How the Largest Players in Asia Pacific Are Changing Consumer Expectations in Digitally-enabled Commerce Companies like Pomelo, Lazada and Zalora are changing the face of ecommerce in APAC, and the world.

By Hazel Hernandez

Opinions expressed by Entrepreneur contributors are their own.

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When most people examine the strength of an ecommerce store or channel in Asia Pacific, they typically look at gross merchandise volume (GMV): the dollar value for goods sold over a particular period of time. While looking at the GMV is helpful, there are also other signals that should be looked at.

One is influence: To what extent has the company influenced other players in the space, or indeed, forever shaped the expectations of their own customers. This thought may strike some as abstract until you look at individual examples in Asia Pacific.

Take the case of cash on delivery (COD). Cash on delivery was a popular option for small businesses and individuals who sold through online classifieds. The seller would meet the buyer for a face-to-face meetup in a public location, who in turn would fork over the cash in exchange for the item. The idea that this could scale to large ecommerce marketplaces would probably be laughable to most analysts at the time - until that is, the Rocket Internet-backed Lazada and Zalora entered the scene in 2012.

The two companies would in time both offer cash-on-delivery to onboard the critical mass of people in Southeast Asia who did not have a credit or debit card, but still wanted the convenience of ordering products online. The caveat was that such companies would have to eat the operational cost of failed or canceled deliveries, as well as repeat deliveries (i.e. attempting to deliver a product multiple times in order to get the final successful delivery with cash).

Even if cash on delivery was expensive for ecommerce players, the influence of Lazada and Zalora was so large that it became a status quo. Any large ecommerce player, and even niche marketplaces, would have to offer cash-on-delivery if they wanted any chance of wooing the customers who were now expecting it as a payment option. By setting terms of competition, Lazada and Zalora should be both viewed as two of the most impactful ecommerce players in the region.

The same expectations apply to the other side of the ecommerce process: returns. A study commissioned by American logistics company UPS and released just last year found that half of shoppers in Hong Kong, China, and Japan reviewed return policies before buying. Since only a small minority of shoppers ever return an item, the results showed that people merely like the psychological comfort of a customer-centric return policy, even if they may not ultimately go through the rigamarole of returning anything.

One company that is institutionalizing customer-centric return policies across Asia is Pomelo, which offers free returns and exchanges, subject of course to some terms and conditions. That one of the largest ecommerce players is offering free returns - Pomelo has raised more than $83 million and is active in Thailand, Singapore, Malaysia, and Hong Kong - may go a long way toward making free returns a customer expectation in the region.

Ecommerce sites that want to have any hope of competing with Pomelo in fashion ecommerce would need to offer free returns as a baseline condition in developing its user experience. Those that ignore the importance of this option will see potential customers turning to Pomelo and other sites with friendlier return policies for their peace of mind.

The Opportunity Cost of Time

In addition to flexible payment options and customer-centric return policies, customers in Asia Pacific also value speed of delivery. Take the case of SM Appliance Center in the Philippines, the country's largest appliance store chain which partnered with on-demand logistics platform Mober beginning in December 2016.

Prior to the Mober partnership, SM customers had to wait anywhere from 36 to 72 hours from the moment they bought an item to the moment it was delivered. As of December 2019, 7 out of 10 customers are electing to pay Mober's delivery fees - which range from 450 pesos to 750 pesos, depending on distance - to get their product delivered the same-day.

Customers arrange the delivery through Mober via an enterprise web application, which can be used at SM's claiming counter. That the vast majority of customers are weighing the trade-off between a longer delivery time versus a considerably shorter one with a minimal fee just goes to show that customers factor more into their buying decision than just the sticker price. They are increasingly considering the opportunity cost of not having a product or item sooner, and deciding that it's worth more in hand than en route.

What should other tech leaders make of these changing consumer expectations in ecommerce and digitally-enabled commerce? Since you may also sell your own products or services online, you should strive to learn from the cases of these pioneers. Do what you can to offer flexible payment options, provide them with speedy shipment or delivery options, and extend them psychological comfort with customer centric return policies.

Hazel Hernandez

Service Analyst, Citibank

Service Analyst for Citibank in the Philippines

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