16th March, 2018
Creating strong connections with customers is vital for Australian retailers looking to expand into Southeast Asia.
SMEs dominate the economies of Southeast Asia and, according to one report, comprise 96 percent of all businesses in the region.
The Asia Foundation says that in Vietnam, SMEs make up a whopping 80 percent of the retail sector and over the past few years have enjoyed 20 percent profit growth rates.
Although online shopping is gathering momentum in places like Vietnam, Malaysia, Indonesia, Thailand and the Philippines, on average it accounts for less than one percent of total sales. Even in sophisticated Singapore, the bulk of retail still occurs in bricks-and-mortar stores.
As Harvey Norman CEO Katie Page told The Straits Times on opening a flagship outlet in Singapore, “You must have the physical space that tells the world what you’re about. You have to make it appealing to customers and give them an experience.”
Despite this, ‘me too’ retailing abounds throughout Southeast Asia. “Same, same, but different”, the locals say, which leaves the door wide open to Australian retailers with real points of difference.
Boost Juice founder Janine Allis recognised this when she created a new market niche by turning what for many young people in Southeast Asia was a mundane, everyday staple into a premium-priced, aspirational experience. Today there are Boost Juice franchises in Indonesia, Malaysia, Singapore and Thailand.
On a smaller scale, when launching Chuck Norris Dim Sum in Phnom Penh, Cambodia, the B-grade Hollywood actor differentiated it from other dumpling restaurants through action movie memorabilia and a menu that, among other things, challenges diners to ‘dumpling roulette’, where one contains hot mustard. It’s a hit with tourists, expats and locals alike.
Ellis and Norris didn’t even attempt to compete on price; the focus was on a unique selling proposition. Besides, Southeast Asian consumers are generally more relationship- than price-driven, preferring to buy from someone they know and trust than someone they don’t, even if they’re cheaper.
Because the legal landscape differs from country to country, Thailand-based lecturer in international business law Gan Suttikul says finding an appropriately qualified lawyer is a must.
To network effectively, you’ll be expected to spend time in-country, ideally speak some of the language and definitely respect local cultural and business etiquette. Email, Skype and phone calls are not the way to do business in Southeast Asia, particularly as it’s relatively close to Australia.
Joint ventures are commonplace, especially in Thailand and Vietnam, where strong foreign-ownership restrictions apply. Partnering with a local operator is a calculated risk often worth taking in exchange for ready-made access to the market or better-quality products from local suppliers. On the other hand, it can increase the risk of intellectual property (IP) leakage.
“Whichever way you come at it, relationships are central to the Asian business model,” says Paul Phillips, founder of Melbourne-based Old Saigon Coffee, which for over 10 years has been importing traditional coffees from Vietnam.
It’s now roasting whole beans at its Reservoir factory to create new coffee blends that it intends to retail in Vietnam.
“In Asia, it’s all about ‘face’ [status], so you need to know your customer and offer something that is not only different, but is packaged and marketed in a way that will make the purchaser feel special,” Phillips advises.
Don’t even think about expanding into SE Asia without IP protection. As many foreign brands such as Starbucks have discovered, local companies frequently take their name and logo and open fake, unapproved outlets.
“Patents and trademarks registered in other countries are not usually protected,” warns Suttikul. “Also, some countries operate on a ‘first-to-file’ registration system, rather than a ‘first-to-use’ or ‘first-to-invent’ basis.”
This means if you don’t register your idea, someone could quite literally and legally steal it from under your feet. In fact, the problem is so acute, even the pirates are being pirated.
The Bagus Watch retail watch chain in Indonesia – which has been going gangbusters selling dubious ‘designer’ brands in stores that feature multi-lingual sales assistants and merchandising that would not look out of place in a Westfield – is a case in point.
Ironically, it’s now seeing copycat outlets spring up alongside its own.
Registering a copyright is obviously not watertight, but it’s usually inexpensive and will at least act as a deterrent to IP theft.