I can't understand Southeast Asia, is it more rational or more gambling?

This article is from the WeChat public account: Xiaguang Society (ID: Globalinsights), author: Guo Zhaochuan, editor: Weber, title picture from: Visual China

"We've seen a lot of entrepreneurs from China bring new concepts and ideas for consumer brands to Indonesia, so we always pay close attention to these entrepreneurs who are starting businesses in the consumer space." Melina Anlin, vice president of investments at AC Ventures, said.

New consumer brands going overseas in Southeast Asia are in the ascendant. What role does content e-commerce, represented by TikTok e-commerce, play in the current development of consumer brands? Indonesia TikTok Shop has experienced a series of turmoil, and after merging with Tokopedia and changing its name to ShopTokopedia, what is the impact on sellers and traffic?

Is the "D2C brand (also known as DTC brand, that is, Direct to Consumer) that we often refer to in Europe and the United States still a pseudo-concept in the immature market in Southeast Asia? What is the underlying consumer psychological logic behind this?

Through an interview with Melina Anlin, Vice President of Investment at AC Ventures, an investor in consumer brands in Southeast Asia, we had an in-depth understanding of the current situation of consumer brands going overseas in Southeast Asia.

The disruption of content e-commerce: It's like being in a giant online Disneyland

"The most interesting thing is that when TikTok enters Southeast Asian countries such as Indonesia, its essence is like an online Disneyland." Melina Anlin said.

Every day while waiting for public transport on the way to work, you can always see Indonesians naturally turn on TikTok and immerse themselves in the online paradise world.

"When people get bored in Indonesia, the first thing they do is turn on TikTok, which is really a form of entertainment." These people spend a lot of time on TikTok, and ride-hailing drivers waiting for orders on the side of the road are also scrolling through TikTok videos all the time.

On the one hand, people rely on short videos to pass the boring time, and on the other hand, they are also unconsciously contacting and discovering countless new brands every day.

And for these brands, whether they are local or foreign, what is behind the factories, supply chains and investors, it doesn't mean much to these broad viewing audiences – consumers are more concerned about what the brand stands for (whether it's decent or trendy), whether it's selling it appealing, and most importantly, the price factor.

"When you're shopping in a live stream, there's usually a special price. Some streamers always encourage people to check in, and there are plenty of e-vouchers. Melina said.

Locals have become more and more accustomed to this new form of shopping. While it's really just for fun when you open TikTok, if you find out in a live video that something special only lasts for two hours, you can make an impulse purchase.

On March 27, 2024, Indonesia's TikTok e-commerce has completed the migration of its e-commerce system, fully merged with Tokopedia, and changed its name to ShopTokopedia.

As a result, Tokopedia fully manages the payments, user data, and merchant operations of the original TikTok Shop. This is the latest news about TikTok e-commerce after Indonesia's regulations restricting direct commodity transactions on social media platforms were enacted last year.

In October last year, after TikTok e-commerce was restricted in Indonesia, many people believed that traffic would flow to traditional shelf e-commerce such as Shopee and Lazada to a certain extent.

But in fact, after research and observation, it was found that "the growth of other e-commerce platforms is actually not as much as people expected." Another big seller who is engaged in consumer brand management in Southeast Asia also said that after this twist and turn in Indonesia, the current TikTok e-commerce does not seem to be much different from before (referring to the use and operation of sellers and buyers).

However, there are indeed sellers who have invested more in the early stage and say that they vaguely feel that "the traffic is not as good as before". But now, for many new consumer brands that want to break into the Southeast Asian market, investing in content e-commerce on TikTok has become an important option.

"Not just in Indonesia, but globally, social media platforms such as Instagram and TikTok are fundamentally changing the way brands emerge and grow. The initial cost of brand testing is small, but the benefits can be high. Melina said.

Due to a lack of trust, new consumption in Southeast Asia is still in its early stages of development

"Although TikTok cuts from the social side, in fact, the traditional shelf e-commerce is okay overall, not so bad." Southeast Asian e-commerce sellers said.

In Melina Anlin's view, the development process of consumer brands in Southeast Asia can be observed in comparison with the US FMCG industry.

Melina Anlin previously worked for Bain & Company. Every year, Bain & Company publishes a list of emerging brands in the U.S. FMCG industry. In the current Southeast Asian market, we can see many new consumer brands with similar characteristics to independent emerging brands in the United States.

But the difference is that "emerging brands in Southeast Asia are not true D2C brands like the United States." ”

Because the first step for new consumer brands in Southeast Asia is often third-party e-commerce platforms (whether content e-commerce or traditional shelf e-commerce), rather than directly contacting customers through brand official websites or independent websites like real D2C brands.

