Indonesia 2016 | Thought Leadership | Surviving the e-commerce hype cycle
by Richard McLeod
Engaging for sustainable success
Richard McLeod – Group Account Director, Millward Brown Indonesia
Mahesh Agarwal – Executive Director, TNS Indonesia
E-commerce in Indonesia is relatively small by global standards, but the category is starting to see dramatic growth. By some estimates, e-commerce will represent 8 to 10 per cent of total retail sales in Indonesia within the next decade. And the value of e-commerce is expected to hit US$24 billion this year – twice the value of e-commerce in 2014. Many businesses are now looking at how they can ride this wave.
A huge proliferation of new e-commerce brands, and a dramatic rise in adspend that has seen e-commerce become the third-most-advertised category in the country, mean that e-commerce brand choice for consumers has grown increasingly fragmented. But a recent Kantar TNS study demonstrated that only a small number of e-commerce brands are making it into the consumer consideration set, and most online shoppers have only ever bought from two different e-commerce sites. The current battle is fought on the grounds of high media spend and even higher discounts. In the long term, this will not be sustainable. As the category matures and becomes increasingly competitive, e-commerce brands will need to evolve their strategies to ensure they can survive the next phase.
Millward Brown and TNS have joined forces to identify the three factors that will ensure long-term success for Indonesia’s e-commerce brands.
1. Driving saliency through effective share of voice, not media spend alone
Total e-commerce adspend in the first half of 2015 totalled around IDR 1,725 billion – nearly three times the level of spend in the first half of 2014. With investment soaring like this, it will become increasingly difficult and expensive for brands to push for salience. Millward Brown research has demonstrated that adspend alone is not a guarantee of success. Some Indonesian ads are 10 times more efficient at generating brand saliency; the key differentiator is creative storytelling, which provides e-commerce brands with an opportunity to cut through the clutter.
Bukalapak is one brand that has managed to deliver above-expected awareness relative to its advertising spend through creative storytelling. Millward Brown Link research showed that Bukalapak’s “Paket” ad outperformed the e-commerce category average in terms of Enjoyment and Engagement. This was achieved through a very relatable and humorous storyline that captured audience attention. The ad tells the story of someone who is keenly awaiting the delivery of his Bukalapak order and races to the door whenever there’s a knock, but the delivery is always for his neighbour. Memorable advertising is helping Bukalapak to deliver better media spend ROI than its competitors.
2. Creating engagement through a personalized brand experience
One of the most important tasks for every e-commerce player is to engage with the consumer in a better way, and to do that they need to better understand the customers’ core needs. TNS has identified six core consumer needs from e-commerce brands.
Three of these needs are already well catered for by the current offering. “E-commerce enthusiasts” are driven by the excitement and possibilities of e-commerce and need constant delight. “Bargain Hunters” can find a multitude of discounts, and “Assortment seekers” are bombarded with choice.
However, there are some segments which are not yet being addressed well enough: “Therapy seekers”, “Novelty seekers” and “Prudent buyers”. To address these segments, e-commerce players need to offer a personalized brand experience across all touchpoints, from communication to the website, right through to home delivery.
Brands that can address the needs of all six of these types of e-commerce shoppers will differentiate themselves from the rest, and be well positioned for sustainable growth.
3. Building a Meaningfully Different Brand Proposition
BrandZ research into the e-commerce category in Indonesia has shown that high Saliency plays very little role in justifying a premium. Building a ‘Meaningfully Different’ brand is the only way for e-commerce brands to break out of the discount cycle and deliver sustainable growth. Some of Indonesia’s strongest e-commerce brands, such as Tokopedia and Lazada, are starting to build more meaningful connections with consumers by asserting functional benefits that meet consumer needs. Tokopedia’s “Sudah cek Tokopedia belum?” campaign, which means “Have you checked Tokopedia or not?”, for instance, shows the site as having everything that a consumer needs. But more generally, e-commerce brands are still far less Meaningful than other top brands in Indonesia, with only Tokopedia and Lazada making it into the Indonesian Top 20 for Meaning.
Building Meaning is the next frontier for Indonesia’s e-commerce brands. E-commerce brands should focus on fulfilling key functional consumer needs, but they must also showcase the bigger picture – the emotional benefits they bring to consumers’ lives.