ASEAN E-commerce: The Online Fashion Industry
Interview with Anthony Fung, CEO and Managing Director of Zalora Indonesia
18 October 2021
When the Covid-19 pandemic hit and bricks-and-mortar stores had to close their doors, consumers in Southeast Asia turned online for their retail therapy. Southeast Asian consumers spent 19% more online in 2020 than they did the previous year, bringing the average spending per order to US$32 (HK$250). Many retailers and brands have therefore started to strengthen their presence online to ride on the digital acceleration in online retail.
Zalora, the region’s leading e-commerce platform for fashion and lifestyle products, stands ready to embrace the opportunities brought on by the growing consumer appetite for online shopping. HKTDC Research recently interviewed Zalora Indonesia’s CEO and Managing Director Anthony Fung, who shared about how the company stay ahead in the market and his views on consumer preferences and trends in Southeast Asia.
Regional Leader in Fashion Retail
Established in 2012 as part of the Global Fashion Group, Zalora is a leading online fashion platform in Asia with a presence in Singapore, Indonesia, Malaysia, Brunei, the Philippines, Hong Kong and Taiwan. Sharing the reasons behind the success of becoming a trusted platform by fashion brands and retailers, Fung said, “With our extensive network and presence, we’re able to bring local brands to overseas markets through the Zalora platform. For example, the Hong Kong apparel company I.T has made use of our platform to raise brand awareness and introduce its products to Southeast Asian consumers. Our connection with other e-commerce platforms under the parent company also allows us to introduce new and overseas brands from countries in regions such as Latin America to the Southeast Asian market.”
Fung pointed out that another attribute that differentiates Zalora from other e-commerce players is its comprehensive support for sellers, saying: “Cross-border e-commerce can be challenging for sellers in terms of payment collection, customs clearance and even last-mile delivery. At Zalora, we offer assistance across these aspects and reduce cross-border selling barriers. Take payment collection as an example. Zalora first collects customer payments in foreign currency, such as Indonesian rupiah, and sellers can then choose to receive them in the same foreign currency or a local currency such as Hong Kong dollars. We also have our own logistics fleet and work closely with a number of third-party logistics partners in Southeast Asia to ensure fast and reliable delivery in the region.”
Exploring A Diverse Landscape
As one of the most connected regions in the world, Fung believed that Southeast Asia is the next gold rush for e-commerce: “According to market research, internet penetration in the region currently stands at 69%, with the number of users growing at almost 10% year-on-year. This is most evident in the Philippines and Thailand, where users between the ages of 16 to 64 clock in an average of over five hours on their mobile phones daily.”
“When we look at e-commerce penetration, there’s a rapid growth across the region too, particularly accelerated by the Covid-19 pandemic. Take Indonesia as an example, its penetration rate was about 1% four years ago and now it’s estimated to be 19%.”
While Southeast Asia offers appealing opportunities for the e-commerce sector, Fung highlighted the importance of understanding the region’s fragmented complexities, saying: “Consumers in the region are not a homogenised community. They vary in terms of purchasing power, heritage background and are often influenced by a myriad of races and religions, forming unique attributes that are specific to each country.”
With that in mind, Zalora has implemented different strategies to tap into the different markets. Outlining some of the differences in approach, Fung said: “Indonesia has a relatively low GDP per capita compared to other countries in Southeast Asia and consumers are looking for affordable products. The products we included on the Zalora platform are therefore mainly low to mid-priced. We even have our own manufacturing line to produce low-cost apparel to cater to such demand. The Philippines is a former US colony and consumers typically favour US and international brands such as Nike and Abercrombie & Fitch. Acknowledging that, we have worked to include more international brands for our customers there.”
Logistics Challenges and Preferences
Not only does Southeast Asia cover a large number of diverse consumer personas and preferences, it also comes with geographical and infrastructural differences. Fung pointed out that logistics remains a challenge for e-commerce, and shared his views on Indonesia’s current development. He said: “The country has a unique archipelagic nature comprising 17,000 islands, making it more challenging and costly to transport between cities and islands. For example, shipping within Jakarta for a parcel below 2kg costs less than US$1 but shipping the same parcel from Jakarta to Maluku will cost about US$20. Shipping into Indonesia is expensive too, especially since the Covid-19 outbreak, given the reduction in operating flights.”
