marketplaces
With online shopping becoming the new normal, brands are pressured into joining the e-Commerce bandwagon. In this insightful read, Krishna Kumar, our Group Director for Strategy, Media and E-Commerce, deep dives into the crowded space of online marketplaces and offers tips for brands looking to make their move online.
E-Commerce marketplaces are a level playing field. Where legacy brands can compete with direct-to-consumer (DTC) brands, and large enterprises might tussle with SMEs. The landscape is quickly evolving and as marketplaces become more competitive, many brands seem to be compromising their long-term objectives with short-term targets. The outcome of this approach results in hefty discounting, with a focus on volume transaction over value as competing on price becomes the norm. To add on this, the increasing cost of doing business on these marketplaces is increasing their customer acquisition cost (CAC).
The e-commerce basket is getting bigger and so is the cost of the basket
A Euromonitor report indicates that the value of ASEAN’s E-Commerce has grown almost six times in just four years - from USD9.5 billion in 2016 to USD54.2 billion in 2020. In the ASEAN region, e-commerce sales as a percentage of total retail sales hit 9%, up from 4% in 2018. Although the figure is in single digits, it is growing steadily. A Forrester report indicated that in the next five years, online retail sales in Asia-Pacific will double, growing from USD1.3 trillion in 2018 to USD2.5 trillion in 2023, with a compound annual growth rate (CAGR) of 14.0% and accounting for 28% of total retail sales!
Reaping the profits will not be easy. Profit margins can quickly dwindle if brands stay focused only on basket optimisation. When calculating the CAC besides cost of goods sold (COGS), marketing, marketplace fees and shipping costs, marketers also need to account for other costs such as warehousing, product returns, free shipping discounts and marketplace campaigns to know the actual CAC (customer acquisition cost). Competition amongst e-commerce marketplaces also drives them to bring their costs down and changes in recommendation algorithms force sellers to decrease their listing costs and demand exclusivities.
"Digital commerce is an ecosystem and should not be considered only as a sales channel. Good customer experience and value creation can be a big driver. Value creation may sometimes be as simple as putting things together based on consumer needs. This serves as a convenience to consumers while buying, so instead of buying individual sku they can buy the brand's offerings. i.e. gift packs. Virtual bundles allow brands to offer consumers a solution based on their needs or wants".
‒ Satish Kunwar, Head of Digital Commerce, PZ Cussons, Indonesia
Creative e-commerce strategy for bottom funnel profit marginalisation
Before the pandemic, both showrooming and webrooming were much talked about and had their own preferences for specific categories. The pandemic changed the buyer journey completely to a digital one, but what has not changed is the desire for experience at each stage. In-real-life (IRL) stores are being re-imagined in the digital space with technology, with UI/UX inspired by great design thinking giving better returns over cookie-cutter solutions.
“It is clear that e-commerce is an area of growth for brands. It provides brands with a new way to interface with customers to persuade and drive purchase. However, as this space develops, brands also need to evolve their thinking from being focused purely on a bottom-funnel, transactional approach, to a more holistic brand experience, focused on customer’s needs. Brands set themselves up for success if they focus on the entire experience and seek to differentiate via brand experience rather than purely focusing on discounting practices".
‒ John Campbell-Bruce, Managing Director, Lion & Lion Indonesia
Here are few of the creative commerce pointers that a brand can bookmark to leverage its emotional quotient in the bottom funnel.
Customisation at scale
Brands like Nike, Fleetwood and FunkySofa have mastered this art of giving customers opportunities to customise their products. Functioning as a DTC brand from production to delivery, these brands provide an experience that gives the creative canvas to the customer while making them part of the creation process. The price premium set at the point of purchase then becomes highly valuable and customers become emotionally bonded in the transaction.
Redefining the transaction
At the point of purchase from a click-to-pay mindset, a more engaged path can be created with technology that translates to higher satisfaction. live streaming, social influencers as brand advocates, digital shelf optimisations (DSO) and purchase experiences that can be converted to social content by users to be shared on their own social spaces, can become critical points that deter customers from basket abandonment. Better purchase experience was cited as one of the top reasons why customers stay or switch to alternative brands in the e-Conomy SEA 2021 report by Google, Temasek and Bain & Company.
Creativity as a solution
Breaking the bottom funnel into micro-moments and charting experiential touchpoints can open new avenues for the brand to look beyond transactional approach and leverage its strength. Working with the right CX platform to harness the data and insights for each opportunity can then become a creative challenge to be addressed by an idea, visual styling or value messaging.
"During my time in China working with e-commerce / tech giants like JD.COM and Meituan, I've witnessed how critical it is for both brands and the e-commerce platforms to utilise creative thinking to attract consumer interest and drive purchase. From gamification, social commerce, innovative live selling and branded entertainment; creativity coupled with knowledge of how to apply it in a digital-first, mobile-led environment will be the added firepower to fuel e-commerce success."
‒ Cheelip Ong, CCO and CPO, Lion & Lion
A step before marketplace strategies, the creative approach can also be harnessed to strengthen a customer’s intent towards a brand. From informational intent to transactional intent, the right content can bolden a brand’s hold on the customer’s decision and deter competitive encroachment when the customer enters the e-commerce marketplace.
Long-term impact beyond ‘Sale-Days’ optimisation
During a webinar in June 2020, when McKinsey polled US consumer-packaged-goods (CPG) executives, more than one in four respondents said low profitability was their first concern with e-commerce though the primary source of growth for them in future is from e-commerce. As e-commerce marketplaces evolve and become formidable powerhouses with scale, brands will also mature in creating their own e-Commerce platforms. However, when entering the level playing field in marketplaces, brands need the mechanism that exists in their DNA which can be used creatively to deter simultaneous price discounting.
"Over the last year, we have been observing and analysing how brands are trying to enter or invest in the e-commerce space. One commonality we continuously see is a complete disconnect between what brands are trying to achieve from a branding perspective to how they act in e-ccommerce due to the channel’s extreme focus on price discounting. As a creatively driven, digital-first agency, we believe we can become a very valuable partner for these brands by ensuring the unused potential of your brand equity to remove focus on price only."
- Fredrik Gumpel, Group CEO, Lion & Lion
If you are looking for a more nuanced approach to e-commerce or need help with your e-commerce marketplace strategies, content development, media or analytics, you can reach us through https://www.lionandlion.com/.