Chinese auto brands venturing into Southeast Asia are poised for significant opportunities, but they must navigate a complex landscape of market challenges to succeed in the region.
THE RISE OF SOUTHEAST ASIA
Southeast Asia is an economic success story. According to the latest International Monetary Fund World Economic Outlook figures, Southeast Asia has a combined GDP of USD3.08 trillion. It is predicted that by 2050, the region will rank as the fourth-largest economy in the world.
With its vibrant economy, favorable foreign trade policies, and geographical proximity to China, the region offers significant opportunities for Chinese businesses to expand their presence, build strategic partnerships, and engage with Southeast Asian consumers.
In the four major markets of Indonesia, Thailand, Vietnam, and the Philippines, there is substantial demand for Chinese products, from beauty and electronics to rising interest in Chinese automotive brands. These markets are particularly welcoming to automotive brands that emphasize electric vehicles (EVs). As such, they collectively represent the ideal zone of expansion outside the saturated Chinese market.
Understanding the economic landscape, consumer perception, and demands in these markets is instrumental for Chinese brands looking to enter these countries and cultivate strong market presence.
This white paper by Vero and WeBridge provides insights into the economic landscape and consumer perceptions and demands in these markets and offers a roadmap for Chinese auto brands exploring Southeast Asia.
Indonesia, the largest economy in Southeast Asia, has experienced significant economic growth since overcoming the Asian financial crisis in the late 1990s. It is the world’s fourth most populous nation and the 10th largest economy based on purchasing power parity. Indonesia’s economy expanded 5.3% in 2022 in its post-COVID recovery. However, the country expects moderate growth in 2023 and 2024 — both at 5%, as domestic demand takes over from commodity exports as the driver of growth, the Asian Development Bank reports. The Bank of Indonesia predicts that by 2025, economic growth will reach 4.9-5.7%.
The Philippines’ vibrant and dynamic economy is driven by urbanization, a burgeoning middle class, a strong labor market, and robust remittances. In 2022, the Philippines experienced a remarkable 7.6% economic growth, the fastest since 1976. GDP growth in the country is projected to slow to 5.6% in 2023 due to still-elevated inflation, tight financial conditions, and a weak external environment, but the World Bank noted the economy is expected to pick up to 5.8% by 2024 and 2025.
Thailand, the second-largest economy in Southeast Asia after Indonesia, has transitioned from a low-income to an upper-middle-income country. Between 2015 and 2019, the Thai economy grew at an average annual rate of 3.4%, and its GDP is expected to reach $509.21 billion by the end of 2023, according to Trading Economics. In the long term, Thailand’s GDP is projected to reach around $531.11 billion in 2024 and $548.63 billion in 2025.
Vietnam, an agro-industrial country, is one of the fastest-growing in Asia, with an impressive average annual GDP growth rate of 6.5% pre-pandemic, positioning it as a lucrative long-term market. In 2021, the GDP exceeded $352 billion. The World Bank forecasts moderate growth of 4.7% in 2023, gradually accelerating to 5.5% in 2024 and 6.0% in 2025.
The China-ASEAN Trade Partnership
Southeast Asia’s geographical proximity to China has made it an attractive market for Chinese investments. From large-scale infrastructure projects to the energy sector, technology, and manufacturing, Chinese investments in the region have experienced substantial growth. China’s trade with ASEAN amounted to $975.3 billion in 2022.
Trade between China and Southeast Asia has more than doubled in the past decade and almost quadrupled since the ASEAN-China Trade in Goods Agreement came into effect in 2005. Within this trade agreement, more than 90% of goods from China and ASEAN are subject to zero tariffs. This has led Southeast Asia to overtake the European Union and become China’s primary trading partner, indicating the establishment of a new regional economic and trade cooperation framework.
Additionally, a 15% year-on-year increase in trade was observed following the implementation of the Regional Comprehensive Economic Partnership (RCEP). Within RCEP, over 90% of trade in goods will be fully liberalized.
Southeast Asia’s Transport Infrastructure
According to the Asian Development Bank, Southeast Asia will need to spend $2.8 trillion on infrastructure through 2030 to sustain economic growth. To meet these demands, countries in the region should invest more than 5% of their GDP over the next decade. Presently, Vietnam leads ASEAN in infrastructure investment, dedicating 6% of its GDP to this sector. In comparison, Indonesia and the Philippines allocated about 5% of their GDP in 2023, while Thailand had the lowest infrastructure spending at 3.1%. Recognizing that transportation and mobility are critical drivers of economic growth, governments are directing their efforts to address transportation challenges, modernize the transport system, and ensure efficient networks.
