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Thinking of expanding your Apparel and Accessories (A&A) eCommerce business to include selling in Southeast Asia (SEA)? You should, it’s an emerging market with tons of opportunity.
However, it’s also a region with huge differences in culture, laws and societies between countries and cities. We’ve broken down a lot of information to bring you the basics of what you need to know to expand into this exciting part of the world.
It’s tempting to sum up Southeast Asia as steamy hot temperatures, rich religious cultures, and spicy, delicious street food.
But it’s also a region that, in reality, is impossible to be summarized. It’s made up of 11 countries that have distinct cultures with nuances that go back generations and depend on the region, country, state, island or even neighborhood that you are in.
These differences can make it a challenge to expand into this region, but once you figure out how, it’s an amazing place to do business. Just in Indonesia, it is estimated that the population that falls into the middle and affluent classes will double to 141 million people by 2020.
e-Conomy SEA is a multi-year research program launched by Google and Temasek, and the 2019 study found that Southeast Asia’s Internet economy had increased by 40% year on year to hit an impressive $100 billion. The same study also predicted that the Southeast Asian Internet economy is on track to hit $300 billion by 2025.
So, it’s a region with great potential for you to expand your business.
We’ve gathered all the critical data on demographics, cultural expectations, size charts, and import taxes - the essentials to make the move into the market.
Southeast Asia is made up of eleven countries that around6 million people call home. It includes Singapore, Malaysia, Indonesia, Vietnam, Cambodia, Laos, the Philippines, East Timor, Brunei, Burma and Thailand.
We’ve decided to focus on six countries from this region that are emerging as the favorites for international eCommerce, especially in the apparel and accessories industry. These five countries have a large percentage of people using the internet, an emerging middle class with growing purchasing power, and increased credit card usage. Even with narrowing it down to six countries, this is a seriously diverse region that’s almost impossible to generalize.
Here’s a quick breakdown on country demographics:
*% of total population - i.e. your target audience!
**% of population that has regular access to internet - and therefore your eCommerce store
You’ll find a lower percentage of English speakers in Thailand, Indonesia and Vietnam, except in the urban areas where English is spoken commonly. As your following grows, consider translating your site into local languages - your current and potential customers will appreciate the customization.
Ten Southeast Asian countries belong to the economic region ASEAN , or Association of Southeast Asian Nations. All five countries we’ve covered here are a part of it. ASEAN is an economic bloc that allows for free trade, free movement of goods and improved communication between members.
Unlike the European Union (EU), which is a politico-economic union with a centralized governing body, shared currency, open borders, and free trade amongst member nations, the ASEAN is only an economic region that is still growing. Each country still maintains its own currency, trading rules, and import/export regulations. If you get to the point of warehousing and manufacturing locally in various countries, the ASEAN region can be a competitive advantage when it comes to saving on costs related to customs and duties.
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Several large companies have already found a space in the ever expanding SEA eCommerce apparel market. Check out the table below for a list of the current major players in each country.
(source)
When exploring any region for business expansion, it is important to know the trends in the market and to evaluate if you can take advantage of them. We’ve noticed the following shopper trends in the 5 SEA countries we are discussing:
If there’s one word that really describes the current SEA eCommerce market, it’s international. The globalization of Southeast Asia has been quick with a rapid rise in regular internet access, smartphones usage and even low-cost flights between countries.
Also, increased mobilization and migration to and from countries has resulted in the population transforming from homogenous to multi-cultural that accommodates varied lifestyles.
All this globalization means that trends and brands, especially within the fashion industry hop from one country to another with surprising speed. It also means that consumers are now open to new, international brands on the scene in ways that they wouldn’t have been before.
49% of South East Asia's urban consumers who are commercial bank customers already use e-wallets, this percentage is projected to reach 84% by 2025.
First, get people to visit your eCommerce store. Make sure you have an awesome store to begin with. Improve your eCommerce store with free tools that can be found online, like those we’ve outlined here.
Thailand came in first out of six South-east Asian countries for mobile payments use, while Vietnam tops the table both regionally and globally in terms of the biggest jump from 2018 to 2018, according to PwC's Global Consumer Insights Survey 2019.
Of these, 'convenience’ was the top motivating factor to shop using a mobile device. The global market is ready for mobile shopping - it’s time for your site to get ready too.
(Source)
In Singapore, 79% of the population has a social media account according to We Are Social and Hootsuite’s Digital in 2019 Singapore report.
Looking at the combined number of people in these 6 SEA countries that use a social media account, you could be reaching over 300 million potential customers.
As a marketing tool, a social media presence can help develop trust and brand awareness, allowing you to enter the market with more recognition.
