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Social-Commerce-in-Southeast-Asia-2022-Report-by-Cube-Asia.pdf

The report analyzes the growth of social commerce in Southeast Asia, highlighting its influence on e-commerce, particularly during and post-COVID-19. It identifies four archetypes of social commerce—social platform commerce, conversational commerce, live shopping, and community group buy—contributing to an estimated $42 billion in e-commerce gross merchandise value, which represents 25% of the region's online retail. Targeting brands, retailers, and investors, the report aims to provide insights on market dynamics and opportunities in the evolving landscape of social commerce.

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Sponsored by: Report by: Sector report December 2022 Social Commerce in Southeast Asia 2022
Objective What this report seeks to achieve Who should read it and why 1. To systematically analyse the growing space of Social Commerce During COVID, Social Commerce became a widely discussed theme among consumer companies, as buyers (and sellers) sought to make e-commerce richer and more exciting. Yet, its understanding remains broad, and at times vague. 2. To provide a quantitative framing to the narrative Despite all the talk of Social Commerce transforming the online retail landscape in Southeast Asia, there has been very limited data on its market size and economics in the region. 3. To call out overlaps between different types of Social Commerce Social Commerce is complex, and its different archetypes such as Live Shopping or Community Group Buy often overlap. Sizing the market requires identifying and quantifying these overlaps. The target audience of this report includes brands, retailers, and investors in the online retail economy. By reading this report, you can: • learn about the opportunity size and dynamics of Social Commerce in Southeast Asia in detail, • pick the most suitable channels and business models for your company, • identify the strategies and capabilities needed to win, and • understand the P&L economics of different Social Commerce models. 2
3 Our methodology Distributed data collection Statistical data aggregation Unstructured data from across sources was analysed, triangulated, and stitched together into a structured picture of the market Series of online surveys with 15,000+ total respondents across Southeast Asia conducted between Jun and Nov 2022 Extensive primary research of company literature for key players, their financial reports, executive interviews, and public statements Web crawling to research data reported over the last seven years in news articles, interviews, analyst reports, and government publications Interviews with multiple e-commerce players, stakeholders, and sector experts Case studies of leading and emerging players in the online economy
Disclaimer The information and analyses presented in this report are outside-in, compiled on a best effort basis. Publicly available data on online retail in Southeast Asia remains limited. The sources used could therefore not always be independently verified, and the validity of these insights and analyses is not guaranteed. The suggestions, recommendations, or other submissions in this report do not constitute investment or financial advice. For any questions or comments, you can write to info@cube.asia. 4
About us Cube Asia delivers reliable data and insights for online retail in Asia to help brands, retail companies, and investors, drive profitable growth Better data and insights = More profitable online growth Find us at cube.asia, or email info@cube.asia 5
About our sponsor Sprinklr is a leading enterprise software company for all customer-facing functions. With advanced AI, Sprinklr’s unified customer experience management (Unified-CXM) platform helps companies deliver human experiences to every customer, every time, across any modern channel. Sprinklr’s unified-CXM solution equips businesses to drive up to 185% more revenue with omnichannel commerce through extensive support for social channels and conversational AI. Learn more at www.sprinklr.com 6
100 pages condensed into 1 key message Executive summary The Future of All e-commerce is Social 42bn USD, or 25%, of e-commerce GMV across Southeast Asia in 2022 is directly influenced by social experiences. The dynamics of these social experiences are complex, extending across four archetypes that offer different flavors. Brands and retailers who are able to manage this complexity, and incorporate one or more of these archetypes in their e-commerce channel strategies, will be the winners of the future. 7
1. Overview of Social Commerce in Southeast Asia 2. Social Commerce archetypes A. Social Platform Commerce B. Conversational Commerce C. Live Shopping D. Community Group Buy 3. Sprinklr and Unified-CXM 4. Learn more (sponsored section) Contents 8
How do we define Social Commerce? Any form of e-commerce that is influenced heavily by social aspects of human relationships such as real-time communication, authenticity, trust, community, etc. 9 Social Commerce | Definition > Context > Archetypes > Impact
10 For the purposes of this report and the market size estimates herein … Social Commerce: ✓ Is online ✓ Can be on any digital platform ✓ Requires a product selection / payment step at the end of the user journey ✓ Is B2C • Offline transactions that are influenced by digital social communication are not included • All digital platforms or channels such as marketplaces, social platforms, messaging apps etc. are considered • Without such a step it would technically be considered online marketing and not ecommerce • We have excluded B2B or C2C e-commerce from this report Social Commerce | Definition > Context > Archetypes > Impact
11 Social Commerce has grown in the intersection of social experiences and e-commerce A long time ago … Social media / messaging and e-commerce were separate user experiences offered by different companies; the former held the consumers’ attention, and the latter offered goods for sale Then … Social media platforms began to introduce shopping / e-commerce functionality to increase their share of their users’ mindshare, time and spending And then … e-commerce platforms realized that higher user engagement meant higher conversion, and began to introduce more social features to drive engagement After that … Entirely new platforms emerged that reimagined the e-commerce user journey from scratch, with social being a core part of the experience And finally … The lockdowns under COVID drove up demand for the same social experiences online that users were familiar with offline Social media and messaging e-commerce Social Commerce Social Commerce today 25% of total e-commerce in SE Asia Social Commerce | Definition > Context > Archetypes > Impact
12 There are four meaningful ways in which social experiences are being integrated into e-commerce Social Platform Commerce e-commerce functionality is being gradually introduced into social media user journeys Live Shopping Live video is offering a channel for buyers and sellers to digitally recreate the face-to-face purchase experience Conversational Commerce Messaging apps are incorporating product listing, check-out, and payment features; while e-commerce platforms are introducing live- chat features Community Group Buy New digital platforms are leveraging the social dynamics of communities and group leaders to drive commerce Social media and messaging e-commerce Other archetypes will likely continue to emerge over time Four archetypes of Social Commerce A C B D Social Commerce | Definition > Context > Archetypes > Impact
13 These archetypes are not mutually exclusive Conversational Commerce is a subset of Social Platform Commerce, as messaging apps like WhatsApp are also commonly considered social platforms B. Conversational Commerce D. Community Group Buy A. Social Platform Commerce C. Live Shopping Social platforms are not only integrating e-commerce features, but also enabling specialized social experiences through the other archetypes Live Shopping can happen on social platforms, as well as on e-commerce marketplaces and native apps While there are some native group buy platforms, messaging apps and social platforms are often used for group communication and demand aggregation The analysis in this report attempts to identify and address these overlaps to avoid double-counting in our market size estimates Social Commerce | Definition > Context > Archetypes > Impact
14 Together, these archetypes contribute to 42bn USD of e-commerce GMV 34bn USD 12bn USD 5bn USD 13bn USD A. Social Platform Commerce C. Live Shopping B. Conversational Commerce D. Community Group Buy 55% on social platforms 45% on other platforms 50% on other platforms 50% on social platforms Messaging included in social platforms Total (adjusted for overlaps) ~ 42bn USD Equivalent to 25% of all e-commerce in Southeast Asia1 1: Estimate of total Southeast Asia e-commerce GMV (across all platforms including marketplaces, e-retail, social platforms etc.) ~ 160-170bn USD in 2022 SOURCE: Market size estimates based on triangulations of primary data collected from online consumer surveys across 6 SE Asian countries, with secondary data from public sources including; Facebook; Bain & Company; McKinsey & Company; Ipsos; Oppotus; Shopavision; Thai PBS World; Shoplus; Statista; eMarketer; PWC; Krungsri; Essence Global; Decision Lab; iKala SE Asia estimates for 2022 Indicative bar lengths (not to scale) Social Commerce | Definition > Context > Archetypes > Impact
15 The indirect impact of Social Commerce is much greater across online and offline channels 42bn USD (direct impact) GMV of e-commerce transactions linked directly to at least one of the four archetypes Indirect impact online GMV of e-commerce transactions enabled by any of the Social Commerce archetypes Indirect impact online and offline GMV of all online and offline transactions enabled by any of the Social Commerce archetypes 2022 e-commerce GMV in Southeast Asia Example use cases Live Shopping: User watching a Live Shopping session chats with the seller, and buys a product being showcased during the session Social media marketing: User clicks on a Facebook ad by a consumer brand, and gets directed to the Shopee Mall store of that brand where she completes the purchase Chat & Shop: User messages a physical store staff to learn about what’s in stock before visiting the store and making the purchase offline Note: Indirect impact online and offline are not estimated; the sizes of the blocks are meant to be indicative Social Commerce | Definition > Context > Archetypes > Impact
16 Most e-commerce channels in SE Asia have adopted at least one of the four Social Commerce archetypes Southeast Asia’s fragmented B2C e-commerce channel landscape Consumer Business Horizontal consumer marketplaces, e.g. Shopee, Tokopedia Category specific consumer marketplaces, e.g. Zalora Multi-category / multi-brand e-retailers, e.g. Central Online, Sephora Single brand D2C e-retail, e.g. H&M, Uniqlo online Social platforms with e-commerce features, e.g. Facebook, TikTok Messaging apps with e-commerce features, e.g. WhatsApp, LINE Native Live Shopping platforms Group Buy or Reseller platforms, e.g. WeBuy, Evermos Quick commerce, e.g. Grab, Food Panda Social Platform Commerce Live Shopping Conversational Commerce Community Group Buy → no social experiences yet; a space to watch? A C D B Social Commerce | Definition > Context > Archetypes > Impact
(sponsored section) Contents 17 1. Overview of Social Commerce in Southeast Asia 2. Social Commerce archetypes A. Social Platform Commerce B. Conversational Commerce C. Live Shopping D. Community Group Buy 3. Sprinklr and Unified-CXM 4. Learn more
