In the first part of this Silk Road series, I wrote about what the new Belt and Road initiative means to both Asian and Western brands. Here, I want to highlight the opportunities that lie ahead.
Both traditional trade and modern trade are being disrupted by the advancement of digital technology. Just look at the current e-commerce wave in Asia; online retail sales in China are reported to have reached USD 500 billion last year, exceeding the US by about USD 90 billion. To put this into perspective, China’s e-commerce sales alone exceeded the entire GDP of Belgium.
Asia’s e-commerce boom is driving disruptive change to the retail industry. With a rapid growth in the B2C e-commerce market, the ownership of mobile devices and the number of domestic e-commerce applications customized for the local market, the lines between the physical and digital world are increasingly blurring. However, an e-commerce-only strategy needs to be very focused to achieve scale, you will still need O2O-thinking (online to offline).
The important point for companies who want to expand their business to Asia is to not act too hastily. Take changes into account and take restrictions in, among other things, e-commerce, to heart. There is significant opportunity in Asia, but focus remains key.
It is crucial to know what country you are expanding to and pay close attention to complex go-to-market decisions. Because of the diversity of language, culture and economic development, Asia (unlike Europe or the US) does not have a supranational or federal government implementing uniform rules and regulations.
Also, in many developing South East Asian nations, back-end logistics, transportation infrastructure and supply chain is not always able to keep up with growing consumer demand. As such, a weak last-mile delivery significantly compromises the speed and efficiency of the entire supply chain.
Furthermore, know that times have changed for Western brands. With the emergence of Asian brands who are faster to market and armed with first-hand knowledge of local preferences, multinational brands need to be closer and react faster to the markets.
As consumers’ demand for information, speed and accessibility to brands are rising, it is crucial to engage with customers through an increasingly omni-channel approach to suit their needs. Taking an omni-channel approach is complex. Interconnectivity and alignment of your multi-channel strategies that offer customers the same experience in every channel are being used instead of focusing on different channels that operate in silos.
Even though there is a rapid rise of digital and e-commerce platforms within the consumer goods business, it is advisable to focus on pushing the strongest part of your portfolio on these channels, while leveraging the omni-channel approach by taking advantage of the modern and traditional trade channels. While modern trade and convenience stores are clearly on the rise, traditional trade such as mom-and-pop stores continue to play an important role in total consumer goods trade across the region.
Take Thailand for example, because of an aging society, smaller households and government policies on large retail stores, Thai retailers have shifted their focus towards small-sized stores. Krungsri Research noted that there was a total of more than 15,300 convenience stores across Thailand in 2016, up from nearly 14,300 in 2015.
Among the key considerations brand owners must pay attention to include ways to use digital and social media platforms to capture consumers attention and assessing the reach of in-store materials including point-of-sales, visual merchandising, brand presenter and promotion.
"Globalization 2.0" clearly displays a growing interdependence between the East and the West. The production and exportation of high value goods is no longer a one-way street. There is a vast interconnection which has surpassed the words of British writer R. Kipling: “East is East and West is West, and never the twain shall meet.”
The modern Silk Road truly goes both ways and provides huge opportunities for businesses willing to and capable of adding value for manufacturers and consumers alike.
Luke Horton is General Manager, Business Development, Business Unit Consumer Goods at DKSH Thailand. He has lived and worked in Thailand for over five years and has developed a deep understanding of the Thai FMCG sector.