Global February 19, 2020 Last updated March 12th, 2020 317 Reads share

How Offline and Online Integration Will Disrupt Southeast Asia’s E-Commerce

Image Credit: DepositPhotos

There is no denial of the fact that the e-commerce industry has seen a huge leap in the recent past. In Southeast Asia, where there are several offline stores, the rift between online and offline stores has garnered negative impact and now e-commerce giants like Amazon are trying to mitigate this impact through a new strategy of offline-online store integration. 

The number of online shoppers is bound to exceed 480 million in 2020 for Southeast Asia. E-commerce markets of the Southeast Asia region are rising in terms of revenues and popularity. By 2025, the SEA (Southeast Asia) e-commerce markets are bound to reach $88.1 billion in the SEA region.

But the offline stores are suffering from the rise of e-commerce and in some areas, these stores are suffering heavy losses. Due to aggressive pricing and ease of shopping, e-commerce has gained consumer traction, leaving the offline stores to rags from earlier riches.

E-Commerce in Southeast Asia

E-commerce has been growing with innovations and an increase in network capabilities in the Southeast Asia region. It is an extremely dynamic market with fragmented sections of many market leaders and coexisting business models. 

The surge in the e-commerce markets is due to a rise in the usage of smartphones. In Southeast Asia, the internet is mobile and smartphones are more accessible and affordable.

“How do we leapfrog? For example, in Southeast Asia, we bypassed the PC era, going straight to mobile technologies”- Reuben Lai, senior managing director of Grab Financial.

With 90% of consumers connecting to the internet through mobile, it is no wonder that smartphones have garnered the e-commerce surge. From ride-hailing to food delivery and from online stores too, Southeast Asia has become a breeding ground for e-commerce and gig economy.

Offline Stores in Southeast Asia

Offline stores in Southeast Asia and other Asian countries are trying hard to battle it out with the e-commerce giants. Many such retailers and store owners are now trying to transform their business operations to the digital medium.

Take an example of the “little India” in Singapore, where more than 100 merchants are trying to transform their businesses through digital tools. Such programs are helping small businesses and offline stores to offer some resistance to e-commerce onslaught.

These offline stores can transform their app ideas into reality with excellent mobile app development. Such mobile apps are highly responsive and provide customers with ease of shopping through digital payments that boost the SEA fintech industry.

Such efforts by offline stores and small businesses can be boosted through government policies and industrial support. Southeast Asia’s fintech industry can uplift such stores by investment into digital transformation with a view to promoting digital payments in the region.

What is Offline and Online Store Integration?

The integration of offline stores and online stores can bring about higher efficiency and faster deliveries. E-commerce strives for aggressive pricing and door-to-door delivery services. Offline stores lack such capabilities due to capital limitations and infrastructure challenges.

The integration of offline stores into an e-commerce platform can bring about mutual benefits to both of them. Here, the delivery networks and storage infrastructure of e-commerce can benefit offline stores, and the local reach of offline stores can help e-commerce go local.

There is also an emotional value to offline stores and customer sentiments that can boost confidence in the e-commerce stores through effective integration of both the services.

Will It Be a Feasible Strategy?

Last year, the Chinese e-commerce giant JD.com unveiled its plan to integrate offline and online stores. First of its type of integration strategy by which the e-commerce brand intends to integrate supermarkets, convenience stores, and Dada-JD Daojia – a delivery service giant in China.

For offline supermarkets and stores, this is a great opportunity to be part of the e-commerce revolution with strategic partners. It will enhance the RaaS (Retail as a Service) paradigm. Though there are concerns around its feasibility.

To make such integration, there are some points to be considered:

  • Training and induction of offline store owners for effective synchronization.
  • Development of mutual delivery and packaging infrastructures.
  • Invest in digital upgrades of offline stores.
  • Establishment of advanced systems and processes.
  • Adoption of digital payments across all sections.

Benefits of E-Commerce Integration:

  • The integration of e-commerce online stores with offline entities can bring about an economic shift to Southeast Asia’s economy.
  • Digitization will bring more job opportunities for local residents.
  • Offline integration will offer an effective pricing balance in goods and services.
  • Swift deliveries will boost the on-demand economy.
  • Integration could uplift the state of several small businesses and store owners.
  • E-commerce can scale better with outreach to the most remote areas in the regions like the Philippines, Vietnam, Thailand, etc.
  • Offline stores can speed up purchase processes through digital tools.
  • This integration will improve the retailing business on the whole for SEA.

Key Challenges for Integration of Online and Offline Stores:

  • Revenue sharing among online and offline stakeholders can be a challenge.
  • Creating a standard for Retail as a Service.
  • Need for large investment into the digitization of offline stores.
  • Government policies are backing such integration across regions.
  • Network capabilities are still evolving in Southeast Asia.

Conclusion 

Southeast Asia is rich in its diversity of cultures and people. So, a combination of offline and online stores needs quite an effort. To commemorate such an initiative, authorities and e-commerce giants need to understand the basic business model of the offline stores.

The on-demand economy is disruptive, and there are trust issues between the offline and online store communities. The lack of trust needs to be bridged through proper revenue sharing and investments into the upliftment of offline stores.

Such integration gets easy as far as urban areas of Singapore, Malaysia, Indonesia, and even the Philippines. However, integration into rural areas requires extensive research and market analysis to cater to local customers. Finally, it can end the tug of war between e-commerce and offline commerce!

e-commerce website – DepositPhotos

Sachin Devmurari

Sachin Devmurari

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