18 The next four sections analyze each of the Social Commerce archetypes in detail Flow of pages in each section: ➢ Definition of the archetype ➢ Illustrative example ➢ Why should brands and retailers care? Commercial business case ➢ Market size ➢ P&L economics for sellers ➢ Ecosystem ➢ Outlook ➢ How to win? Top five tips for brands ➢ Trends, dynamics, and other considerations
(sponsored section) Contents 19 1. Overview of Social Commerce in Southeast Asia 2. Social Commerce archetypes A. Social Platform Commerce B. Conversational Commerce C. Live Shopping D. Community Group Buy 3. Sprinklr and Unified-CXM 4. Learn more
What is Social Platform Commerce? e-commerce where critical parts of the purchase journey such as product selection, payment, and order confirmation, happen inside a social platform Social aspect of the experience = A familiar environment, e.g. a social media or messaging app, in which the primary activities that users engage in are social in nature, with a pre-existing trust that underlies these activities in this environment 20 Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
21 TikTok is the best example of this archetype in Southeast Asia Example: L'Oréal Paris TikTok Shop in Thailand Although known primarily as a content- focused social platform, TikTok now offers a full- feature in-app e-commerce store1 1: Currently only available in the US, UK, and 6 Southeast Asian countries – Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam While Meta also offers Shops in Facebook and Instagram, TikTok has gone a few steps further to keep the check out and payment steps within the app, instead of sending the user to a separate website to complete the transaction Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
22 Social platforms offer brands an option to diversify their channel portfolio Lower commission fees As social platforms seek to capture a greater share of the economic value (instead of just passing high-quality traffic to e-commerce marketplaces through ads), brands may be able to negotiate lower commission fees. Available tech infrastructure e-commerce infrastructure such as payments rails, logistics platform integrations, and customer service agent routing software has improved, reducing dependance on e-commerce marketplaces. More engaging user experience Consumer preferences have evolved with new ways of shopping online; traits like fun, engagement, community and instant gratification are increasingly important – experiences that can currently be delivered more effectively on social platforms. Competitive dynamics In categories like beauty, 63% of brands are now selling on TikTok Shop; other brands that are not on these platform risk losing out on a growing audience size. Long-term channel economics Emerging platforms like TikTok Shop are currently offering discounts and vouchers to attract sellers but may pull these back as they scale up. Established platforms like Facebook and Instagram have limited e-commerce features and need 3rd party plugins to address these gaps. But watch out for … Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
23 Social Platform Commerce is the largest archetype, contributing 34bn USD of e-commerce GMV in 2022 SOURCE: Market size estimates based on triangulations of primary data collected from online consumer surveys across 6 SE Asian countries, with secondary data from public sources including; Facebook; Bain & Company; McKinsey & Company; Statista; eMarketer; PWC; Krungsri; Essence Global; Decision Lab; iKala 2 6 17 30 34 2022 2018 2019 2020 2021 SE Asia e-commerce GMV on social platforms1 USD bn Social Platform Commerce grew 5-6x during COVID 1: GMV estimate includes all transactions where product discovery, evaluation, and selection happen on the social platform (payment may or may not happen on the same platform) • Southeast Asia has one of the world’s highest rates of social media engagement, with 90% internet users having signed up with platforms such as Facebook, Instagram, TikTok, WhatsApp, LINE, and Zalo • As these social platforms have introduced e-commerce functionality, users have followed with their wallets • For example, an estimated 55% of internet users in Indonesia and Thailand are making online purchases on these platforms, spending on average 100 USD and 180 USD per user per year (respectively for the two countries) Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
24 To size this archetype, only those user journeys where the key purchase steps are on the social platform are included Not included in Social Platform Commerce These user journeys start on a social platform, but most of the transaction happens off platform Included in Social Platform Commerce For these user journeys, a significant part of the purchase experience happens on the social platform User journey Awareness & discovery Evaluation & product selection Check-out & payment Facebook marketing Facebook post or ad Facebook messenger enquiry; user directed to uniqlo.com Checkout on uniqlo.com Facebook Shop Facebook post or ad Facebook Shop catalogue (for product selection) Instagram marketing Instagram post or ad Click through to Shopee product page Shopee check-out TikTok Shop Video or Live Shopping TikTok Shop catalogue TikTok Shop Instagram Conversational Commerce Instagram post or ad Instagram message enquiry and product selection e-wallet payment / bank transfer Checkout on uniqlo.com Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
25 Social Platform Commerce can be more profitable vs. marketplaces currently due to lower platform fees Net price Marketing costs List price Discount1 COGS2 Platform fee Logistics / delivery2 List price for illustration 20 USD -35% -15% -10% -7.5% -10% 100% Operating profit3 85% 22.5% The economics for discounts and marketing do not need to be very different from current social media marketing budgets, especially since most brands are already using social platforms for marketing Commission fees for selling charged by some social platforms are lower than major marketplaces; there may however be additional costs associated with third-party plugins Does Social Platform Commerce make money? Yes, can even be more than horizontal marketplaces if brands can negotiate better overall commissions, given marketing (traffic generation) and sales (conversion) are on the same platform SOURCE: Interviews with brands, sector experts; company reports 1: Only includes discounts by seller, excluding discounts paid for by the platform 2: Indicative estimates; costs may vary by category, order size, weight and delivery distance 3: Operating profit before considering ex-channel / allocated expenses such as G&A and HQ costs | 3: Fixed costs to hire service personnel handling customers messages Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations Simplified P&L, illustrative numbers for a conceptual discussion
26 As social platforms adopt e-commerce functionality, they provide a direct link between sellers and buyers, reducing the number of intermediaries Buyers Messaging-led platforms1 Social platforms Brands and retailers Sellers Content-led platforms ▪ An ecosystem with fewer intermediaries makes it easy for sellers to get started, while also offering up more margin to be shared between the seller and the platform ▪ There still are limitations in commerce functionality on platforms like Facebook and Instagram however that need third-party plugins to bridge Enablers Third-party plugin developers (tools to accelerate e-commerce capture within social platforms) SMEs and resellers 1: Messaging-led platforms covered in more detail in the Conversational Commerce archetype Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
27 2 6 17 30 34 85 2018 2019 2022 2027 2020 2021 125 Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations Base case ~ 20% CAGR e-commerce on social platforms grows faster than incumbent marketplaces TIkTok continues to strengthen its e-commerce offering and attract a growing number of users and online spending from incumbent marketplaces and other platforms Other regional social and messaging platforms (super-apps) like LINE and Zalo also continue to improve their e-commerce integration High case ~ 30% CAGR Facebook and Instagram follow TIkTok’s lead and build out their e-commerce functionality in the region, leading to a big shift in spending from other channels to them Social Platform Commerce Social Platform Commerce in Southeast Asia can grow to US$ 85 ~ 125bn in 5 years e-commerce GMV on Social Platform Commerce USD bn SOURCE: Stakeholder interviews; financial modelling for different scenarios
28 Top five winning tips for brands #1 #2 #3 #4 #5 Establish a strong and flexible direct-to-consumer fulfilment engine Social Platform Commerce lends itself best to direct-to-consumer transactions. Building the necessary inventory management, order management, and fulfilment capabilities to accept orders from several new channels will help you get the most out of these channels. Invest ahead of the curve on TikTok Shop, the most important new channel TikTok Shop has begun to show its promise across Southeast Asia in 2022, and will likely continue to dominate the Social Platform Commerce landscape in the years to come. Invest early to learn and capture share ahead of your competition. Wherever you launch, staff your new channels for 1-2 years of experimentation The pace of innovation and new feature development across the Social Platform Commerce space is very high. Ensure your organization is resourced to test new features and tactics early and often. Prepare your digital marketing strategy with less distance between traffic and sales Single-platform e-commerce journeys unlock greater spend attribution and insights. To take full advantage, build a marketing organization that goes beyond traffic generation and be empowered to adapt pricing, promotion, and messaging in real-time. Elevate your social shops by integrating other Social Commerce archetypes Social Platform Commerce enables quick and seamless single-platform customer journeys, but is worth little without consistent activation. Invest in on-platform Live Shopping, Conversational Commerce, and content generation to maximise engagement and sales. Social Platform Commerce is suitable for almost any consumer brand, but success needs good planning and execution Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
Facebook and Instagram launched Shops a few years ago, but do not yet offer a complete user journey Product listing and catalogue management Native promotion / voucher mechanics Product pages with ratings and reviews Native check-out and payment integration ▪ Meta’s official shop front solution, Shops, is offered across the region for Facebook and Instagram, allowing sellers to set up and customize an online store, tag products in posts and ads, and integrate with Facebook Messenger ▪ However, it does not include native check-out and order flow, so sellers must either leverage third-party software plugins, or link to an external site to check-out ▪ Meta has rolled out more advanced features in the United States, but there is no news of when they will arrive in Southeast Asia ▪ Meta’s messaging platforms, Messenger and WhatsApp, both offer some commerce features focused on business messaging, but also do not support native end-to-end e-commerce journeys ▪ Meta’s properties, however, are relatively open for third-party plug-in developers, allowing vendors to bridge the gaps in their product offering 29 Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
