Report: Experiential stores and social commerce redefine SEA's retail landscape

In Southeast Asia, the fusion of social commerce and experiential retail is redefining how consumers engage with brands, a recent report from online fashion and beauty retailer ZALORA finds.

According to its latest report, as we move into 2025, the retail industry faces further hurdles and consumer sentiment remains fragile due to persistent inflation, with retail leadership undergoing significant turnover.

Businesses are prioritising profitability through cost-cutting measures such as layoffs, reflecting the tough economic climate. Despite the global slowdown, Asia Pacific stands out as a beacon of growth. With a projected real GDP growth of 4.0% YoY in 2024, the region surpasses both the United States and the Eurozone.

This economic resilience is coupled with stabilising inflation rates, leading to the expectation of interest rate reductions in several markets by mid-2024. Reduced pricing and financing costs are expected to boost purchasing power and drive retail sales growth, albeit at a more moderate pace than the initial "revenge spending" surge witnessed post-pandemic.

Meanwhile, the region is also actively embracing areas such as omnichannel in retail. Experiential stores with interactive displays, live demonstrations, and personalised experiences create a memorable and engaging shopping experience.

Technology is playing a vital role in enhancing these immersive experiences, while augmented reality (AR) and virtual reality (VR) are blurring the lines between the physical and digital worlds, offering shoppers new ways to interact with products. TikTok's prominence as a retail tool has reshaped the region's eCommerce dynamics, with initiatives like GoTo's partnership in Indonesia creating seamless omnichannel shopping experiences.

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In her foreword, Gunjan Soni, CEO of ZALORA group and COO of Global Fashion Group, highlights the dynamic shifts in Southeast Asia's retail landscape, emphasising the rise of omnichannel experiences, social commerce, and sustainability in fashion.

"Despite eCommerce's dominance, nearly half of retailers anticipate a resurgence in brick-and-mortar spending. This highlights the enduring appeal of in-person interaction and the curated shopping experience it offers," she wrote.

The rise of social commerce, according to the report, complements the region's demand for diverse retail experiences. Experiential stores, enhanced by technologies such as AR and VR, have become immersive brand destinations. PUMA and Meta's partnership exemplifies how virtual experiences can captivate audiences.

Retailers are also leveraging innovative formats like pop-up events and personalised services to engage consumers directly. As omnichannel strategies evolve, the seamless integration of digital tools with tangible brand experiences remains critical to meeting the expectations of Southeast Asia's increasingly mobile-first shoppers, the report says. It adds that 82% of consumers discover new products through social media.

The report also highlights the resilience of Southeast Asia's tourism industry amidst ongoing recovery challenges. ZALORA observed increasing consumer interest in travel, with searches for "travel" on its platform averaging 340,000 throughout 2023, peaking towards the year's end.

Meanwhile, in Southeast Asia's evolving fashion landscape, traditional women's apparel is regaining prominence after years of athleisure dominance. As offices and social spaces come alive, demand for stylish and versatile clothing has surged, particularly during year-end festivities.  While sportswear remains the leading category, the rise in modest fashion reflects the region's cultural diversity and purchasing power, with luxury modest wear continuing to draw interest.

ZALORA's modest wear category experienced a 33% increase in Q1 2024 compared to Q1 2023, driven by the festive season of Raya and the resurgence of social gatherings, the report says.

The report also outlined some of the biggest brands in each of the countries. 

At the same time, sustainability is transforming Southeast Asia's retail sector. Consumers are increasingly prioritising ethical fashion, pushing brands to adopt sustainable practices. This shift is not only fostering a more environmentally conscious industry but also enabling brands to build deeper connections with consumers who value transparency and accountability.

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