Behind this is a general lack of trust between consumers and businesses in Southeast Asian countries.

"If I place an order on an e-commerce platform such as Tokopedia, Shopee, Lazada and Bukalapak and the goods do not show up at my doorstep, I can go to the e-commerce platform to complain about a refund. But if I go directly to a brand's own channels, I can't even guarantee that they will answer my call. Melina Anlin explains the online shopping mindset of Southeast Asian consumers today.

In fact, this type of online shopping mindset is not unique in Southeast Asia. Even domestic online shopping has only developed more diversified shopping channels in recent years, and consumers have a new concept of "brand owned".

Similarly, in the marketing of consumer brands in Europe, America, Japan and other countries, common subscription services, email marketing communication methods, credit card payments, etc., are also facing "unsuitability" in the promotion of new consumer brands in Southeast Asia.

At this time, the value of content social platforms such as TikTok and Instagram for brand promotion is more prominent, especially TikTok, which has its own e-commerce system, has become the first choice for many new consumer brands in Southeast Asia to expand their markets.

Melina cites two emerging local consumer brands that AC Ventures has invested in: Simplus, a small home appliance brand, and Rosé All Day, a local beauty and skincare brand, both of which have achieved excellent sales growth and profitability in the Southeast Asian market.

After Indonesia, why the Philippines?

In Southeast Asia, everyone has a common understanding that if you do well in one country, you are not guaranteed to be good in another Southeast Asian country, whether it is Indonesia, Thailand or the Philippines.

The so-called market expansion involves the overall resource ratio, investment direction, the degree of adaptation of goods to the local culture, and most importantly, whether the local resources have advantages.

Many new consumer brands entering the Southeast Asian market will choose Indonesia as their first stop for starting a business.

We have analyzed the Indonesian market in many articles before ("China's new energy vehicles, "killing" into Indonesia", "after throwing the pole rabbit, he said that "those who win Indonesia get Southeast Asia"), the most important population number, the extremely high proportion of young people, etc., are the key factors to promote consumption.

And in Indonesian culture, there is a large part of the people who have the mentality of having fun and advocating consumption. Young people like to spend money, like to try new products, and are very receptive to new brands, new product concepts and ideas, and new ways of shopping.

The Indonesian market has special characteristics in the whole of Southeast Asia:

Indonesia accounts for nearly 40% of Southeast Asia's GDP and is the most populous country in Southeast Asia, now approaching 280 million, with the country's middle class growing as the economy grows. One of the most important is that Indonesia's population is very young, likes to spend money, and has a strong spending power.

"Indonesia is actually a very consumption-driven economy, so we are very optimistic about the Indonesian market." Melina Anlin said, "It's very attractive in terms of structural market fundamentals. ”

If we look back and compare Indonesia today with our more familiar consumer market in China, we will find that:

Around 2014, China's GDP per capita was $7,500, and more than 50 consumer companies were preparing for IPOs between 2014 and 2018. Indonesia's per capita GDP is now close to US$5,000 and growing rapidly, and is expected to reach US$7,500~US$8,000 in 2030, which means that considerable new consumer brands and companies will be listed through the Indonesian market.

And now in 2024, it is a very opportune time to invest in Indonesian consumption as an early investor.

After Indonesia, the Philippines may be the second choice for many investors and entrepreneurs among Southeast Asian countries.

"Interestingly, if you look at Metro Manila, it's a very dense area, it's almost as dense as Jakarta, and it's actually even more dense." Melina Anlin said.

With a population of 110 million, the Philippines is about one-third the population of Indonesia and is the second largest country after Indonesia.

In fact, close to 10% of the Philippines' GDP comes from the diaspora, and a lot of Filipinos work in wealthier countries overseas while still having very close ties to their home country, the Philippines, sending a lot of money back to the Philippines, which actually boosts Filipinos' domestic spending power.

On the other hand, the Philippines is heavily influenced by Western culture. They speak English, so new brands can be sold in English, and short videos for marketing can also be in English, so it's easy to get into the market.

However, at the same time, entrepreneurs of new consumer brands going overseas to Southeast Asia also need to bear in mind that "Southeast Asia" is not a unified overall market, but a market segment with great differences in various countries, so it is also necessary to make targeted localization landing strategies and localized content marketing for different national markets.

This article is from the WeChat public account: Xiaguang Society (ID: Globalinsights), author: Guo Zhaochuan, editor: Weber

This content is the author's independent view and does not represent the position of Tiger Sniff. May not be reproduced without permission, please contact [email protected] for authorization

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