The good, the bad and the ugly

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Thailand is currently experiencing a boom in online shopping. One of the main drivers of this growth has been the Covid pandemic, which has increasingly made it necessary to purchase goods and services from home. This has led to a surge in purchases of products such as groceries, fashion, beauty and electronics.

Another reason for this continued growth is the growing convenience of shopping online, including increased reliance on the main online shopping platforms: online marketplaces. Online stores such as Lazada and Shopee have increasingly won over Thai consumers with their wide selection of products and the convenience of shopping with them.

This has led to an ever-increasing number of brands using and relying on these platforms to reach consumers and drive sales. But how does this affect their marketing mix and what considerations should be made when using marketplaces as part of the digital marketing mix?

Good

Let’s start by thanking the marketplaces. They played a pivotal role in encouraging first-time online shoppers to give it a try. Lazada and Shopee have been the main promoters of the online shopping experience and have really helped transform the perception of online shopping.

By focusing on operations, they made it easier for customers whose past perceptions of online purchases may have been skewed towards negative impressions related to issues such as the authenticity of products purchased, whether or not they arrived. of the product and what would happen if there was something wrong with their order.

Marketplaces have offered consumers a wealth of choice and transparency. At the same time, they enabled customers to pay for goods with methods they are already familiar with and enabled them to track the status of their deliveries through internal distribution networks and 3PLs.

For sellers, they offer almost instant access to a very large audience of buyers. This has allowed not only big brands, but also struggling retailers to have an online presence with little or no experience building online stores. This gives them access to thousands of potential customers and immediate sales without the marketing costs and resources otherwise required. Thus, marketplaces have become a natural part of Thailand’s online sales strategy.

This is a channel that you cannot ignore or at least ignore at your peril.

The bad

However, all is not rosy.

From the customer’s perspective, even though purchasing touchpoints are through the Marketplace, any order issues are escalated directly to stores that have varying degrees of customer service experience. It can make it a bit hit or miss if you receive a satisfactory resolution to an issue.

However, it is when looking at the vendor side that the most glaring problems appear.

First, there are leaks. When customers browse a store’s products, they are exposed to a large amount of leaks, which means marketplaces push similar products from competitors on the same page. Anyone who has visited one of these sites will be familiar with features such as “recommended products” or “people also viewed” ads, which can distract customers and even drive them away from selling from that seller.

Being in a marketplace with potentially hundreds of other stores selling similar products can also dilute your listings. Also, if other sellers are perceived to have a much lower price, this could be a problem. There have been reports of sellers on these platforms selling counterfeit or counterfeit products which are cheaper and due to this, the genuine retailer is losing sales.

It’s also not entirely free. Marketplaces charge at least a percentage fee on each sale made. Add that to the logistics costs they charge for holding and shipping the product and it can all eat into margins. And that’s not even taking into account the extra budget needed to pay for better placements to increase visibility.

Some may think that all it takes is to get the products listed, then sit back and watch the orders come in. No, it doesn’t work like that. As with everything, success takes effort. This can easily turn into a full-time job to simply support the general operation of maintaining a presence in one or more markets. But it’s getting worse.

The ugly one

There is another problem that weighs even more heavily. From a store perspective, the most critical issue in driving all sales through marketplaces is the fact that they never own the customer, the experience, or the transaction. All data collected belongs to the marketplace, and any remarketing, customer engagement or otherwise must go through them.

You also have no control over the shopping experience. It is completely controlled by the market. There is the possibility of interacting with the customer via chat, for example, but this is only possible via its ecosystem. Also, if there are any issues with a particular order, it can easily turn into a blame game between the marketplace and the store.

Algorithms can also be a problem. They decide what visitors see and when. One day, a brand may appear at the top of search listings for a product, then the next may disappear from the page entirely due to a change in the algorithm or listing structure. There is nothing the store can do and such drastic changes could potentially put stores out of business.

Related to this is data mining which marketplaces spend a lot of resources on. Many of these projects are innocent enough in that they are there to learn customer behavior on the site and help recommend products related to a customer’s interests. However, some analyze which products sell and are the most popular. That might not seem like a big deal, but what was happening on Amazon in the United States, for example, was that once they knew what was selling, they sourced and made the products. They overprice and outcompete other sellers to gain competitive advantages. In other cases, sellers were increasingly squeezed on their margins as their dependence on the market made them vulnerable.

We wonder if it will be the same in this region, especially for brands totally dependent on marketplaces.

The overreliance on using marketplaces ultimately means that the store turns into a supplier rather than a brand. The market controls the experience, the transaction and the relationship. Moreover, with the increasing dominance of brands, they are starting to become destination sites for consumers. Without stores collectively competing for market share in their direct channels through their own marketing, they may struggle to get a piece of the online sales pie, or at least struggle to be the ones who actually profit from it. .

What is the next step ?

From the customer’s perspective, marketplaces provide an all-in-one convenience hub or supermarket to find whatever one needs. Stick with reputable stores, read customer reviews, and you should be fine.

From a store perspective, there are many reasons, as above, why using marketplaces as the only channel to drive sales is not the right strategy. If they haven’t already, they should also consider growing their direct-to-customer (DTC) channel. Otherwise, their dependence on markets will only grow, making them vulnerable.

As an example of diversification, marketplaces charge a percentage commission for each product sold. Stores that are familiar with this business model can use it to their advantage. There are channels like affiliate marketing that allow the same payment model but at the same time allow the transaction to happen on their own platform. In this example, the store sets the commission rate. In other words, they can define the margin they are willing to give in commissions for these sales.

Stores should look to grow the DTC portion of their business through these marketing channels, complemented by social and potentially search activities. The store controls, not the other way around. They own the experience, the transaction, the data and ultimately the customer. This can then be supplemented with other channels like marketplaces as needed.

As e-commerce continues to thrive in Asia, it’s essential for brands to control their own channels. Own the customer, not the other way around.


About the Author: Anthony Quinn is the Managing Partner of Lodestar Marketing, which specializes in helping businesses launch profitable affiliate programs to drive sales from their direct-to-customer channel. He can be reached at https://lodestar-marketing.com

Anthony Quinn of Lodestar Marketing.

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