—Expanding Road Networks for Better Connectivity
Indonesia has made substantial investments in constructing toll roads across Sumatra, Java, North Sulawesi, and Kalimantan, aiming to alleviate congestion in cities such as Jakarta and encourage car ownership. Additionally, the country has commenced the development of roads, expressways, green zones, and energy infrastructure in Nusantara, East Kalimantan, the site for Indonesia’s new capital.
Thailand, meanwhile, announced it is investing about $15 billion in transport infrastructure to promote economic growth. Thailand’s current network of roads and highways has a total length of 702,989 km, and is bound to expand as new investments pour in. In the first phase of a 20-year Motorway-Rail Map project, Thailand will construct 331km of new highway, establishing a modern and efficient transportation network.
Significant road construction initiatives are also underway in the Philippines. Among these projects is the construction of the Metro Cebu Expressway (MCE). The north-south bypass is expected to cost $1.64 billion. Additionally, the 8km NLEX connector road, linking the North Luzon Expressway and Manila, was opened for motorists in October, further improving connectivity.
Vietnam’s ambitious transportation infrastructure plans are projected to cost up to $65 billion between 2021 and 2030, with an aim to scale up the current 1,290km of national highway to 5,000km by 2030. The ambitious 1,800km HCMC-Hanoi highway is currently being constructed, which will aid transport and goods movement throughout the country.
—Developing Infrastructure for Mobility Electrification
Southeast Asia knows the future of mobility is electric. Consumers in the region are showing willingness to shift to electric cars —56% in Thailand, 51% in Vietnam, and 47% in both the Philippines and Indonesia, according to a survey by Milieu — but the current infrastructure gap remains a deterrent to the full adoption of green mobility.
Charging stations remain scarce, if not inaccessible, making consumers apprehensive on long-haul routes. A comprehensive network of publicly accessible charging points is essential for the successful decarbonization of the region’s transport sector. Indonesia only has 439 charging stations as of November 2022, Thailand has about 2,000 charging stations, and the Philippines has 900 charging stations, but only 338 are registered with the government. Vietnam’s EV infrastructure, meanwhile, is currently dominated by homegrown EV manufacturer VinFast, which does not share stations with other brands.
Major factors impacting the growth of EV charging penetration in the region include the lack of usage and purchase incentives for EV users, high import tariffs, lack of accessible space to serve as charging stations, inefficient distribution of charging infrastructure (resulting in saturation of EV chargers in commercial areas), and lack of EV chargers in residential areas where it is more convenient for users to use overnight charging.
The availability of efficient battery-swapping systems in the region is also a common concern among Southeast Asian consumers. A Singaporean smart battery startup is one of the few players trying to bridge the gap in Indonesia, having already built 16 swap stations in Jakarta, but only for e-bikes. In Vietnam, homegrown EV scooter startup Selex is building battery ATMs, sophisticated automated locker systems that allow users to conveniently exchange depleted batteries for fully charged ones. Thailand and the Philippines are currently testing out battery swapping systems with private companies, but such services may only be available in their capital cities.
Governments will need to streamline the processes and allow data-sharing – between charging points and the vehicle, the manufacturer and the vehicle, the charging network providers and charging points, or charging network providers and utility providers – that could also help to strengthen the overall EV ecosystem.
—Government Policies Propelling EV Adoption
The rise of electric vehicles in Southeast Asia is propelled by government efforts to promote environmentally friendly transportation systems. Energy efficiency, a central topic of discussion and a key purchasing motivator among consumers in Indonesia, Thailand, the Philippines, and Vietnam indicates a surging demand for these vehicles.
Indonesia has made a priority of boosting electric vehicle production and usage. The government is actively courting more Chinese investors to create a downstream nickel industry. Indonesia is the world’s largest nickel producer, which is essential for making the lithium-ion batteries used in EVs, of which China is the world’s largest producer. The government announced its goal for Indonesia to become one of the top three producers of EV batteries by 2027. In April, the country lowered its VAT on battery-based electric vehicle sales from 11% to 1%, provided they are manufactured with at least 40% local content.
