Southeast Asia's booming market is immensely appealing to businesses within and outside of the region. The region comprises a medley of people with different cultural background, socio-economical progressions. How should e-commerce navigate this unique market?
Following Alibaba's record-breaking sales with Singles Day Sale event, marketplaces in Southeast Asia such as Lazada and Shopee have been devoting significant efforts in consolidated sale periods like the recent 99 Sale and the upcoming Single's Day Sale (11/11).
These mega-sales are increasingly popular for good reasons. First, they help marketplaces attain greater market share, especially with the tech-savvy bargain shoppers. Second, frequent mega-sales are useful for merchants to manage inventory balances with enticing deals. Third, products with a heavily reduced price may act as loss leaders to encourage traffic to their store and improve sales across the board. Other independent online retailers which are not listed on marketplaces have also been tapping on such sale period to attract consumers.
Frequent discount shifts reference prices and deter future transactions at the usual price. Bargain conscious consumers are primed to accumulate their shopping carts before making their purchases. To combat this undesirable consumer behavior, merchants have to be strategic in the products chosen to be discounted.
The culture of mega-sale is becoming the norm for consumers in Southeast Asia. Inevitably, this trend augments the transaction volume and creates a wider gap in demand - decreased transaction in the non-sale period and increased transaction during the sale period. This phenomenon results in operational challenges such as spikes in functional duties related to order processing. With boosted transactions, related activities like merchant queries, quality checks, order fulfilment increase during sale periods. Uneven distribution of demand for operational needs can result in difficulties in human resource allocation. The solution is oftentimes not as simple as hiring and firing additional headcount to meet short-term demand spikes. Businesses still need to provide staff training to these ad-hoc hires in order to meet service standards. Luckily, this problem does not exist without a solution - automation.
Automation solutions for specific tasks are ubiquitous in the current day and age. Firms can choose to hire external providers or develop automation solutions in-house to scale. Such solutions will help the firm to scale with ease, regardless of long-term organic growth or seasonal fluctuations. This can be strategically implemented in three stages.
Firstly, e-commerce marketplaces can implement automation solutions for its internal team's usage. This includes managing merchant queries from a customer service viewpoint and streamlining order-fulfilment processes from an operational one.
When internal users can utilize automation solutions effectively, the marketplace can proceed to the second stage which is to scale the automation application horizontally. This can be achieved by helping merchants adopt automation; passing the baton on to merchants can become a key differentiating factor for the marketplace to keep merchants in their ecosystem. The small and micro enterprises will benefit from automated processes which could otherwise be uneconomical. Through this, merchants will be able to provide better, and more efficient service to consumers. This will heighten the network effect experienced in the entire marketplace as increased utilization of automation solutions can translate to making more training sets available for machine learning and artificial intelligence.
Network effect - a phenomenon whereby increased numbers of people or participants improve the value of a good or service.
After the entire ecosystem is on board with the automation processes and tools, marketplaces can continue to expand the capabilities of its AI automation solutions to solve business problems outside of its industry. Any organisation, notwithstanding its domain-specific difficulties, will face a set of core challenges in which low dexterity tasks occupy significant amounts of employees’ day to day work, resulting in a loss of productivity. These challenges that are industry-agnostic can then be solved by the marketplace’s automation solutions which have already been tried, tested and proven internally and by its merchants.
On one end, they can develop and rely completely on the AI algorithm to recognize and differentiate application. However, this is still idealistic with the current state of technology. More realistically, merchants and the businesses using such automation tools should be able to customize them at an individual level so each of them can tailor the use case to their industry or business model.
The variance in demand is a problem faced by many businesses, not just e-commerce marketplaces discussed in this article. How businesses can differentiate itself to improve operations using automation, and which type of automation should they adopt are highly dependent on the business model itself. The framework provided here on scaling solutions through network effects could be easily adapted for any industry.