In this exclusive report conducted in collaboration with iPrice, we looked into leading marketplaces in Southeast Asia to examine their role in the direct-to-consumer (DTC) trend in retail.
Some important insights we picked up on:
- More brands are adopting a DTC strategy, with DTC sales accounting for up to 40% of brands’ total retail sales revenue
- Marketplaces, which may see the shift towards direct-to-consumer as a threat to their business model, actually play a vital role as part of brands’ DTC strategy
- More direct-to-consumer brands like Adidas, Nike, and Under Armour are establishing official partnerships with marketplaces like Shopee and Lazada to expand their online presence
- This is also reflected in the significant increase in the number of official brands’ products on marketplaces. Official products sold by Adidas themselves, for instance, make up 18% of all Adidas products on Lazada Singapore
Direct-to-consumer (DTC) refers to brands that sell their products directly to consumers without the need for intermediaries such as retailers or wholesalers. The rise of DTC in retail is often seen as a competitive threat to e-commerce marketplaces. After all, with an increasing number of big retailers adopting a direct-to-consumer strategy, it would appear that marketplaces would begin to occupy a less prominent position in the e-commerce landscape.
On the contrary, our study has found that many DTC retailers are increasingly utilizing e-commerce marketplaces as a crucial pillar of their direct-to-consumer strategy. This is because marketplaces enable them to reach out to a larger consumer base, especially in countries where brands experience a smaller retail footprint.
The shift from traditional retail to direct-to-consumer
Despite facing a 38% dip in revenue due to store closures, Nike’s sales bounced back in August 2020 thanks to its DTC business which saw its online sales increase by 82% up from last year. Similarly, Under Armour’s wholesale revenue fell 25% in 2020, while DTC sales rose 2% driven by a 40% gain in e-commerce sales.
With Adidas targeting to hit 50% DTC sales by 2025, combined with strong e-commerce demand trending upwards during the pandemic, the trend towards direct-to-consumer is unlikely to lose momentum in the coming years.
Let’s take a look at how direct-to-consumer sales have significantly contributed to these brands’ sales revenues:
(DTC sales as a % of total sales revenue for Nike, Under Armour, Adidas)
Has this trend towards direct-to-consumer caught on in Southeast Asia?
For this analysis, we looked into the e-commerce traffic data for the three international sports retailers above in Singapore, as one of the most developed cities in Southeast Asia, and Indonesia, as the largest e-commerce market in the region.
iPrice, a price comparison platform for products sold online, reported a 329% and 56% increase in Google impressions on iPrice for Under Armour in Singapore and Indonesia respectively. These upward trends were also observed for Adidas and Nike in both Singapore and Indonesia, indicating that consumers do their own research before making a decision to purchase items.
As consumers conduct their own price comparisons, marketplaces have increased in popularity among consumers in Southeast Asia. Shopee, Lazada, and Tokopedia, the biggest e-commerce marketplaces in Southeast Asia, saw over 280 million, 137 million, and 88 million visits to their platforms respectively in 2020.
With marketplaces seeing up to hundreds of millions of web visits, this indicates that consumers seem to prefer having the ability to conduct their own price comparisons between products as well as across marketplaces before purchasing their items.
DTC brands have caught onto this trend and responded by partnering with these platforms and setting up official e-commerce storefronts to expand their presence on marketplaces.
The role of marketplaces in Southeast Asia and the direct-to-consumer trend
With international brands moving towards retailing to consumers directly, what does this mean for marketplaces? In Southeast Asia, we observed that retailers are increasingly leveraging top marketplaces to tap on the growing potential of this market.
Both Shopee and Lazada, the leading marketplaces in Southeast Asia, are partnering with retailers to make their products more accessible to consumers in the region. For instance, the announcement of Lazada’s partnership with Nike last November aims to allow Nike to directly retail to consumers in this region. Likewise, Shopee is working with Sulwahsoo and its parent firm to allow them to directly retail to consumers in this region.
The birth of official stores in marketplaces like Shopee and Lazada
Marketplaces like Lazada and Shopee have dedicated spaces, LazMall and Shopee Mall, that feature a collection of official stores. Official stores are retailers or sellers of brands that have been verified by marketplaces themselves, ensuring consumers of the authenticity of branded products.
Shopee Mall currently has over 25,000 official stores across the region, an impressive number indicative of how much marketplaces have evolved. From iPrice’s research, we found that the percentage of brand products in marketplaces from official stores ranges from just 4% to over 20%!
In the past, marketplaces were typically dominated by small local and international businesses. Today, marketplaces look completely different with big-name brands occupying a significant presence. For instance, based on iPrice’s research, there were more than 1,000 Under Armour Official Store products listed on Lazada and Shopee Singapore alone as of April this year!
No. of Official Brand products in top marketplaces Shopee and Lazada
as of April 2021
(Data Source: iPrice Group)
What this shows is the ever-changing landscape of marketplaces and the crucial role they play in driving the sales of huge direct-to-consumer brands. Marketplaces present immense opportunities for not just small businesses, but also for some of the biggest retailers in the world, serving as an integral component of the DTC strategy.
Indeed, with the end-to-end value provided by marketplaces that range from marketing to logistics support, brands cannot afford to pass on marketplaces.
“Lazada’s partnership with marquee brands offers premium and personalized shopping experiences to our customers. LazMall provides a trusted platform that complements business strategies. For example, our bold compensation and returns policy guarantees product authenticity and assortment quality. Combined with access to our comprehensive logistics ecosystem, brand partners can scale their commerce operations sustainably,” said James Chang, Head of Strategic Accounts and Retail, Lazada Group.
Marketplaces are growing stronger than ever, especially in Singapore and Indonesia
Of course, the strongest appeal of direct-to-consumer brands partnering with marketplaces is the millions of users who visit and transact on these marketplaces especially in Southeast Asia.
In 2020, Shopee and Lazada experienced record-breaking Singles’ Day sales numbers that surpassed their performances in 2019. As 200 million items were sold in one day on Shopee, and $11m in sales poured in on Lazada within the first 100 seconds of the event, marketplaces are vital platforms that enable brands to capture huge growth opportunities.
Comparing Q1 2021 with Q1 2020, the top three e-commerce marketplaces in Singapore and Indonesia experienced a 65% increase in web visits. At this rate, the top e-commerce marketplaces in both countries may grow above last year’s web visits.
(Website traffic visits of top 3 marketplaces in Singapore and Indonesia in 2020. Website traffic visits increased by 25% and 33% from H1 to H2 in Singapore and Indonesia respectively.)
It is no wonder why direct-to-consumer brands are drawn to marketplaces as they can tap these millions of users (particularly during mega sale events like Singles’ Day), significantly expanding their reach to consumers in the region and doubling down on their DTC sales.
Direct-to-consumer retailers rely on marketplaces to increase distribution
The rise of direct-to-consumer retailers can be seen to be competitive to marketplaces. However, our study suggests that the opposite is true — DTC retailers are increasingly relying on marketplaces to further boost their sales.
With how integral marketplaces are to the direct-to-consumer strategy of even the biggest retailers in the world, it is likely that we will see even more big-name brands working in partnership with marketplaces. We look forward to seeing how this collaboration between DTC brands and marketplaces will evolve in the near future, especially with e-commerce growing faster than ever.
About iPrice Group
Currently, iPrice compares and catalogs more than 6 billion and receives about 20 million monthly visits across the region. iPrice currently operates three business lines: price comparison for electronics and health & beauty; product discovery for fashion and home & living; and coupons across all verticals.
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