Six Strategies for Digital Growth in Southeast Asia

By Praneeth Yendamuri, Derek Keswakaroon

The digital economy is booming in Southeast Asia (SEA). With 350 million digital consumers, SEA is set to leapfrog China, outpacing that country at a 1.6x growth rate and becoming the fastest-growing digital economy in Asia-Pacific. According to research conducted by Bain & Company and Meta, 78% of consumers in SEA are now digital consumers, that is, those who have performed a commercial transaction online.

At the same time, brands are also facing obstacles as a result of commodity price increases, raw material shortages, and shipping/port capacity chokes that are beginning to impact their top line and margins. A poll conducted by Bain of Asia-Pacific consumer product leaders revealed their top three issues for 2022: supply chain, inflation, and post-Covid consumer roadmaps. While solving for the here and now, savvy brands are building strategies around post-pandemic readiness. To reach these 350 million consumers in SEA, we see six crucial strategies. These ‘Six Rs’ can help maximise your brand success.

Rewrite your digital-first agenda

Most consumers are set in their online buying and browsing habits. Digital channels are increasingly playing a role in how consumers hear about products, evaluate products against the competition, and make purchases. Combined, these behaviours develop brand loyalty for consumers.

Digital is now the foundation for how the internal engine functions: core themes are supply chain, customers, consumer connection, employees, and workplace. Savvy brands are setting their digital ambitions for the coming three to five years, including a bold and realistic ambition for the digital domain. They assess “digital maturity” across different digital domains; review and benchmark ongoing efforts and outcomes; evaluate data, applications, technology architecture upgrades, assess investment requirements—both domain specific and transversal; determine organisational gaps to fill to run digitalisation at scale (including changes in culture and capability); and establish objectives and key results.

Rewire your supply chain/business model

Consumer product companies are experiencing inflation and supply chain challenges that are expected to increase or continue. The top two issues are inflation and supply chain resiliency. Savvy companies are addressing these issues pragmatically.

Regarding inflation, brands are exploring immediate opportunities to realise more net revenue per unit through a combination of revenue growth management levers, including price pack architecture, strategic pricing, trade terms, promo optimisation, channel mix, etc. Brands are also exploring more structural and transformational change through design to value.

Regarding supply chain, brands are solving for the immediate problem of freight and logistics by creating innovative mobility solutions and prioritising hero SKUs while establishing greater transparency through control towers. Brands are also thinking about breaking the value chain by exploring local contract manufacturing operations by shipping bulk, if that is more feasible compared to container freight.

While for the longer term they are using a ‘future back’ approach to look at supply chain resilience, taking into account geopolitics, consumer intimacy, response time, tax regimes, and cost considerations.

Reimagine consumer engagement

E-commerce platforms are increasingly used for searches; social channels are increasingly used as points of sale. While for digital consumers, end sales are still split between offline and online, we see digital channels far outpacing offline channels for brand discovery and consideration.

Given this phenomenon, common pitfalls for brands around commercial spends include the following:

• lack of visibility on how much is spent; and a ‘last-year-plus’ mindset about allocating commercial spending
• not ROI-driven
• democratically allocating commercial spending across different subfunctions
• a siloed approach that doesn’t understand which touchpoints most influence the consumer’s path to purchase and how those touchpoints influence one another

Brands must independently reevaluate their commercial activities and reorient their marketing and trade spends to mirror this multichannel, multi-platform path to purchase. They must also create brand loyalty and differentiation with a unique, consistent, and engaging experience across their offline presence, social channels, website, and app.

Finally, brands must identify differences between offline channels vs. e-commerce and determine how they should guide internal processes, such as sales and operational planning, dashboards and KPIs, decision rights, and organisational structure.

Refresh product offerings

On average, digital consumers shop across 7.9 online websites or platforms—a 52% increase from 2020. Fifty-one per cent of consumers say they switched from their most purchased brands in the past three months. Price wasn’t the only reason they switched: Better product quality, better availability, and faster delivery times all contributed to switching brands.

Consumers increasingly demand ‘right for me, right now’ products, services, and experiences. But this contrasts with how the pandemic drove the need for affordability. Brands need to manage the growing gulf between consumer price inflation and product cost inflation simultaneously. Brands must manage this contrast while keeping their range simple with easy-to-understand propositions and price points, including carrying out ‘revenue growth management’ initiatives.

Re-envision sustainability

Listen to your customers’ desire for sustainability. Right now, 80% of SEA consumers will pay up to a 10% premium for eco-friendly and socially conscious products, according to the research conducted by Bain & Company and Meta. A sustainable approach can guide all aspects of the business—from product design to supply chain and operations.

Ensure that your brand has adequate ESG-focused options in your product range and proposition. It is possible to make the supply chain more sustainable without compromising on cost efficiencies. And since many of your consumers are willing to bankroll your environmentally and socially friendly practices, promote your sustainable initiatives.

Realign to consumers’ new hybrid lifestyle

Some pandemic-era trends are here to stay, including flexible working arrangements. Consumers want shopping options that are closer to home, especially in SEA countries with challenging transportation issues.

Your product offerings, marketing, and delivery options should cater to this new wave of homebodies. Redesign and customise a subset of your offerings especially for at-home consumption.

In conclusion, the Southeast Asian market has jumped to the top of the digital-first priority list. Demand is pulsing through the region and growing. Existing digital consumer trends are ready for immediate action, along with new trends created during the pandemic. In addition, brands need to combat supply chain related headwinds. The time is right to implement the ‘Six Rs’ to gain traction with these SEA consumers—now and in the future.

Praneeth Yendamuri is a Partner at Bain & Company based in Singapore and Derek Keswakaroon is a Partner based in Bangkok.

Yan-Xin Tay
Senior Specialist, Market Reputation
Bain & Company
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