SINGAPORE — ZALORA, part of Global Fashion Group (GFG) and Southeast Asia’s leading fashion, luxury, beauty, and lifestyle ecommerce player, released its latest Southeast Asia TRENDER 2022 Report, which forecasts that Southeast Asia’s e-commerce sector remains optimistic even amid economic uncertainties and an increasingly dimming global economy.
The last few years saw the e-commerce landscape evolve dramatically, forcing brands and businesses to recalibrate. Even though the path to recovery in 2023 will be disrupted by an impending recession, revived consumer interests, cashless payment options rapidly gaining momentum, and a newly-connected Southeast Asian retail landscape that saw more than 100 million new shoppers come online since the start of the pandemic, will help to propel the e-commerce sector forward.
Against this backdrop, ZALORA’s Southeast Asia TRENDER Report 2022 publishes these findings and insights to help brands and businesses find their footing in current realities while spotlighting opportunities in the near horizon. The report is based on a comprehensive analysis powered by ZALORA’s retail intelligence and data analytics solution, Data by GFG, to forecast consumer megatrends and purchasing patterns that will inform and shape retail strategies for 2023. It also includes intel from close to 60 million monthly visits, complemented by insights driven by Google and other partners.
“The nascent Southeast Asian e-commerce landscape is undergoing a significant digital transformation. Even as we brace for the potentially volatile climate ahead, it has become increasingly important for brands and retailers to connect with consumers in the right way,” said Gunjan Soni, Chief Executive Officer of ZALORA Group. “Our flagship state-of-the-industry report helps to guide the industry through this unpredictable time and aid in their retail strategies as they navigate through the region’s diversity and build on the momentum.”
Southeast Asia: A nascent yet buoyant e-commerce sector
Having emerged from the pandemic, consumers are returning to in-store shopping and traveling internationally. Despite these changes, and consumers cutting back on discretionary spending in the face of rising inflation, Southeast Asia’s e-commerce scene is still a bright spot from ZALORA’s standpoint. ZALORA saw continued year-on-year growth in resilient categories against a backdrop of a slowing economy.
This could be attributed to Southeast Asian consumers, even those in remote and rural areas, being more digitally connected than ever before and having incorporated technology into their daily lives. According to the e-Conomy SEA 2022 report, e-commerce adoption is high among urban and suburban consumers with 98% of affluent users and 74% of suburban users making an online purchase in the last three months.
Additionally, as travel resumes, so does online spending on travel essentials. ZALORA saw an uptick in consumer demand for swimwear (4%) and sunscreen (8%), while winter wear saw a spike of 71% as compared to 2021.
Another critical contributing factor has been the success of shopping festivals, in particular double-digit campaign days, when brands offer special deals and discounts. Known for driving sales and marketing impact in the region, ZALORA’s shopping events on these dates also saw the highest sales numbers as compared to any other day in 2022.
Maturing of cashless payment services such as BNPL will revolutionize Southeast Asia’s retail scene
Given the region’s growing mobile-first community, cashless payment options such as credit cards, e-wallets, and BNPL are rapidly gaining momentum. With over 70% of Southeast Asia’s population unbanked or underbanked, offering alternative digital payment methods can open new opportunities for online retailers whilst improving financial inclusion for millions across the region.
According to marketing intelligence firm IDC, inclusive payment options are set to power e-commerce spending to USD 179.8 billion by 2025, with digital transactions accounting for 91% of total e-commerce activity. Likewise, ZALORA saw the use of digital payment options grow substantially from 75% in 2020 to 81% in 2022 while cash transactions steadily declined. Singapore and Hong Kong are inching closer to being fully cashless with 98% of transactions in Singapore and 89% of transactions in Hong Kong made via digital payments and credit cards.
In particular, BNPL had a positive influence on consumer spending on ZALORA, as seen in the year-on-year rise in basket size net merchandise value (NMV) of 74% from 2020 to 2021, and 26% as of Q3 in 2022. With BNPL giving greater accessibility to high-value items, the most popular BNPL product categories are luxury (21%) and home and lifestyle (21%). In the Luxury category, purchases paid using BNPL options grew from 13% in 2021 to 21% in 2022.
As BNPL payments skyrocket across the region – by 226% in central areas and 190% in the outskirts from 2021 to 2022, it is quickly becoming a preferred payment method with its flexibility and interest-free monthly payments, together with the use of e-wallets as the convenience and the use of e-hailing rides and food delivery services will continue to fuel the popularity of e-wallet payments, which increased by 22% in central areas and 12% in the outskirts. BNPL is also most popular among Millennials and Gen Zs.
Consumers of tomorrow: Millennials and Gen Zs
ZALORA’s data shows that Millennials are this year’s biggest spenders on its platform, specifically those aged 36 to 40 years old. Gen Zs are also a rising powerhouse, making up about 24 percent of Southeast Asia’s population. Diving deeper into ZALORA’s data, this generation is spending the most on sports-related products (29%), followed by apparel (25%). They also favor footwear – Millennials too – particularly sports lifestyle shoes and sports performance shoes, for fitness and investment as they capitalize on the sneaker resale market. On the beauty front, skincare is the most popular product category among female Gen Zs while fragrances lead the charts for male Gen Z consumers.
Consumers across all ages are also investing in more sports-related products such as sports electronics (e.g., fit-tech wearable devices), which enjoyed a positive growth of 15% from 2021 to 2022. This reflects how wellness remains a top priority in a post-pandemic world. As for the biggest spenders of wellness products in Southeast Asia, ZALORA’s data shows they come from Indonesia and the Philippines. Across the region, adults above 40 spent the most, followed by Millennials aged 26 to 30.
In today’s hyper-aware age of consumerism, consumers, especially Millennials and Gen Z, are prioritizing sustainability in their purchasing decisions. Both ZALORA’s Earth Edit and pre-loved segments saw substantial growth year-on-year. Total sales for Earth Edit, which focuses on the use of sustainable materials, increased by 152% from 2020 to 2021 and continued to have double-digit growth as of Q3 in 2022. Brands have reacted to this trend by expanding their product offerings on ZALORA.
ZALORA’s pre-loved segment, although still very small, also saw a sharp growth of 70% from 2021 to 2022, led by Millennials and Gen Zs who will continue to drive the momentum for circular fashion. As a push towards carbon-neutral continues to underscore fashion and e-commerce, brands can stand to gain market share by introducing more sustainable products while reviewing their supply chains.
These findings and insights featured in ZALORA’s Southeast Asia TRENDER Report 2022 will help ZALORA’s brand partners to recalibrate their retail strategies and evolve with the times. Now in its third edition, the report is supported by the following partners and contributors: Google, Boston Consulting Group, PayPal, Urban Revivo, and Leapro.
ZALORA is part of Global Fashion Group (GFG), the leading online fashion & lifestyle destination in
growth markets. GFG is the brand partner of choice in growth markets, providing unparalleled access to a market of more than one billion consumers and an unrivaled end-to-end value proposition. The Group offers tailored business models to suit individual brand partner needs, including B2B services across fulfillment, media solutions, and data analytics leveraging GFG’s expertise in e-commerce.
To download the full report, visit here.