30 TikTok has introduced e-commerce features in a short time that are comparable to leading marketplaces ▪ While known primarily as a content-driven social app, TikTok also offers end-to-end integrated e-commerce within its platform ▪ TikTok supports a range of payment modes and integrations with third-party logistics companies ▪ These features help to ensure an “unbroken” user journey, allowing the platform to keep the users on it from product discovery through payment ▪ TikTok’s seller center has order management and sales tracking functionality that is similar to marketplaces like Shopee and Lazada ▪ Unlike the leading marketplaces however, most of TikTok’s e-commerce however originates from a live stream or a short-form video; its support for category-based or search-based navigation appears more limited Product listing and catalogue management Native promotion / voucher mechanics Product pages with ratings and reviews Native check-out and payment integration Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
31 Brands in all categories are selling on social platforms, although beauty brands are the most active 1: Includes more than 800 popular local and global brands in Indonesia % of brands tracked by Cube Asia1 in Indonesia that have a TikTok Shop, as of Nov 2022 51% 42% 40% 38% 37% 26% Home & Living Beauty & Personal Care Fashion, Apparel, & Shoes Electronics & Appliances Sports & Outdoors 63% Food, Health, & Wellness Hobbies & Collections The beauty category offers the ideal combination of user demographics (the majority of TikTok users as well as content creators are women), and engagement dynamics (as the value of a product demonstration on video, or trust in an independent person such as an influencer). Social Platform Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
(sponsored section) Contents 32 1. Overview of Social Commerce in Southeast Asia 2. Social Commerce archetypes A. Social Platform Commerce B. Conversational Commerce C. Live Shopping D. Community Group Buy 3. Sprinklr and Unified-CXM 4. Learn more
Additional insights in this section are provided by our sponsor, Sprinklr – the leading unified-CXM solutions provider that supports Conversational Commerce and Conversational AI. Sprinklr’s unified-CXM solution provides communication channel coverage of 30+ channels, covering social, messaging, SMS, email, and voice, including support on Facebook Messenger and WhatsApp. Sprinklr is continuously expanding its channel coverage to support customers globally. 33
e-commerce that is influenced heavily by real-time two-way conversations between sellers and buyers, including product evaluation and selection (and some times also the payment) steps happening on the messaging platform Social aspect of the experience = The ability to ask questions and get quick answers at any point along the purchase funnel, recreating digitally the experience of buying a product in a physical store where customers can interact with the store staff What is Conversational Commerce? Hi! I am looking for the Philips Airfryer model HD9654/91 We are sorry that model is out of stock. We do however have model HD9860/91. Link to store Thank you. I would like to buy this product, but don’t have a credit card to make an online purchase. Can I make a bank transfer? Absolutely! I am sharing the account number below: 4104-291830-20 HSBC Bank Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations 34
35 LINE is a good example of the combined power of e-commerce and chat messaging Example: CutePress chat & shop experience in LINE Thailand The Line app has a fully functional e-commerce store built right in to the chat interface With features like automated messages that connect users who reply to real staff members, the app allows brands to offer a seamless and highly personalized purchase experience all within the app Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
36 Conversational Commerce can offer high conversion with low marketing costs Better staff utilization The workload of replying to incoming user messages can be allocated across a wide pool (e.g. retail store employees), allowing staff to reply to messages when they are idle; available tech plugins can help with queuing and distributed management Higher sales conversion By answering shoppers' incoming questions in real-time, Conversational Commerce can help drive conversion with little to no marketing expense Unit economics Given high service costs (especially if dedicated resources are required to handle incoming messages), unit economics for Conversational Commerce tend to be better with higher average order values; AI chat bots can help with unit economics But watch out for … Benefits across online and offline Messaging apps are a great way to enable omni- channel user journeys, connecting users with physical retail channels remotely through a digital medium Available tech infrastructure Many plugin developers have introduced tools for e-commerce integration directly into popular messaging apps Brands can boost revenue by up to 185% with Sprinklr omnichannel commerce, with extensive support for social channels and conversational AI. Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
37 Conversational Commerce directly impacts 12bn USD of e-commerce GMV 1 2 6 11 12 2019 2018 2020 2021 2022 e-commerce GMV on Direct Conversational Commerce USD bn SOURCE: Market size estimates based on triangulations of primary data collected from online consumer surveys across 6 SE Asian countries, with secondary data from public sources including; Facebook; Bain & Company; Statista; Tech in Asia; Essence Global; Bangkok Post; Krungsri Conversational Commerce has grown 6x during COVID Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations • An estimated 55% of internet users in the region are making purchases on messaging apps, spending on average of 45 USD per user per year on this channel • Most of this communication has historically been with individuals and small sellers (who have the capacity to handle their buyers’ incoming requests themselves), but brands and retailers are gradually also realizing the benefits of this channel • In response, messaging apps like LINE and Zalo (most popular in Thailand and Vietnam respectively) have built fully functional e-commerce stores to keep the end-to-end user journey within the app
38 Conversational Commerce also has significant indirect impact in online and offline transactions 2022 SE Asia Conversational Commerce GMV 1: Including messaging apps such as WhatsApp, Facebook Messenger, LINE, Zalo etc. SOURCE: Market size estimates based on triangulations of primary data collected from online consumer surveys across 6 SE Asian countries, with secondary data from public sources including; Facebook; Bain & Company; Statista; Tech in Asia; Essence Global; Bangkok Post; Krungsri 12bn USD (direct impact) GMV of e-commerce transactions completed on Conversational Commerce channels1 50bn USD (indirect impact online) GMV of e-commerce transactions enabled by Conversational Commerce 200bn USD (indirect impact online & offline) GMV of all online and offline transactions enabled by Conversational Commerce Example use cases Closed loop transaction: User selects a product and pays directly on the messaging app Web-chat: User chats with the seller using live web chat before buying Chat & Shop: User messages a physical store staff to learn about what’s in stock before visiting and making the purchase offline Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
39 Conversational Commerce can be very profitable, especially if it encourages consumer-led transactions SOURCE: Interviews with brands, sector experts; company reports Service costs (incl. fixed4) Net price Discount1 List price Logistics / delivery2 Marketing costs COGS2 -10% 100% List price for illustration 50 USD -35% -5% -20% -7.5% 22.5% Messaging channels are generally set up to make it easier for users to reach out directly; the transactions are therefore consumer-led (“pull transactions”) and do not need high marketing budgets Nominal discount rates sufficient; in general no special deals needed to drive Conversational Commerce Service costs are the biggest bucket; these mainly include the personnel cost of handling incoming messages, but can also include the cost of messaging platform or plugins Does Conversational Commerce make money? In most cases, yes; but needs higher average order values to pay for the service staff costs (even better if they can be shared resources) 90% 1: Only includes discounts by seller, excluding discounts paid for by the platform 2: Indicative estimates; costs may vary by category, order size, weight and delivery distance 3: Operating profit before considering ex-channel / allocated expenses such as G&A and HQ costs | 4: Fixed costs to hire service personnel handling customers messages Operating profit3 Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations Simplified P&L, illustrative numbers for a conceptual discussion
40 Conversational Commerce ecosystem in SE Asia Buyers Brands and retailers Sellers Messaging platforms e-commerce platforms Other examples of enablers Some of these apps have built-in e-commerce features; others support 3rd party plugins e- retail Most e-commerce platforms offer messaging through web-chat, either in-built, or 3rd party provided Direct Conversational Commerce Indirect Conversational Commerce SMEs and resellers Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations Sprinklr expands on shoppers’ experience by enabling direct conversational commerce through key channels in Southeast Asia while providing visibility of shopper feedback from retailer sites and e-commerce platforms. e-commerce plugins for messaging apps Web-chat plugins for e-commerce Enabler (sponsor of this report)
41 1: Base case e-commerce outlook based on triangulations of expert interviews with secondary data from public sources including Facebook, Bain & Company, Google, Temasek, and eMarketer 1 2 6 11 12 23 35 2021 2018 2020 2019 2027 2022 Conversational Commerce in Southeast Asia can grow to US$ 23 ~ 35bn in 5 years Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations e-commerce GMV on Direct Conversational Commerce USD bn Base case ~ 15% CAGR1 Conversational Commerce grows in step with overall e-commerce in the region The use of messaging apps for e-commerce grows, but incumbent marketplaces and other online platforms are able to maintain their share of overall e-commerce transactions High case ~ 25% CAGR Spending per user on messaging apps grows faster than other platforms, as emerging plugins significantly improve the purchase experience on apps such as WhatsApp Conversational Commerce SOURCE: Stakeholder interviews; financial modelling for different scenarios