If you have the resources, a pop-up shop can be a great chance to capture the trust of customers that are still uncertain about ordering online. Customers can see your brand, in person, at your pop-up shop. They’ll be happy to touch and feel your products, and be more confident in purchasing online.
Pop-up shops allow you to interact with your customers and increase your own understanding of what they like, what they don’t, what they enjoy about your brand. You can also check out the demographics of your potential customers, and your target audience - it’s basically first-hand market research.
How can you make the most of your pop-up shop? Fashion start-up Grana recently held a super-successful pop-up shop in Singapore, and allowed us to observe all the action. Their top three tips on making sure you connect with the local market?
Customize the shop to the location and city. Add in touches that show you’ve done your research on the city you’re visiting.
Reach out on social media. Grana liked to start posts with “Hey, Singapore!”. Make your social media presence as important as your physical presence.
Get in touch with your customers. Talk to people who come to your shop, ask them what they do and don’t like, figure out who they are. Get in touch to stay on top of what your customer base wants and needs.
Once you’ve gotten customers to stop asking, “who are these people anyway?”, it’s time to start selling. While direct selling to your customers is an option, have you thought about giving it a try in one of the marketplaces mentioned earlier?
Selling on an existing B2C marketplace can be a great advantage, because you’ll have access to a wider consumer base using a smaller amount of resources. You’ll have a built-in audience of established customers who already use (and trust) the marketplace.
As a disadvantage, you lose a bit of your unique identity and customers see your products on the marketplace, rather than as a whole brand on your own website.
Each of these countries has their own set of rules and regulations when it comes to import duties and taxes. For example, in Singapore, a customer who receives a small shipment of a few pieces of apparel from Australia is unlikely to have to pay any duties upon receipt at all.
According to iPrice’s database, Southeast Asia’s top categories of 2019 were Electronics followed by Fashion.
About 25% of the product orders received in 2019 were made from the fashion category. The average amount spent on fashion items in a day is US$22.
However, in Vietnam, an eCommerce company from the USA would need to either get a local distribution license or find a local distributor to send goods to a consumer.
Even with the ASEAN bloc, it’s essential to find out the individual duties, taxes and import rules that will apply to the goods you are shipping.
Landed cost refers to the entire cost of shipping a good all the way to a customer’s door. This would include import taxes, duties and value added taxes. Make sure you have calculated the entire landed cost —
for your sake and the sake of the customers!
Also, depending on where you’re shipping from, where your goods are produced, and where materials originate from, the goods will have different levels of taxes and applicable duties.
For example, each country has a different consumer tax rate:
(Source)
The logistics of shipping within these five countries can be a challenge on their own. Local mail service in Vietnam, the Philippines, Malaysia and Indonesia costs less initially, but it can be slow, unreliable and hard to track, especially when shipping outside of the major cities.
Consider whether the cost savings for local mail weighs more than the reliability of bigger carriers such as UPS, FedEx or DHL. Each of these major companies has an extensive and helpful tool to estimate shipping and other potential landed costs for your shipment.
Hiring a 3PL or third-party logistics provider can be a great help when expanding into a new, international market. Do you know the ins and outs of documentation, customs, duties, taxes, and distribution for every customer in every country you’re selling to?
A 3PL provider definitely does.
If you use a 3PL provider, they’ll take care of all these logistics for you and since they specialize in these details, you can be pretty sure they know what they’re doing. You may also save costs in the long run by hiring one company to take care of these things, rather than trying to do it all yourself. One mistake on the documentation of an item can be a costly mistake - either for you, or for the customer.
UPS, DHL and FedEx are examples of some major international shipping companies who also take care of third-party logistics, but there are literally hundreds of companies to choose from, depending on your own company’s needs.
3.1 Payments, Pricing and Pesos
Trust in online banking can still be an issue in this region. It can be a challenge to get consumers to be comfortable with giving credit card details online, but level of trust varies by country. For example,
Singaporean shoppers are embracing online credit card payments for convenience and ease of use, while in Vietnam, the preferences are bank transfers or cash on delivery.
Much of the population in all five of these countries is open to online shopping, but have barriers to online payment for two main reasons: low prevalence of credit cards (but it’s growing!), and lack of trust in giving personal details to an eCommerce site.
Asian Development Outlook (ADO) 2020 Supplement (June 2020)
Much of the population in all five of these countries is open to online shopping, but have barriers to online payment for two main reasons: low prevalence of credit cards (but it’s growing!), and lack of trust in giving personal details to an eCommerce site.
Much of the population in all five of these countries is open to online shopping, but have barriers to online payment for two main reasons: low prevalence of credit cards (but it’s growing!), and lack of trust in giving personal details to an eCommerce site.
