Southeast Asian retailers boost social commerce amid challenges

Shopify has published its Southeast Asia Retail Report 2024, revealing that a significant majority of retailers in the region are adapting to the challenging economic environment by increasing their investment in social commerce.

According to the report, 68% of Southeast Asian retailers plan to bolster their spending on social commerce within the next 12 months. This trend comes as social media emerges as a critical platform for brand and product discovery, with 82% of consumers in the region discovering new products via social platforms.

The report highlights that social commerce is experiencing rapid growth in Southeast Asia. Platforms such as TikTok are predicted to expand their user base in the Asia-Pacific region by 11.3% in 2024. Correspondingly, 39% of retailers surveyed cited social media engagement as one of their most crucial metrics for determining the return on investment (ROI) of commerce infrastructure, second only to profit margin, which was prioritised by 44% of retailers.

Eugene Chua, Executive Head of Global E-Commerce and Sales at Secretlab, a client of Shopify, commented on the impact of the economy on consumer behaviour, stating, "Given the economic climate, customers have become more discerning and selective with how they spend their money. Social media continues to play a big role as a platform of discovery and in influencing customers' decisions."

The economic pressure has prompted Southeast Asian consumers to become more price-sensitive. The combination of inflation and an increased cost of living has led 83% of consumers to reduce their spending on non-essential items, with over half actively seeking the best value deals. Price remains the primary factor for shoppers in the region, with 96% of consumers indicating that they would stay loyal to a brand offering incentives, particularly promotions and consistently low prices, which appeal to 70% of those surveyed.

Contextual real-time pricing is becoming increasingly significant, with 71% of retailers planning to boost technology spending in this area to drive conversions while maintaining favourable margins. Despite the importance of price, retailers are also focusing on customer experience to foster loyalty. Key considerations for Singaporean consumers shopping online include free shipping (71%), accessible payment methods (55%), and free returns (51%). For in-store shopping in Singapore, knowledgeable staff (56%), stock availability (55%), and attentive service (36%) are prioritised by consumers.

Retailers in Southeast Asia are facing operational challenges, with 85% reporting efficiency issues due to manual processes and complex systems. A near-universal consensus (99%) exists among retailers that technology can alleviate these challenges. As a result, retailers plan to invest about 20% of their total revenue in innovation over the next year. Investment priorities include contextual real-time pricing (71%), social commerce (68%), business intelligence (67%), unified commerce platforms (66%), and composable stacks (65%).

The role of the Chief Technology Officer (CTO) is becoming pivotal in navigating these technological advancements. The report notes that 93% of retailers believe that the CTO will be instrumental in driving the evolution and revenue growth of their businesses. Operational and support costs have become critical considerations, with retailers seeking technology solutions that offer lower total ownership costs while maintaining high performance and stability.

Shaun Broughton, Managing Director, APAC and Japan, at Shopify, stated, "In this current economic climate, the imperative for both shoppers and retailers to achieve more with less has never been greater. Retailers are turning to advanced technology solutions to not only meet evolving customer demands but also to fortify their long-term resilience."

"Unified commerce is set to be a key growth catalyst, enabling retailers to harness comprehensive data and insights across their customers, inventory, and operations to make informed and strategic decisions. With technology being the linchpin to the future of retail, Shopify is the partner of choice for retailers across Southeast Asia, from large enterprises to small businesses, with solutions that are purpose-built to cater to their unique needs."