42 Top five winning tips for brands #1 #2 #3 #4 #5 Adapt your style of Conversational Commerce to your category and price level Human-agent Conversational Commerce delights customers and improves conversion rates, but only becomes profitable at large transaction sizes. For lower price-points, an implementation focused on chatbots with human escalation paths can be more cost effective. Leverage software and systems integrations to make the customer experience sing Conversational Commerce has the most robust enabler ecosystem in Social Commerce, with specialized solutions for multi-channel agent routing, CRM, e-commerce integration, and more. Leverage these solutions to improve customer experience and reduce operational costs. Conversational Commerce is both for messaging apps and e-commerce platforms The ability of Conversational Commerce to improve conversion rates and customer experience also extends to e-commerce platforms like Shopee and Lazada, where up to 50% of purchases are influenced by messaging. Automate close-ended questions to maximize impact of human conversations Human labour is the most expensive and scarce resource in Conversational Commerce. Make consistent efforts to automate all answers to questions that have no human value-add, such as shipping status notifications and shop opening hour inquiries. Use Conversational Commerce to diversify tasks and career paths for retail staff Detailed brand and product knowledge, as well as customer service skills, make brands’ retail staff members ideal for staffing Conversational Commerce. Engaging them actively will also help to develop more rewarding and flexible work experiences. Conversational Commerce is a must- have for any consumer brand to build a more personalized connection with its users Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
43 The objective of Conversational Commerce is to help answer users’ questions in real-time … Discovery Evaluation Purchase intent Purchase success Drop off Drop off Drop off Do you have white King size bed sheets? Which of these 3 options is the best value for money? Can I pay by bank transfer? Examples of shopper questions along the purchase funnel 74% of consumers message a business to make a purchase. Social messaging is the preferred channel for customers to make purchases. Source: Facebook Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
Discovery Evaluation Purchase intent Purchase success Do you have white King size bed sheets? Which of these 3 options is the best value for money? Can I pay by bank transfer? Drop off Drop off 44 … in order to reduce the drop-off rate at each step and improve overall conversion Yes! These are our latest selection – link. The Snowcotton selection has been our highest rated series among value buyers. Surely! I am sharing the bank details below. Drop off Shoppers who move on to the next stage having found answers to their questions ▪ Conversational Commerce seeks to answer shoppers’ questions in real-time, and so reduce the drop- off rate at each step ▪ It only works however if the answers are responsive ▪ Brands and retailers can do so either by setting up a dedicated team, or assigning staff who are not continuously utilized (e.g. physical store staff) to answer questions as soon as they come in ▪ Staff costs can build up however, which is why AI chat-bots are becoming popular Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
45 Chat offers the most convenient, real- time and cost- effective channel for Conversational Commerce Phone calls offer real- time communication, but can be disruptive for buyers, and expensive for sellers to set up Chat offers the right balance of convenience and real-time responsiveness for buyers, and cost-effectiveness for sellers Email can be a very cost-effective channel for sellers, but is not responsive enough to turn around users likely to drop off along the purchase funnel Sprinklr’s unified-CXM solution equips businesses to resolve customer cases faster with Conversational AI and Bots that cost 91% less than humans. Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
46 Facebook Messenger and WhatsApp are the leading apps being used for Conversational Commerce SOURCE: Online consumer surveys across 6 SE Asian countries, administered in July 2022 27% 21% 6% 46% SMS / iMessage Facebook Messenger WhatsApp Other Q: How many of your transactions on mobile messaging apps were on the following apps? % of respondents Facebook Messenger and WhatsApp jointly contribute to nearly 50% of all Conversational Commerce transactions in SE Asia The Other bucket includes apps like LINE and Zalo that are most popular in Thailand and Vietnam respectively, and a long list of other apps like Viber and Telegram Sprinklr’s unified-CXM solution provides communication channel coverage of 30+ channels, covering social, messaging, SMS, email, and voice, including support on Facebook messenger and WhatsApp. Conversational Commerce Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
(sponsored section) Contents 47 1. Overview of Social Commerce in Southeast Asia 2. Social Commerce archetypes A. Social Platform Commerce B. Conversational Commerce C. Live Shopping D. Community Group Buy 3. Sprinklr and Unified-CXM 4. Learn more
48 What is Live Shopping? e-commerce that happens during live video streaming sessions, influenced heavily by live product demonstrations by sellers (live streamers), and their real-time visual engagement with a group of buyers (live shoppers) Social aspect of the experience = The visual, “touch and feel” experience of a physical purchase, recreated digitally through a live shopper demonstrating the product, and able to answer the buyers’ questions Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
49 Facebook has traditionally been the leading host platform for Live Shopping streams in SE Asia Example: Pimrypie live stream in Thailand Elements of successful Live Shopping: An engaging presenter Attractive products and prices A streaming platform with real- time interactive features Engaged users commenting, asking questions and getting answers, live Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
50 Extensive influencer and tech ecosystem Influencers and KOLs moved online in big numbers during COVID. Along with that emerged talent agencies, studios, and tech providers that allow even small sellers to produce high- quality streams even if they don’t have in-house capabilities. Relevant for experience products Live Shopping is most popular for categories such as beauty, electronic appliances, and fashion – where the long-term physical experience of using the product is a big contributor to the users’ satisfaction. Live Shopping, especially with a trusted presenter, helps to highlight this experience. Growing live video consumption Movement restrictions during COVID created a demand for more face- to-face experiences online. In addition, the work from home culture – which has survived past COVID – has opened up more time and willingness for consumers to consume video content. Unit economics Success in live shopping requires attractive deals, a good presenter, and seamless and engaging tech UI/UX – costs that can impact profitability. This makes Live Shopping more suitable for occasional events such as new product launches than ongoing sales. Live Shopping offers brands a high engagement sales channel But watch out for … Buyer retention Live Shopping draws many viewers attracted by big discounts. Converting these users to loyal, repeat buyers can however be challenging. Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
51 Live Shopping has accelerated to become a 13bn USD market in SE Asia SOURCE: Market size estimates based on triangulations of primary data collected from online consumer surveys across 6 SE Asian countries, with secondary data from public sources including; Facebook; Bain & Company; Statista; Essence Global; Ipsos; Oppotus; Shopavision; Thai PBS World; Shoplus; Vietnam Investment review; Decision Lab 1 4 9 13 2018 2019 2020 2021 0.3 2022 e-commerce GMV on Live Shopping USD bn Live Shopping sales have grown more than 10x during COVID • Live Shopping has been one of the breakout trends in Southeast Asia during the COVID years • Indonesia is the largest Live Shopping market in the region with nearly 5bn USD estimated GMV from live sales in 2022; 40% of internet users in the country are expected to have made a purchase on live streaming in 2022 • Meta platforms such as Facebook and Instagram have been traditionally the largest host platforms for live video streams, but TikTok has taken up a significant share of this market, especially in Indonesia Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
52 The market size estimate includes purchases made during or immediately after a Live Shopping event Announcement of the Live Shopping event Expiry for deals offered during Live Shopping Start of the live stream End of the live stream $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Live Shopping market (GMV) = Transactions between the start of the shopping event, and the expiry of the deals (normally up to 24 hours after the end of the event) Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
53 Discounts and influencer fees are the key drivers of bottom-line profitability SOURCE: Interviews with brands, live streamers, sector experts; company reports Discount1 List price Net price Marketing costs COGS2 Influencer fees Logistics / delivery2 1: Only includes discounts by seller, excluding discounts paid for by the platform 2: Indicative estimates; costs may vary by category, order size, weight and delivery distance 3: Operating profit before considering ex-channel / allocated expenses such as G&A and HQ costs Operating profit3 List price for illustration 25 USD -30% -35% -10% -13.5% 100% 60% -7.5% 4% Live Shopping is characterized by great deals and deep discounts to create a reason for users to tune in, and an urgency to buy during the live-stream; discounts can vary from 20 - 40% (or higher) Influencer fees vary based on the job to be done. Costs are low when a presenter merely needs to host a stream for a brand’s own audience; but high-profile influencers expected to activate their own audience can charge a lot Does live selling make money? Operating profits can vary greatly, but tend to be low; for big brands, Live Shopping is best suited for new product launches or occasional customer engagement Some marketing budget required to promote the live-shopping event Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations Simplified P&L, illustrative numbers for a conceptual discussion
54 Live Shopping ecosystem in Southeast Asia Enablers Buyers Brands and retailers Influencers and celebrities Independent sellers Sellers Manufacturers and distributors Brands Products Streaming platforms e-commerce platforms Native live platforms Social / content platforms Technology / system providers Influencer discovery, training, and management Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
55 1 4 9 13 26 2019 2020 2018 2021 2022 2027 0.3 50 Live Shopping in Southeast Asia can grow to US$ 26 ~ 50bn in 5 years Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations e-commerce GMV on Live Shopping USD bn Base case ~ 15% CAGR1 Live Shopping grows in step with overall e-commerce in the region Time and money spent on live streams grows, but growth is muted by a return to offline / other channels post COVID, and limited marketing budgets restrict big deals to select cases, e.g. new product launches High case ~ 30% CAGR Live Shopping accelerates to ~ 15% of total e-commerce, similar levels as China today Brands continue to make aggressive investments into this model, live shopping on TikTok takes off, and a sophisticated ecosystem for live video production and delivery emerges in Southeast Asian countries, similar to China 1: Base case e-commerce outlook based on triangulations of expert interviews with secondary data from public sources including Facebook, Bain & Company, Google, Temasek, and eMarketer SOURCE: Stakeholder interviews; financial modelling for different scenarios