In navigating logistics challenges in Indonesia, Zalora works with an extensive network of third-party delivery partners. Fung explained: “Each delivery partner specialises in different zip codes. We can trust them with fast and reliable last-mile delivery because they are familiar with certain areas in the country. Unlike Hong Kong, where the delivery fee is usually standardised regardless of the delivery service provider, it varies in Indonesia depending on different delivery partners. It is therefore important to provide options for local customers to cater for preferences in delivery costs and time.”
Fung also pointed out that most Southeast Asian consumers prefer home delivery over self pick-ups, saying: “Pick-ups at convenience stores or parcel lockers aren’t that popular among consumers in the region, especially in countries such as Indonesia and the Philippines where infrastructure like this may not be close to consumers’ homes.”
Covid-19 Redefining the Fashion Wardrobe
As consumers are re-evaluating their priorities in light of a new normal since the coronavirus outbreak, Fung observed several changes in shopping behaviours among Southeast Asian consumers. He said: “Video conferences and Zoom meetings have become the go-to solution for business meetings. Filmed via webcam, attendees dress from the waist up specifically for online meetings, allowing for a more relaxed approach to workwear. In Indonesia, this trend was reflected in a sale uptick by 2% for blouses and tunics while the popularity of dresses dropped by 7%.
“With people spending more time at home, we have also seen a significant uptick in sales in the sportswear category as well as self-care and personal grooming products.”
In addition to the aforementioned product categories, the children’s wear market in Southeast Asia appears to be an untapped opportunity that has only recently come into the spotlight since the pandemic. Elaborating on this, Fung said: “At Zalora, the average basket size for children’s wear last year was valued at US$89, with each basket averaging about 3.38 items.”
“Throughout the pandemic’s lockdown, the children’s wear segment has experienced a significant boom in sales. In Indonesia, we saw a 16% growth in sales of children’s t-shirts and a 6% rise in sales of dresses in 2020. This is most likely because of the increase in virtual home-schooling and parents’ reluctance to bring children out to shop. Besides, children outgrow their clothing faster than adults do, so the replacement cycle within children’s clothing is quite high.”
The Covid-19 crisis has also expanded the scope of e-commerce, including the sale of luxury items online. Elaborating on this trend, Fung said: “Before the pandemic, consumers liked to make luxury purchases outside their home countries. Not only because they could benefit from lower prices in cities such as Hong Kong and Singapore, but also because shopping has become an integral part of the travel experience. There’s still a demand for luxury products, but with the recent travel restrictions, luxury purchases have shifted online.” According to Zalora, luxury has been the fastest growing product category since its introduction in 2020, with the largest growth in demand from shoppers in Indonesia and Malaysia.
A New Age of Fashion Towards Sustainability
While the fashion industry is reorganising for the new normal, consumers in Southeast Asia are calling for more social and environmental responsibilities from fashion brands and industry players amid the pandemic. According to Zalora’s Sustainability Consumer Survey conducted last year, about 90% of respondents presented some level of interest in shopping for sustainable products. Specifically, over 60% of consumers from Singapore and Philippines expressed that they were willing to pay at least 5% more for sustainable apparel products.
To meet this escalating interest from consumers, Zalora has stepped up its sustainability efforts and commitment across all aspects of its businesses, from sourcing to product delivery. Outlining the company’s sustainability goals, Fung shared: “By 2022, we aim to ensure that 100% of delivery and internal packaging used at Zalora incorporates sustainable materials. We are also looking to achieve 100% offset of CO2 emissions from transportation and operation in four years’ time.”
As well as minimising its environmental impact, Zalora also aims to inspire a shift towards conscious shopping, by increasing the sustainable product assortment on its platform and increasing the use of sustainable materials in its private label products. In May 2020, Zalora launched the Earth Edit – a dedicated shopping filter featuring more than 15,000 fashion and beauty products from over 600 brands, enabling conscious shoppers to find a selection of brands meeting defined sustainability criteria through the Earth Edit filter. During the same year, Zalora also launched its first sustainable private label brand in Southeast Asia, Origin by Zalora, using biodegradable fabrics such as Lyocell.
In the long run, Zalora looks to promote sustainability by building a circular fashion ecosystem through tapping into the second-hand market. Fung said: “Currently, about 95% of items on Zalora are first-hand goods. In late 2019, we kickstarted our efforts by partnering with luxury marketplace reseller Style Tribute in Malaysia and Singapore to sell second-hand items on our platform. Looking forward, we hope to increase our second-hand product assortment and assess the options to allow our customers to resell items purchased on Zalora.”
 We Are Social, Digital 2021 Report
 Zalora, Southeast Asia Trender Report 2020
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- Garments, Textiles & Accessories
- Southeast Asia
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