Opinion: The not-so-sexy revolution in Southeast Asia eCommerce

There’s been a lot of coverage in recent months for the flashier functionality on Shopee and Lazada - livestreaming, gamification and more. New words have even been coined, such as “shoppertainment”, to describe these new features.

At the same time there’s been much excitement about social commerce announcements from the big platforms, with Facebook Shops promising to disrupt the landscape. However, a quieter, but no less important, change is taking place: upgrades to and increasing emphasis on advertising within the marketplaces.

To this end, Shopee and Lazada both seem to be aggressively hiring talent to beef up their ad offerings. See below for a couple of promoted job offers seen last week.

ecommerce pic 1

Their strategy is simple: Use advertising to monetise the traffic garnered through investment in shoppertainment and other initiatives designed to get shoppers to hang around for longer on the platform and to come back more regularly.

Sellers on the big Southeast Asian marketplaces for a long time relied more on a “barter” system, where they could get exposure for providing certain discounted inventory. Most regular paid advertising happened on Facebook and Google, with special ad formats developed that allowed custom audiences, for example.

This is in contrast to China, where, from early on, running a store meant a focus on paid advertising within platforms such as Tmall. This was one of the biggest differences I felt having moved over to Southeast Asia, from a job in China eCommerce.

The move to an emphasis on on-site advertising is already well underway for Shopee and Lazada. According to insights from Epsilon, a tech solution that automates part of the on-site ad buying for multiple big brands, the budget split is shifting rapidly from off-site, eg. Facebook, to on-site, with on-site advertising up by around 40% from the previous year. Separately, Lazada and GroupM also struck up a deal to offer GroupM's clients preferential pricing and access.

Such shifts in budget and emphasis from agencies is certain to continue as the platforms improve their ad tools (with their new hires!) and as they have more regular traffic or eyeballs to advertise to, thanks to their shoppertainment push.

Right now Shopee, for example, offers a variety of options within the platform: Paid search ads put your product or store at the top of the search results, similar to Google Ads, and there are options to get products onto recommendation sections of homepages too. More are on the way on Shopee and Lazada. Options to target and personalise will also increase, both on the platform and using platform data to target people outside of the platform.

So, what does this mean for brands?

Obviously we need to get smarter and more nimble at ad buying. This is particularly difficult to do at scale on marketplace stores with hundreds of SKUs, each requiring different treatment due to considerations including inventory, conversion rates, profitability and so on. Technology and specialist partners will help brands do this, as well as governance to allow nimble budget allocation.

It may make sense to harmonise budgets between social and eCommerce channels, which can be hard if managed by different teams and agencies. Structures and processes need to be in place to switch between the two based on what’s driving the most traffic.

Also, if China is anything to go by, cost per acquisition will go up. It makes sense therefore to make a head start in building effective retention strategies for stores.

Perfect the experience, collect data and plan communications or promotions to get people coming back without needing to advertise to them.

Finally, of course, taking a step back, a strong brand is as important as ever. It’s more expensive to advertise a weak brand on a marketplace.

Longer-term investment in the brand has to happen alongside the short-term sales-driving advertising.

This quieter shift in Southeast Asia’s commerce landscape is less sexy but no less important. Marketplaces may only represent a few percentage points of overall sales today, but this will change quickly. Those that win on marketplaces, through advertising and more, will win an inordinate share of the market as marketplace sales represent more and more of their total categories. 

The writer is Jeremy Webb vice president, customer engagement and commerce for Southeast Asia at Ogilvy.

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