56 Top five winning tips for brands #1 #2 #3 #4 #5 Focus on experimentation and speed instead of production value Many brands start their Live Shopping journey with elaborate studio setups, professional production, and paid celebrity hosts, but that sacrifices what audiences care most about – genuine engagement and authenticity. Embrace these traits from the start to get ahead. Partner with influencers to expand your “stage”, but beware of the costs Live Shopping influencers can help brands convey their messages better and to larger audiences, but not without costs. Popular influencers demand attractive brand-funded deals and sales commission of up to 30%, taking a steep toll on channel profitability. Focus on a single clear goal to maximize impact Brands can leverage Live Shopping in many different ways depending on their objectives – attracting new audiences, engaging existing audiences, improving e-commerce conversions, etc. Set a clear goal to drive your Live Shopping strategy. Learn from independent live sellers to drive higher engagement and conversion Thousands of independent live sellers compete for the attention of SE Asia’s consumers every day, leading to a rapid pace of innovation in selling techniques and gimmicks. Observe and learn from them to drive results. Get ready for always-on Live Shopping on TikTok Daily Live Shopping sessions might sound daunting, but leaders are already going beyond that with many digital challenger brands streaming at least 8 hours per day (and some planning for 24-hour coverage) on TikTok. Plan for high streaming frequency to make the most of the channel. Live Shopping is particularly effective for experiential products in beauty, fashion, and home & living categories Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
57 SOURCE: Online consumer surveys across 6 SE Asian countries, administered in June-July 2022 100% All respondents 92% Know about Live Shopping 79% Have watched at least 1 Live Shopping session in the last 12 months 44% Have purchased at least once in the last 12 months 8% 13% 35% 44% of internet users in SE Asia have participated in Live Shopping in the last 12 months ▪ High awareness: 90+% of consumers have heard of Live Shopping ▪ High participation: 4 in 5 internet users have watched a Live Shopping session in the last 12 months ▪ High conversion: More than half of all users watching live streaming sessions are making purchases ▪ Vietnam and Thailand have the most active audiences, where 60% of respondents made a purchase via Live Shopping in the last 12 months Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
58 For most consumers however, Live Shopping is an occasional shopping channel SOURCE: Online consumer surveys across 6 SE Asian countries, administered in June-July 2022 7% 42% 26% 14% 5% 3% 3% 2-5 1 More than 50 11-20 6-10 21-30 31-50 Q: How many purchase transactions did you make directly from watching Live Shopping sessions online in the last 12 months? % of respondents 75% of users buy occasionally (less than once a month), suggesting most are “curious buyers” who still prefer their primary purchase channels About 10% of users are “power buyers”, tuning in to Live Shopping sessions regularly, e.g. to get discounts on their favourite products / brands or follow their favourite influencers Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
59 Who is streaming? 3 categories of live sellers ▪ 3 categories of live sellers are vying for eyeballs today, each employing different techniques to engage and convert viewers ▪ Independent sellers are the largest group, peddling a range of normally low-cost wares often imported from China ▪ Brands & retailers, and influencers tend to offer higher-value goods during live-streams with higher production quality ▪ Low entry barriers mean that there are thousands of live-streams active at any moment ▪ Consumers can only view one livestream at a time however, so there’s sharp competition for viewership Micro-sellers of all kinds, by far the largest group, including everyone from local clothing shop owners to toy importers Established brands looking for new ways to engage their users, embracing live sales as a channel both for user engagement and sales Influencers or KOLs - no new concept in SE Asia, but now also famous as live sellers due to their infectious personalities and selling skills Brands and influencers also often work together on Live Shopping sessions Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
60 Independent sellers are the biggest segment, containing micro-sellers of many kinds Estimated share of live- shopping purchases from independent micro-sellers1 40% Key characteristics: ▪ Limited merchandise differentiation: Most independent sellers get their products from wholesalers, including many from cross-border sites like AliExpress. They respond quickly to trends, so their assortment tends to change rapidly and coalesce fast as they replicate. ▪ Hustle and creativity: Many independent sellers also operate shops on Shopee and Lazada, and started live selling to differentiate themselves. They drive engagement with improvised games and audience outreach, and find creative ways to overcome platforms’ limitations, e.g. sellers with mature audiences at times encourage their buyers to ask their kids to help make the payment. ▪ Focus on community: Most independent sellers stream almost daily. While audience sizes vary a lot, they rely heavily on a small set of regulars who tune in often and buy from time to time. As a result, many of them put significant effort into building relationships with regular viewers. 1: Indicative estimate based on end-user surveys and expert interviews Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
61 More established brands are experimenting with live commerce 1: Indicative estimate based on end-user surveys and expert interviews Key characteristics: ▪ Low frequency of streaming: Brands and retailers who leverage live selling treat it more like a marketing activation than as a distribution channel. Early mover brands tend to stream between once per quarter to once or twice per month. ▪ Reliance on presenters: Established brands rely heavily on hired presenters. Many started by leveraging their existing celebrity ambassadors, but later switched to specialised presenters who offered the unique live selling skill set better. ▪ High production value: Brands tend to invest in elaborate setups, including rented or bought recording equipment, but also branded studios and professional editing. These investments ensure that live selling activities look and feel on-brand, but drag down returns on live selling activities. Estimated share of live- shopping purchases directly from brands and retail companies1 40% Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
62 Specialized live shopping influencers have risen to fame with savvy, on-screen personalities 20% Estimated share of live- shopping purchases from influencers or celebrities1 Key characteristics: ▪ Known for live selling: The biggest live selling influencers today are a very different set of people than the broad influencer top lists. Some live sellers in Vietnam or Thailand move millions of dollars of beauty products annually without being in the list of top influencers. ▪ Curation of deals: Most live selling influencers generated their live-shopping audience by being very selective about which deals to feature. Since their primary business model is promoting other brands and manufacturers’ products in return for a share of revenue, they are very skilled at negotiating a deep consumer-facing discount and meaningful revenue cuts. 1: Indicative estimate based on end-user surveys and expert interviews ▪ Prefer social platforms: Live selling influencers live and die by their viewers, so they tend to prefer streaming on platforms like Facebook and Instagram that give them a higher degree of ownership of their audience. They are largely absent from e-commerce platform streaming, except in cases where brands or retailers hire them specifically for these platforms. Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
63 Where are users Live Shopping? 3 types of platforms Facebook and Instagram attracts large live selling audiences but offer limited engagement and conversion tools in Southeast Asia, leading to high use of 3rd party seller tools; TikTok, meanwhile has embraced live selling with a great integrated e-commerce check-out experience ▪ The 3 most common types of Live Shopping platforms have pros and cons across viewership, engagement tools, and conversion tools ▪ While tools to simulcast a video feed to multiple platforms exist, audience engagement and transaction capture across multiple platforms can be challenging ▪ Live sellers therefore often have to choose a primary platform e-commerce platforms make up for their smaller Live Shopping viewership by building for maximum viewer engagement and conversion A growing crop of native platforms with purpose- built engagement tools and seamless check-out; but most still have limited viewership ▪ TikTok has been the biggest story in Live Shopping in SE Asia this year, within a year having taken up a sizeable share of e-commerce transactions, and an even bigger share of consumers’ mindshare Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
64 Facebook and Instagram have been the traditional leaders in Live Shopping Estimated share of live- shopping purchases in 2022 on Facebook or Instagram1 ▪ When live selling started to proliferate in Southeast Asia around 2018 and 2019, the Meta ecosystem - Facebook and to a lesser degree Instagram - was where most of the action started ▪ These platforms had large, engaged user bases and many sharing features ▪ Brands and influencers with an existing audience were able to find immediate viewership, and new sellers could lean on Facebook’s discovery and sharing algorithms to build an audience ▪ Meta has never seemed to take significant steps to improve its live selling engagement and conversion tools however, and in mid 2022 announced that it would stop supporting Live Shopping altogether ▪ A number of tech-based vendors have stepped in to fill this gap with plugins for order collection and management however, to try and make it easier for viewers to buy and pay 45% 1: Indicative estimate based on end-user surveys, expert interviews, and secondary research Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
65 TikTok is the breakout success story of Social Commerce in SE Asia this year 10% Estimated share of live- shopping purchases in 2022 on TikTok1 ▪ TikTok has taken a starkly different path from Meta, mirroring the integrated e-commerce tools of its Chinese sister-app Douyin to provide fully integrated online check-out, even in its early days of user growth ▪ The app features built-in engagement tools, like emoji reactions and simple in-stream games ▪ Most importantly, it offers an integrated e-commerce engine as part of TikTok Shops which make it a much more engaging and conversion oriented live-shopping platform ▪ It has also energized cross-border e-commerce, with many live sellers in China now setting up dedicated streams for Southeast Asian markets, with prices quoted in local currencies ▪ However, most live sellers on the app are micro-sellers offering high discounts on mass market products; big brands, especially global ones, appear to have been slower in adopting this platform 1: Indicative estimate based on end-user surveys, expert interviews, and secondary research Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
