Why Southeast Asia’s ecommerce players should prioritize customer loyalty

As the saying goes, a rising tide lifts all ships. But for merchants selling online in Southeast Asia, there’s a chance that the region’s rapidly growing ecommerce industry could cause some to sink.

With the shift toward online shopping due to the pandemic, many ecommerce websites saw a surge in consumer interest across the region. In Singapore, ecommerce website traffic in 2020 was 35% higher than the year before, while the Philippines and Vietnam saw jumps of 21% and 19%, respectively, in the same period.

But there’s a catch. With so many eyes on the sector’s success, the number of competitors has ballooned. In Vietnam, for instance, it’s estimated that there are around 51,300 ecommerce sites as of this year. Other countries in the region are in a similar position: Malaysia has 41,200 while Singapore has 29,500.

With more competitors in the mix, Southeast Asia’s ecommerce stakeholders could face some challenges ahead.

In looking to overcome those hurdles, regional companies will need to shift their strategy toward customer loyalty, a change that established industry players like Alibaba have already achieved for major events like its 11.11 Global Shopping Festival this year.

Gaining new ground

One of the biggest issues caused by the surge in online shopping is attracting new customers, something that many digital merchants are already experiencing. While customer acquisition has always been something that ecommerce firms had to work toward, it’s gotten more difficult in recent years.

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The growth of new internet users in Southeast Asia is slowing down. From 2021 to 2022, there was only a 4% increase in users who went online for the first time. This is significantly lower than the one-year period before that, which recorded a 10% jump.

This means that regional ecommerce stakeholders are facing a double whammy: more competitors are fighting over the same pool of digital consumers that is growing at a slower rate.

Emphasizing loyalty

To solve this issue, digital merchants in the region need to focus on customer loyalty more than ever.

In this regard, Alibaba has been a leader in helping merchants on its platform attract and grow their loyal customer base. As of June, the company managed to retain 98% of customers who spent more than 10,000 yuan (US$1,400) over the preceding 12 months. Additionally, merchants on its Tmall platform saw an overall increase of 66 million loyal customers during the pre-sales period of its 11.11 Global Shopping Festival this year.

“Transforming consumer awareness into customer loyalty is key to generating the best return on investment,” said Chui Xue, president of industry development and operation center of Taobao and Tmall, Alibaba Group, during a media briefing.

Third-party numbers back up Chui’s statement – according to a report from business.com, returning customers spend up to 67% more than new ones. As such, both platforms and merchants should look to capitalize on loyal customers to grow sales instead of onboarding new ones.

Join the club

Membership programs are effective solutions to help drive better customer loyalty. According to a study by Nielsen, 84% of customers are more likely to continue shopping with a brand that offers a loyalty program.

On Tmall, for instance, Alibaba’s brand loyalty membership programs allow consumers to sign up as members of individual brands to receive special benefits directly from the merchants.

These programs also help brands generate customer insights, allowing them to issue benefits and rewards that are more tailored to members’ needs. Subsequently, this helps merchants generate a stronger base of loyal customers.

Transforming consumer awareness into customer loyalty is key to generating the best return on investment

Some merchants may reward members by tacking on extra discounts for certain items, while others choose to provide additional value through other forms of engagement. For example, Royal Canin, a pet food brand, regularly shares insights on raising pets with its 1.6 million members on the platform.

For some companies, these programs have become a crucial cornerstone in “attracting new users, building engagement, and facilitating record keeping,” says Claire Sun, associate marketing director at Royal Canin. “The brand’s membership program on Tmall has become a growth driver for its long-term and steady development,” she adds.

Another company that’s leveraging a brand loyalty membership program on Tmall is The North Face. Recognizing how such programs are pivotal in the push to acquire more consumers with strong stickiness as well as more quality members, it’s working with Tmall to power its marketing efforts in those areas.

Membership programs also generate a virtuous cycle as they give brands more credibility, which can help businesses generate even more sales. A survey from Bain & Company found that having a membership program was the third most popular reason for loyal customers to recommend a retailer to a friend or colleague.

According to Chui, Alibaba’s brand loyalty membership programs have seen good results – over 40 brands on the platform have gotten more than 10 million members for their respective programs, while almost 600 merchants have netted over 1 million members each. In addition, loyal members have contributed more than 40% of brands’ sales growth so far.

Banking on loyalty

With new customer acquisition getting harder, the effectiveness of driving customer loyalty cannot be understated. Ecommerce firms will have to keep this strategy in mind even as the regional industry continues to grow.

Major ecommerce platforms like Alibaba have committed to using customer loyalty programs as a strategy to drive continued growth, which should serve as a positive benchmark and reinforcement for Southeast Asian businesses that want to do the same.

“This is a rapidly growing area that will further boost business growth for merchants,” said Chui. “We firmly believe that it is the most reliable source of growth for our merchants in the long run.”

Currency converted from Chinese yuan to US dollar: US$1 = 7.25 yuan.

Alibaba Group’s mission is to make it easy to do business anywhere, with the aim to build the future infrastructure of commerce. Today, Alibaba Group has grown into a digital ecosystem with businesses involved in Chinese and international commerce as well as local consumer services, among many others.

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This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.