3.2 Everyone loves a good sale
It’s hard to resist a good sale, and these are the sale periods throughout the year in each of these countries that you should definitely get in on.
The Great Singapore Sale, held during the month of June, and Christmas in December.
The Grand Prix Sale, held during the Formula 1 race, usually in March, Mega Sale Carnival Sales in July and August, or Year End sales, November and December.
The end of Ramadan, Idul Fitri - dates change every year according to lunar calendar.
Tet and the Vietnamese New Year, dates change every year according to the lunar calendar.
Christmas is the main shopping sale time.
The Grand Sale runs from the middle of June until the middle of August.
3.3 Give ‘em your measurements!
How does your brand size up? No, really, we’re asking that literally.
Brand sizes can vary wildly, and even more so when you’re selling from one country to another. The only way to ensure that people know what size to buy is by providing a clear, detailed, international sizing chart with your products.
A good international size chart will provide your brand’s sizes and corresponding measurements, along with detailed instructions on how to measure for sizes. Include both centimeters and inches in your provided measurements. This is extremely important for international eCommerce.
The countries we’ve covered have a mixture of races, which means a mixture of body types, shapes and sizes. If you’re very clear in your size charts, you can ensure a better fit the first time around - avoiding costly returns on your side and dissatisfaction on the customers’.
Sizes are generally smaller in this part of the world - so an American size M, might be an L in these parts. You can change your sizing, or make your standard sizes very clear in your size charts. As an added bonus, think about adding the option of ordering different sizes on request - it gets you closer to the needs of your customers, helps you research market needs and more accurately manage inventory.
3.4 Anatomy of an amazing size chart
Grey text: Your brand’s corresponding measurements in inches and centimeters here
* Sample size measurements only, make sure you provide the corresponding measurements based on your brand.
Be sure to include applicable charts for all your clothing types. These may include men, regular women, petite women, footwear, children etc.
3.5 Potential challenges - Don’t let anything get you down!
Expanding your business into any new market comes with challenges - and Southeast Asia is no exception. Here are five challenges you might face when expanding into this region:
This is a problem in any market, but it is a particularly common problem in Indonesia, and getting compensation for fraud in any of these countries can be a long, hard process. While credit card fraud cannot be completely avoided, there are a few things you can do to avoid getting scammed. Keep an eye out for large orders that seem to come out of nowhere, avoid shipping to P.O. Boxes, and put a system in place to help you check any suspicious orders, whether it includes calling these customers, or following up with them in another way.
Only 45% of Vietnamese own credit cards or use them on a daily basis. (1) This number varies by country, and in Singapore there’s a larger number of people using credit cards than in any of the other 5 countries. However, it’s common for eCommerce sites to offer Cash On Delivery and Bank Transfer Payment options in this region. This barrier to payment could be a challenge if your store only offers credit card or PayPal options.
Localized warehousing of the major players like Zalora sets a high bar for shipping rates and times. In most of these countries, free, next day shipping is available, making waiting for 3 or 5 days seem like an eternity. Find the value you can offer that will make longer shipping times and higher shipping costs worth it, or consider if it is a viable option to begin warehousing in the countries where you wish to expand to.
Just have a look at the Mall of Asia in the Philippines, the entirety of Orchard road in Singapore and the biggest malls in Kuala Lumpur and Jakarta. Aside from actually shopping, people just really like going to malls.
Mall culture is strong in this region, so look out for ways to capitalize on it, rather than compete with it. One option: pop-up shops to introduce your brand to customers.
With government in these economies encouraging local business investment, and providing incentives for local business, coming in as a foreign company may put you at a financial disadvantage.
Also, you may have to gain the market’s trust before being able to sell substantially.
3.6 Best practices for SEA success
Now that you’ve become more familiar with the region, we leave you with some eCommerce best practices to consider:
It’s common for the major A&A eCommerce sites to offer Free 30-day returns. Low-hassle returns or exchanges are the norm for regular priced items.
Shipping costs for the customer of most major online retailers generally range from low to free, with many sites offering free shipping on purchases above a certain amount.
Indonesia and Malaysia are predominantly Muslim and more conservative cultures, at least when it comes to on-the-surface advertising. This may affect the overall style of your advertisements and marketing.
As a general rule, societies in these five countries tend to be family-oriented. Many people are the first generation in their families to have disposable income; and as a result, consumer spending is mostly focused on improving the household and buying gifts for others.
So, what does all this information boil down to? Get your eCommerce store to Southeast Asia, and fast! It can be tricky, and there’s lots of information to digest, but when you do, the rewards have the potential to be amazing.
Get out there! 650 million potential customers are just waiting to ‘proceed to checkout’ with a cartful of apparel and accessories items from your eCommerce store.