66 Live Shopping on e-commerce platforms is primarily tailored to help engage and convert traffic that already exists Estimated share of live- shopping purchases in 2022 on e-commerce platforms1 ▪ Live selling through e-commerce platforms in Southeast Asia was deliberately instigated by the two dominating e-commerce marketplaces - Shopee and Lazada ▪ Learning best practices from Chinese e-commerce giants like Taobao and JD, they offer live selling tools and experiences, and advertise “primetime slots” with high viewership to brand partners ▪ But the bulk of Live Shopping on these platforms is happening with independent sellers who stream daily to a small audience with a product selection and style similar to a weekend market or bazaar ▪ In response, large brands and retailers are creating their own live selling environments on their online stores to boost user engagement and conversion 40% 1: Indicative estimate based on end-user surveys, expert interviews, and secondary research Live Shopping Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
(sponsored section) Contents 67 1. Overview of Social Commerce in Southeast Asia 2. Social Commerce archetypes A. Social Platform Commerce B. Conversational Commerce C. Live Shopping D. Community Group Buy 3. Sprinklr and Unified-CXM 4. Learn more
68 What is Community Group Buy? e-commerce that is influenced heavily by the dynamics of small communities or groups, who either come together organically to unlock a special deal, or are targeted through a central reseller or agent Social aspect of the experience = Trust, either among community members who are working together to make the purchase, or between the buyers and the reseller / agent Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
69 The rise of Community Group Buy Two types of Community Group Buy models ▪ To understand what Community Group Buy is all about, it is helpful to think first about an offline purchase journey ▪ We might act on the recommendation of a friend or family member or buy a product, but otherwise the transaction happens directly between us, a single consumer, and the seller ▪ Community Group Buy is different in that it introduces group dynamics – friends, family, someone in the middle we trust ▪ This builds on a number of disparate factors including Southeast Asia’s unique community culture and the innovations of Chinese tech companies, and has resulted in new ways of buying and selling consumer products “ Price-led models Reseller-led models “ ▪ Price-led models bring together a group of people based on a common desire to “unlock” a discounted price ▪ This is similar to the original version of Pinduoduo in China, where a deal requires a minimum number of buyers, and the platform allows everyone to organically share the deal with their friends and family ▪ In Reseller-led models, the glue that binds a community isn’t necessarily the deal, but a reseller ▪ This reseller (or agent or group leader) in most cases is known to the end group members, and provides certain services or value-add Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
WEBUY Group Chat ~ Group Leader 70 WeBuy is a good example of a Community Group Buy platform in Southeast Asia 1. A new deal gets launched on the WeBuy website 2. Group Leaders broadcast the deal to their local communities through WhatsApp 3. Interested buyers can make the purchase on the WeBuy website, have the products delivered to the Group Leader’s address, and pick them up later Example: WeBuy purchase journey in Singapore 924WIUEO98 924WIUEO98 Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
71 Useful for slow- moving inventory This model is often used for liquidation of slow- moving inventory (e.g. old models of electronic products or soon to expire beauty or food products) since it allows for quick organic demand aggregation around a heavily discounted offer. "No cure No pay" business model With the burden of product marketing shifting from the brand to the reseller (or agent) who is marketing the deal to their local community in return for a commission, this model reduces the need for fixed marketing spend. This makes it particularly relevant for new brands with limited marketing budgets Low-cost access to Tier 2/3 cities Infrastructure limitations in Tier 2 and 3 cities can make logistics expensive. By delivering to hubs that can aggregate demand for distributed communities however, this model can reduce the unit cost for distribution. Community Group Buy offers a unique “no cure no pay” model But watch out for … Customer loyalty and brand communication The primary draw for consumers buying through communities is better prices, making it difficult for brands to convert them into loyal buyers of regular-priced products. Also, with last- mile communication being done by independent resellers, brands need to be more careful of how they are being marketed. Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
72 Community Group Buy is relatively small, comprising around 3% of e-commerce GMV in Southeast Asia SOURCE: Market size estimates based on triangulations of primary data collected from online consumer surveys across 6 SE Asian countries, with secondary data from public sources including; Facebook; Bain & Company; Statista; Essence Global; Ipsos; Oppotus; Shopavision; Thai PBS World; Shoplus; Vietnam Investment review; Decision Lab 1 2 3 5 2018 2019 2021 2020 2022 0.5 e-commerce GMV on Community Group Buy USD bn Community Group Buy grew 5x during COVID ~ 3% of e-commerce GMV in Southeast Asia • The biggest market for Community Group Buy in the region is Indonesia (2bn USD in 2022), where apps such as Kitabeli and Evermos have used this model to accelerate e-commerce adoption in Tier 2/3 cities • Many of these startups have been inspired by the success of innovative business models such as Pinduoduo in China and Meesho in India • Availability of investor funding in the last few years also helped, since the big discounts required to incentivized deal sharing and/or the presence of an additional intermediary (reseller) leaves less margin available for the platforms to bootstrap growth Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
73 Price-led models need big discounts to trigger a viral response and build organic demand SOURCE: Interviews with brands, sector experts; company reports Discount1 List price Net price COGS2 Marketing costs Platform fees Logistics / delivery2 1: Only includes discounts by seller, excluding discounts paid for by the platform 2: Indicative estimates; costs may vary by category, order size, weight and delivery distance 3: Operating profit before considering ex-channel / allocated expenses such as G&A and HQ costs | 3: Fixed costs to hire service personnel handling customers messages List price for illustration 20 USD -35% -5% -5% -7.5% 60% -40% 100% Operating profit3 7.5% Discounts are the biggest cost-bucket for price-led Community Group Buy transactions; they offer a reasons for end users to make the effort to share the deal with their friends and family, and build towards the minimum order volume Marketing costs tend to be low as the deal is meant to “sell itself” Platform costs are generally also low, e.g. 80-90% of Pinduoduo revenues from services such as advertising This point also explains why price-led models have not taken off in SE Asia vs. China; the region’s high reliance on imports means that companies here often do not have the margins available to offer such steep discounts Does Price-led Group Buy make money? Yes, but only for products with high room for discounting, and where users are driven much more by prices than brand-affinity Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations Simplified P&L, illustrative numbers for a conceptual discussion
74 Reseller-led models do not need big discounts or marketing costs, but can have high intermediary fees SOURCE: Interviews with brands, sector experts; company reports Marketing costs Intermediary commissions Net price List price COGS2 Discount1 Logistics / delivery2 1: Only includes discounts by seller, excluding discounts paid for by the platform 2: Indicative estimates; costs may vary by category, order size, weight and delivery distance 3: Operating profit before considering ex-channel / allocated expenses such as G&A and HQ costs | 3: Fixed costs to hire service personnel handling customers messages List price for illustration 20 USD -35% -5% -25% -7.5% 80% -20% 100% Operating profit3 7.5% Discounts can be less than price-led models but generally still needed to help resellers sell to their end- users (who if not for a favorable price may choose to buy from other platforms) Marketing costs tend to be low as this is a “no cure no pay” channel; most of the marketing is done by the resellers to their communities Intermediary fees can be high however, including ~ 20% commission for the resellers, and ~ 5% if there is a platform managing these resellers Does Reseller-led Group Buy make money? Yes, especially for emerging brands or new products, where the trust between the reseller and the buyer can help bridge the lack of brand-awareness Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations Simplified P&L, illustrative numbers for a conceptual discussion
75 Community Group Buy ecosystem in Southeast Asia Enablers Buyers Reseller-led Community Group Buy platforms Products Resellers Price-led Community Group Buy platforms Manufacturers and distributors Brands Pinduoduo-like platforms that connect brands directly to groups of buyers; limited examples in SE Asia Platforms that allow micro-sellers to sign-up to become resellers without procuring themselves or holding inventory B2B e-commerce platforms1 Platforms that help brands sell to small shops / micro-sellers 1: B2B e-commerce platforms shown here only for comparison; these are not included in Social Commerce in this report as they do not participate in the final B2C transaction, generally leaving it up to the micro-seller / small shop to manage that relationship Many brands are beginning to set up and manage their own networks of resellers; on the other hand, many resellers procure directly from manufacturers (e.g. in China) without going through a Group Buy platform Resellers often use other forms of Social Commerce such as live selling and messaging as enablers for their sales Micro-sellers, small shop or business owners, home makers etc. Buyers in this model do not necessarily need to be online, and can ask the resellers to buy on their behalf Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
76 1 2 3 5 8 2018 2019 2021 2020 2022 2027 0.5 15 Community Group Buy in Southeast Asia can grow to US$ 8 ~ 15bn in 5 years Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations e-commerce GMV on Community Group Buy USD bn Community Group Buy Base case ~ 9% CAGR Community Group Buy tech startups continue to drive e-commerce growth for emerging brands and/or in Tier 2/3 geographies through the reseller-led model But they are unable to structurally compete on prices with incumbent marketplaces at scale High case ~ 25% CAGR New, sophisticated Pinduoduo-like business models take hold in the region and are able to deliver competitive price-led value propositions leveraging group dynamics and gamification Meanwhile, supply chains and logistics improve significantly to enable cost-effective demand aggregation much more effectively SOURCE: Stakeholder interviews; financial modelling for different scenarios
