Taking a Leaf Out of Asia’s E-Commerce Model with Natalie Lee and Giulio Xiloyannis

The Asian e-commerce landscape is rapidly recovering from the effects of Covid-19, an outlier which generated interest from global businesses. Brands and retailers are keen on penetrating the online space in the region, but doing so requires a different approach than in the West.

In our recent webinar hosted by Simon Collins, the co-founder of WeDesign and the former Dean of Parsons School of Design, he spoke to Natalie Lee, Director of Fashion Category at Coupang and Giulio Xiloyannis, CCO at ZALORA Group on:

• The crisis response strategies implemented by Asian online retailers.
• The importance of relationships between brands and retailers in enabling flexibility. 
• Key lessons from Asia’s e-commerce model for global brands to take as an example.

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Quick Reaction Time

In South Korea, traffic for consumables soared online as the population sought shelter at home. According to Lee, Coupang wasted no time in tweaking its fashion merchandising strategies to fit the immediate needs of consumers and to capitalise on the increase in online traffic.

“Some brands that produce in China were affected, but we were able to place orders up to twice a week from local brands”, said Lee. The higher-order frequency gives Coupang more flexibility in assortment planning.

“Communication and being open is key,” Natalie Lee advises in managing relationships with vendors through re-assortment.

Vendors that had supply shortages communicated their setbacks with Coupang, which helped to inform the areas of inventory Coupang will be lacking – in advance. “At the same time, we share Coupang’s plans with the vendors so they can be ready with the assortment,” Lee added.

Zalora, on the other hand, faced varying degrees of disruption as the pandemic’s impact differed by country.

Taiwan and Hong Kong were particularly resilient – attributed to their experience with the SARS pandemic in 2002. The sales drop off in the region was not as drastic as other countries in Southeast Asia (SEA). According to Xiloyannis, it was simply a matter of staying calm and managing the balance sheet.

The situation in the Philippines was out of hand, as strict lockdown orders forced Zalora warehouses to shut for weeks. Instead, the company turned its attention to Indonesia and Malaysia to absorb some of the impact. Demand for fashion plummeted in both countries, calling for urgent de-risking measures.

“We had to do something if we wanted to stay relevant in the minds of consumers, otherwise we will lose that connection,” said Xiloyannis.

Zalora quickly started listing hand sanitisers and face masks on its platform to remain front of mind with consumers while waiting for demand to bounce back. 

The company’s quick turnaround time was instrumental in implementing this crucial step.

Flexibility in the Workforce

Both Coupang and Zalora’s speedy response to the crisis stems from flexibility in the workforce that has been fostered since the companies’ inception.

“It wasn’t an overnight change,” Lee confirms. The new set of challenges brought around by e-commerce has prepared the workforce at Coupang to diversify and quickly adapt to changes. New ideas superseded conventions, as the retailer values input from every segment. Junior employees are responsible for many of the new processes introduced in the company.

The retailer was able to swiftly adjust to the new normal for wholesale trade, such as live streaming. Coupang are also actively approaching new vendors without a DTC platform for opportunities to grow during this critical period.

“Flexibility and adaptability is in the DNA of a startup.” – Giulio Xiloyannis

At Zalora, cross-departmental projects and rotations have been in place since the beginning. The senior positions at Zalora have reinvented themselves numerous times and dabbled in areas outside of their expertise. 

“This training was essential in the first two weeks of lockdowns, when we needed to quickly react to unprecedented changes,” he added. Zalora doubled down on analysing current demand and built inventory on areas that were gaining traction.

Working with Western Brands

The Covid-19 crisis added pressure to the already deteriorating relationship between retailers, vendors and brands in the West. Order cancellations were rampant as contracts were not observed due to fragile alliances. In contrast, the Asian e-commerce retailers value relationships with brands and have tried to honour them as best they could.

“The reason we were able to manage the balance sheet while maintaining relationships with Western brands is they were ready to walk hand-in-hand with us,” said Xiloyannis. When Zalora needed to reduce exposure for brands at the start of the pandemic or risk bankruptcy, both parties worked together to find a compromise. 

An agreement was reached to delay delivery until the SEA market recovers, after which Zalora will immediately resume selling goods from those brands. Xiloyannis continued, “Now that the situation has improved, we’ve been arranging to receive stocks from western brands again to reduce pressure on the supply chain.”

Apart from being open to negotiations, the retailers provide extensive support for brands entering South Korea and SEA’s market.

Polo Ralph Lauren launched on Coupang at the start of the pandemic – expanding its distribution channel to push sales rather than resorting to heavy markdowns. The venture proved fruitful as the brand’s core items are still selling at full price on the platform. Coupang offers insights on trends, seasonal demand and the optimal price points to penetrate the market. Lee stated, “We help brands to understand the consumers and be ready with the right assortment at the right price.”

Zalora is ready to support brands from a marketing standpoint. The company is in partnership with top influencers in the region and can provide localised intelligence on key events like Ramadan or Christmas in the Philippines. Another way Zalora facilitates expansion is through logistical aid such as warehouse and customs services to ease stock movement across countries.

Data’s Role in Strengthening Relationship with Consumers

Lee attributes Coupang’s success to its deep understanding of consumer behaviour. Data of consumer activities on the platform helps define wants and needs, which can be dissected and applied to boost resonance. 

Videos are used extensively to market products on Coupang, in line with the demographic. Dawn delivery and next-day-delivery are strategies derived from data, instrumental in building trust amongst consumers. “It’s not the speed that appeals to consumers, it’s them knowing exactly when they will receive their orders,” Lee stated.

Zalora’s business model calls for a broader collection of data. Operating in six countries presents a diverse range of customers with different religious and cultural standpoints that are shopping from the same inventory.

Technology was implemented to allow Zalora to extract consumer data from its online channel and segmented to understand their needs and shopping habits. This process allows the retailer to localise its marketing and communication efforts tailored to specific segments. 

Omnilytics supplements Zalora’s data with insights on its direct and indirect competitors. Additionally, data on other markets helps Zalora to predict future trends and be the first to introduce them to the SEA market.

“Omnilytics provides data at a keyword level that eases product understanding and is easy to analyse.” – Giulio Xiloyannis

Approach to Seasonality

The Asian e-commerce landscape constitutes a different take on seasonality – something the West is now learning from. 

Consumers in South Korea shop on a ‘buy now, wear now’ basis – seasonal deliveries are aligned with the start of a particular season, instead of months in advance as they typically do in the West. Unexpected weather changes in the past like a warmer winter in 2019 resulted in an inability to sell winter jackets that led to a glut of deadstock. This prompted more brands to produce evergreen products that are transitional and have a higher chance of replenishment.

The tropical countries that Zalora operate in calls for summer apparel throughout the year. At the same time, Zalora requires winter wear year-round for tourists as demand for the category fluctuates. This allows room for the retailer to absorb seasonal stock from brands in both the northern and southern hemispheres while meeting current demand in its market.

“Essentially, you are using technology to sell clothes to people when they want it, not when you want to sell it.” – Simon Collins

The Asian markets’ approach to seasonality is a focal area that Western brands can reference to revamp its outdated seasonal model.

Key Lessons

Flexibility and quick turnaround rates put Coupang and Zalora at an advantage over their Western counterparts, enabling them to adapt quickly to market changes. Utilising data to the fullest and analysing down to the consumer level has also been the key to tackling the different demographics of shoppers. 

Transparency, trust and relationships are central to Asia’s e-commerce model. Fashion businesses in the West must start putting those building blocks in place if they wish to emulate Asia’s success.

For more insights on Asia’s e-commerce landscape, watch the full webinar here.