77 Top five winning tips for brands #1 #2 #3 #4 #5 Leverage reseller-led Group Buy to break into new markets with limited financial risk Consumer brands that seek to break into new geographies and demographics can leverage reseller-led Group Buy platforms due to their attractive combination of high frontier market exposure and fully commission-based business model. Invest in reseller brand training, education, and incentives to maximize impact The critical success factor for reseller-led Group Buy is to ensure that agents feel equipped and incentivized to market your products to their consumer base. Invest in regular brand training and education, as well as reseller incentives, to maximize impact. Monitor prices and reseller behaviour to protect your retail pricing power Because Group Buy resellers get access to products at wholesale prices, participating can risk eroding brands’ retail pricing. To avoid this, monitor the end-user prices regularly and ensure that only a minimal share of channel sales are to resellers buying for themselves. Invest in rigorous logistics planning and optimization to avoid unhappy surprises A high share of Group Buy sales in Southeast Asia are in frontier regions with poor logistics infrastructure. Keep an eye on your unit economics, as the mid-mile and last-mile delivery charges can be substantial. Consider starting your own reseller program if Group Buy becomes a big channel While launching Group Buy through a platform helps to bring an instant community of resellers, it can make sense to go direct eventually if sales become substantial. Running an independent program can save approximately 5% in platform margin, which can be saved or passed on to resellers. Community Group Buy can be a great model for brands with limited fixed marketing budgets, especially for Tier 2 / 3 cities Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
78 The sophistication of e-commerce buyers in most markets tends to grow over time … Growing level of user sophistication over time Lack of Knowledge to buy online Lack of Capabilities to buy online Sophisticated users pick their channel based on Value for Money Drivers of user sophistication: ▪ Greater smartphone penetration ▪ Growing use of digital payments ▪ Improving network speeds ▪ Government efforts to drive digital literacy ▪ Marketing initiatives by e-commerce platforms ▪ Low-income developing countries tend to have many users with Knowledge or Capability gaps ▪ As users build their knowledge and capabilities, they are able to shop online more effectively ▪ Sophisticated users begin to shop around, and are able to pick channels that offer them the best Value for Money Indicative of number of users (illustrative) Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
79 … and Community Group Buy platforms need to evolve along with their end users Growing level of user sophistication over time Lack of Knowledge to buy online Lack of Capabilities to buy online Sophisticated users pick their channel based on Value for Money Bridge the Knowledge gap Bridge the Capability gap Offer Value for Money for the end-user Successful Community Group Buy models need to … For these users, reseller or agent led models offer an excellent approach to bridging this knowledge gap These models can offer a compelling “no cure no pay” offering to emerging brands, but have a limited “shelf-life” if they do not become more sophisticated over time as their end users evolve For these users, having a reseller or agent is not enough; successful models need price-leadership and/or creative business models to deliver Value for Money The role of a reseller is reduced in these models (and hence the margin that needs to be shared with the resellers), but the platforms need to be able to compete better with other types of e-commerce (esp. marketplaces) in offering better value for money ▪ Agent (or reseller) led models work best for user segments that are unable or unwilling to shop online themselves due to knowledge or capability gaps Indicative of number of users (illustrative) Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
80 Price-led platforms, originally inspired by Pinduoduo in China, have had to customize for Southeast Asia SOURCE: Company websites; WeBuy CEO interview ▪ WeBuy launched in 2018 inspired by a conversation between the platform’s founder Vincent Xue and “an investor in early stages of Pinduoduo.” ▪ It started with the objective of delivering savings by encouraging friends and families to aggregate demand in small groups, similar to Pinduoduo ▪ But over time the platform has begun to rely much more on group leaders to not only push deals to the end-users, but also offer aggregated deliveries to minimize logistics costs ▪ Lazada launched a Pinduoduo-like feature called Slash It in 2020, allowing users to invite their friends to slash the price of an item, but the feature is no longer promoted actively ▪ Shopee also tested a group buy feature in a few markets but does not market it actively any more ▪ Both platforms seem to have concluded that the stand-alone group buy model (without active resellers) does not work; and their current cost structures do not offer room for any margin sharing with resellers or agents Started as a price-led model, but now more similar to a reseller led model Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
81 Many of Pinduoduo’s success factors in China are not applicable in Southeast Asia Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
82 Reseller-led platforms have found more traction in the developing markets of Southeast Asia SOURCE: Company websites ▪ Targets female micro sellers in Vietnam as agents, offering a wider range of categories beyond beauty, including home goods and small electronics ▪ Also offers credit to its agents ▪ Focuses on beauty products, working mainly with female micro sellers in Vietnam ▪ Offers a wide range of branded makeup, hair and skincare products from well- known brands ▪ Indonesian reseller platform focusing primarily on fashion, but also offers beauty and home goods ▪ Allows anyone to sign up and become a reseller without holding inventory ▪ Positions itself as a beauty product reseller and dropship platform in Indonesia ▪ Allows customers to become “beautypreneurs” by reselling from 250+ brands and 1,000+ SKUs Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
83 Reseller-led community models can span across B2B B2C, and C2C e-commerce Business Business Consumer Consumer B2B e-commerce B2C e-commerce C2C e-commerce These platforms are digitizing the upstream section of the e-commerce value chain, helping brands sell to small shops / micro-sellers more effectively These platforms are digitizing the upstream section of the e-commerce value chain, helping brands sell to small shops / micro-sellers more effectively A large share of transactions on these platforms are C2C, where many individual micro-sellers directly purchase products from brands and resell them to other consumers Focus of this report (B2C Social Commerce) Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
84 There are some key differences between the two models “ Price-led models Reseller-led models “ Yes ▪ These models tend to target end-users who are not sophisticated shoppers; it is the reseller or group leader’s role to help reach these users Not necessary ▪ The end-users for these models tend to sophisticated and socially connected shoppers able to use tech to connect with other shoppers Group leader needed? Medium ▪ The platform’s primary customer is not the end-user by the reseller; in fact, the reseller platform can even be “hidden” to the end user High ▪ The platform needs to be advanced (even gamified) to make it easier for end-users to participate in sophisticated deal dynamics themselves Platform sophistication Optional ▪ The reseller can add value to end users’ experience not just through price, but also convenience, security, quality, variety of products etc. Required ▪ Since the model requires greater effort from the end-users, it is only worth if users are getting better prices versus other e- commerce channels Price leadership? If so different, why are the two models considered to be part of Community Group Buy? ▪ Most start-ups offering either of these two models refer to the community as being the key differentiator of their offering ▪ Both models also offer brands a mechanism to target end-users not individually, but with groups as the building blocks ▪ Pinduoduo is often the common inspiration Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
85 India and China illustrate these differences Growing level of user sophistication over time Lack of Knowledge to buy online Lack of Capabilities to buy online Sophisticated users pick their channel based on Value for Money Community Group Buy platforms in China tend to be more gamified, and may or may not need an agent / reseller INDIA CHINA ▪ India has a significant user population that is not buying online (nearly 70% of the 700 million users who have internet) ▪ This offers fertile ground for reseller-led models to step in to address these knowledge and/or capability gaps ▪ China on the other hand, has a more sophisticated internet population, with many users already familiar with e- commerce ▪ This reduces the need for pure reseller-led models, and opens up the opportunity for more sophisticated, gamified platforms like Pinduoduo Most Community Group Buy platforms started with an agent / reseller led model Indicative of number of users (illustrative) Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
86 India case study: Meesho started with a reseller-led model, but switched to being price-led over time Growing level of user sophistication over time Lack of Knowledge to buy online Lack of Capabilities to buy online Sophisticated users pick their channel based on Value for Money (when it started) (when it pivoted away from reseller model) ▪ Meesho started with users who had no other channel to buy online (or even compare prices) except from its resellers ▪ As users became more sophisticated, Meesho had to switch to selling direct supported by a price-led proposition (or risk losing them to other platforms) ▪ The company shifted to a primarily price-led value proposition, positioning itself the “lowest prices” destination for fashion (offering LPG – Lowest Price Guarantee) Indicative of number of users (illustrative) Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
China case study: Pindudouo started with a price-led value proposition right-away Growing level of user sophistication over time Lack of Knowledge to buy online Lack of Capabilities to buy online Sophisticated users pick their channel based on Value for Money ▪ Many of Pinduoduo’s users are sophisticated online shoppers with the knowledge and capabilities to hunt for the best Value for Money themselves ▪ Pinduoduo had to do more than just offer them a reseller; they had to build a sophisticated platform that: - Offers indisputably lower prices than other channels, - Owns the end user relationship directly (rather than through a reseller), and - Gamifies the end-user experience, driving direct and active engagement with the platform The Pinduoduo user workflow is more complicated, and designed for sophisticated end users looking for Value for Money Indicative of number of users (illustrative) 87 Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
Southeast Asian markets like Indonesia are between India and China Growing level of user sophistication Lack of Knowledge Lack of Capabilities Sophisticated users pick their channel based on Value for Money INDIA CHINA INDONESIA Consumer spending Internet users, % $2,146 USD per capita (2020) 75% (2022) Consumer spending Internet users, % $1,068 USD per capita (2020) 50% (2022) Consumer spending Internet users, % $4,112 USD per capita (2019) 75% (2022) • Indonesians (on average) are more sophisticated vs. Indians, and so better able to do online shopping themselves • This sets a higher bar for reseller- led platforms to offer better value for money vs. e-commerce platforms 88 Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
89 To be relevant for end-users at scale, the reseller-led model needs to deliver value for money 65% 61% 50% 48% 31% It’s cheaper I get better product variety It’s more convenient Resellers offer me products I cannot find in other channels I trust the resellers Q: I buy from resellers because (top 5 reasons) … SOURCE: Indonesia consumer survey • While reseller-led models emerged to bring e-commerce to users who could not buy online themselves, buyers in most Southeast Asian countries now are already (or are becoming) sophisticated • As a result, for the model to become a meaningful share of a consumer’s wallet, it will need to structurally deliver better price (or at least value for money) than leading e-commerce marketplaces such as Shopee or Tokopedia, which can be difficult given their historical dominance Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
90 Logistics / distribution is also a key success factor for this model to work The logistics cost needs to be low The model should allow for reliable and cost- effective delivery to Tier 2/3 cities Given the need for either big discounts, or margin sharing with a reseller, to activate community dynamics, the margin available for logistics costs in this model is relatively lower. This is particularly true for the FMCG category, which is the bulk of consumer spending for many target customers of this model (price- conscious customers). The most successful examples of this model globally (e.g. Pinduoduo in China and Meesho in India) have heavily relied on a network of 3PLs, choosing to invest in asset light technologies to dynamically choose the least cost delivery option for their shipments. Given that community buying models in many Southeast Asian countries have emerged to serve geographies outside Tier 1 areas, they have to address infrastructure limitations in these geographies while keeping their costs low. Successful models are trying to innovate by aggregating end- user demand at delivery hubs, e.g. with their resellers or agents, where they can deliver in bulk cost-effectively. Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
91 The reseller-led model disrupts the retailer’s role • The exhibit alongside illustrates the distribution of jobs to be done, e.g. for a sale of Adidas branded shoes through the JD Sports retailer in Singapore. • In this instance the manufacturer and brand work together to create the shoe, the distributor holds inventory and brings it closer to points of sale in bulk, and retailers do a long list of jobs including demand aggregation, customer service, making products available to consumers, etc. • Finally, consumers purchase the products, completing the loop. • In this traditional model the margin of the selling price is split between the retailer, the distributor, the brand and the manufacturer. Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
92 … by passing on the retailer’s jobs to a reseller • In the reseller-led Community Group Buy model, jobs traditionally done by the retailer are split between B2B distribution platforms and their resellers (or agents). • B2B distributors deal with brands and manufacturers, hold inventory, provide trade credit and often ship products to the agents, while agents are responsible for generating demand in their local community, performing customer service, and collecting payments from customers. • That in turn allows agents (who are often relatively unsophisticated micro-sellers) to take over the remaining tasks otherwise performed by the retailer, effectively eliminating the retailer altogether. Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
93 Reseller-led models risk price erosion over time • The reseller-led model introduces significant transparency into retail distribution. • Over time, multiple resellers fighting over the same customer segments are likely to offer prices closer and closer to their wholesale purchase level. • This competition can erode channel margins for brands, while exposing wholesale prices to consumers. • This is especially for open platforms (as shown alongside) that market directly to resellers, leaving it up to them to distribute products to the end users at a price of their choice. Open Closed Volume / wholesale pricing is shown online, easy to purchase without prior approval Indicative discounts are featured next to named brands and products, but open purchase is not possible Indicative wholesale discounts are shown in aggregate, not for specific brands; no open purchase is possible Spectrum of pricing strategies for reseller-led platforms Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
94 Best-in-class brands use Community Group Buy as one of multiple e-commerce channels 1: Inclusive of commission where applicable SOURCE: Brand interviews Channel cost, indicative1 Marketing cost Logistics cost Customer data retention Channel purpose Share of sales for best-in-class, indicative Channel 20-30% Very low Low None 10 ~ 20% “Reach and acquire less e-commerce savvy consumers” Reseller-led Community Group Buy 5-10% Medium Limited “Be where the traffic is; we cannot afford to not be present because all my competitors are here” 40 ~ 50% High Popular e-commerce platforms 0-5% Medium Medium High “Build closer relationships with customers and save on retention marketing” 30 ~ 40% Direct-to- consumer e-commerce For most leading brands who use this model, Community Group Buy tends to make up not more than 10 ~ 20% of their total sales at steady state Community Group Buy Definition > Example > Why should brands and retailers care? > Market size > P&L economics for sellers > Ecosystem > Outlook > How to win? > Trends, dynamics, and other considerations
(sponsored section) Contents 95 1. Overview of Social Commerce in Southeast Asia 2. Social Commerce archetypes A. Social Platform Commerce B. Conversational Commerce C. Live Shopping D. Community Group Buy 3. Sprinklr and Unified-CXM 4. Learn more
The rise in social commerce presents a clear necessity for brands to invest in developing conversational commerce capabilities. To get there, they must start with an integrated unified-CXM strategy. But why do brands really need a unified CXM approach? And how can they get there? 2. CX at scale: Customers are present across 30+ digital channels and they expect you to listen and respond at their convenience. 1. Personalized experiences: Consumers are 80% more likely to convert if they get personalized attention. 3. Consistent experiences: Unified-CXM connects and enables all customer-facing teams to take action in sync. Get started with unified-CXM A unified customer experience management approach can help businesses win the trust and loyalty of customers by hitting their goals in 3 key areas: 3 reasons to adopt a unified CXM strategy 96
Establish your end-goals Start by asking yourself what is your strategic goal. Asking this question will help you establish the needs of your business. Whatever path you choose for your unified-CXM efforts, ensure that you align with business goals while creating the optimal experience for your customers. Tap into the power of artificial intelligence Ask yourself – what level of automation makes the most sense for my business? For some brands, live human interactions are key. Others prefer to automate interactions where possible with conversational AI and bots to guide customer conversations. Regardless of the path you choose, leveraging AI is the key to success in a unified-CXM strategy. 3 steps to outline your unified-CXM approach Evaluate your current customer experience Take an honest look at the experience you’re currently delivering to your customer base. Is it consistent across every interaction on every medium? Before you begin your unified-CXM journey, examine customer satisfaction scores, frequency and length of contacts, and, if applicable, number of repeat purchases. 97
98 How to build your unified-CXM strategy A large number of businesses are trying to understand how a unified-CXM approach can enable them in delivering better business outcomes. But only a few businesses understand how a unified CX strategy can fuel their growth strategy. Here’s how they can start if they are venturing out on a unified-CXM journey. Take an honest look at the experience you’re currently delivering to your customer base. Is it continued and consistent across all channels and interactions? A poor experience indicates to your customers that you’re more interested in a transaction than a relationship. It’s the fastest way to alienate the audience you’re trying to reach. Too many brands make the mistake of using the channels they prefer instead of the channels their customers use. Find out if there are additional platforms where your customers are engaging but you’re not responding. Examine audience habits and how they tend to use certain platforms for a winning strategy. For instance, platforms such as Twitter and WhatsApp are more support and service-oriented. Instagram, on the other hand, is more often skewed toward product questions, with consumers showing purchase intent. Establish your end goals, whether that’s serving existing demand or acquiring new customers. For some brands, the main challenge is getting a handle on the high volume of incoming direct messages. If you are mainly looking to boost your conversational commerce strategy, then fielding queries effectively, relieving agents, and achieving high levels of automated support could be your immediate priority. Audit your existing experience Set your customer journey goals Start your journey with Sprinklr Understand your customers’ preferred platforms 98
99 Prada Group leads digital innovation for luxury brands with world-class customer engagement and care Results 92 million mentions tracked in 2021 across 183 topics 70 custom dashboards to gather key insights Challenge Prada Group embarked on an ambitious journey to consolidate dozens of point solutions onto Sprinklr’s Unified-CXM platform. The Group wanted: ● A single, AI-powered platform to manage benchmarking, insights, advertising, and care ● Identify, reach, and engage its Millennial and Gen Z audience ● Keep the company at the center of larger cultural conversations Its digital-first strategy ● Provide a holistic customer experience that today’s consumers demand Solution The Prada Group began its journey to unify digital marketing in April 2020. ● Prada Group added Sprinklr customer care solutions, which enabled sales agents to provide their customers with the highest- quality digital sales experience ● Agents are now communicating and serving customers on Facebook, Instagram and live chat. ● With conversational commerce capability, the agents can now complete sales in those same social channels where they communicate with customers. ● Prada also added Sprinklr’s Modern Research, Modern Advertising, and Social Engagement and Sales products 99
100 Challenge With its rapidly growing social and online presence, L’Oréal was looking to: ● Manage its exploding social volume, which doubled over the past two years ● Accurately and efficiently manage its customer experience at scale ● Identify a technology partner that would help its team to handle and resolve issues with confidence Solution Sprinklr emerged as a natural choice for L’Oréal’s business needs. L’Oréal was able to: ● Optimize its case management interactions with Sprinklr Support/Engineering ● Reduce average first response by 50% and email volume by 40% ● Achieve 60% reduction in time to resolve, and a +17% increase in overall CSAT survey scores How L’Oréal leveraged modern digital channels with Sprinklr to scale its CX Results -60% reduction in time to resolution +17% increase in CSAT (Customer Satisfaction Transaction Survey) ' 100