To achieve its goal of phasing out gasoline-powered cars by 2040, the national government is already laying the groundwork for a robust EV market. This involves providing tax breaks for EV imports over the next five years, with the Most Favored Nation (MFN) tariff rates reduced to zero percent on various imported EV categories, including passenger vehicles, buses, minibuses, trucks, bicycles, motorcycles, scooters, and tricycles. However, it’s important to note that hybrid-type EVs are excluded from this tax exemption. This initiative aligns with the Electric Vehicle Industry Development Act, which aims to transform the Philippines into a regional hub for EV production and assembly by offering incentives to manufacturers, suppliers, and buyers, thereby encouraging the growth of the EV industry in the country.
The Thai government approved a package of incentives, including tax cuts and subsidies, to promote EV consumption and production from 2022 to 2023 by reducing the price of each EV by $2,200 – $4,800 (dependent on the model). The Thai cabinet also approved measures to promote domestic manufacturing of EVs, including exemptions from import duties on significant electrical parts from 2022-2025. These significant electrical parts include batteries, traction motors, compressors for battery EVs, battery management systems, drive control units, and reduction gear. Thailand aims to be an electric vehicle production hub in Asia and expects EVs to make up 30% of its total auto production (or 725,000 units/year) by 2030.
Vietnam has implemented a compelling incentive for electric cars, providing a 0% registration fee for battery electric vehicles for three years starting from March 1, 2022. Over the following two years, the registration fee will be merely 50% of that for ICE cars with the same seating capacity. The special consumption tax rate for battery electric cars has also been significantly reduced to just 1-3% until the end of February 2027. Additionally In August, the government proposed to give out a $1000 subsidy to buyers of EVs, in a bid to change consumption behavior away from fossil fuel vehicles. Also being discussed are several policies to encourage the installation of electric charging stations, including the exemption of import taxes on components and equipment, exemption of corporate income taxes and land fees for five years, and a 50% tax reduction for the next five years.
OPPORTUNITIES FOR CHINESE AUTOMOTIVE BRANDS IN SOUTHEAST ASIA
China is Experiencing A Positive Shift in Consumer Perceptions
China’s remarkable manufacturing revolution, in parallel with its continued technological advancements, has rewritten the narrative surrounding its products in recent decades. These developments enabled China to dominate the global supply chain and eventually become “the world’s factory.”
As manufacturers started to rebalance production volume and expectations of value, Chinese brands expanded their reach beyond the border, positioning their products competitively against multinational rivals. The country’s ability to rapidly digitalize products, services, communication, and distribution, exemplified by the surge of e-commerce platforms, has further facilitated Chinese brands in captivating Southeast Asian consumers.
Using Vero’s social listening tools, we identified three attributes of Chinese brands and products that exhibited the highest growth rate in sentiment scores over the past four years in Indonesia, Thailand, the Philippines, and Vietnam.
Chinese Products’ Affordability and Smart Features Captivating Consumers
Southeast Asia is positioned as one of China’s most vital consumption markets. Consumers in the region exhibit a wide range of preferences, demands, and purchasing motivators influenced by cultural nuances and economic development.
Across all four markets, consumers value Chinese brands for the affordability of their products and services.
Our research also revealed that Vietnamese and Indonesian consumers perceive Chinese products as innovative, especially in the domains of electronics and vehicles.
Filipino and Thai consumers, meanwhile, see Chinese brands’ seamless integration of online and offline distribution channels as an advantage. The presence and influence of prominent Chinese e-commerce platforms such as Alibaba, Taobao, and JD.com have made cross-border purchasing experience easier for consumers in the region.
There’s also a notable focus on Chinese products’ functionality and design, reflecting the increasing importance placed by consumers in Indonesia, Thailand, the Philippines, and Vietnam on the aesthetic qualities of a product.
Word-of-mouth continues to be an effective marketing tool for Chinese brands, as people in these markets actively seek personal reviews and product recommendations when considering brands from China.
Chinese Auto Brands Gaining Attention
Now more than ever, Southeast Asian consumers are open to the prospect of buying Chinese-made automotive products. This shift is largely due to the growing interest in EVs, combined with undeveloped domestic production. Of the four markets studied, only Vietnam has a home-grown EV producer (VinFast), which targets a different market segment from most Chinese brands. Meanwhile, several Chinese brands have already made inroads in these markets, though they are far from saturated. Here’s a glimpse of Chinese auto brands’ presence in Southeast Asia:
The Chery Omoda 5 was awarded as the Most Driven Car with 767 test drives and 376 units sold at the Gaikindo Indonesia International Auto Show (GIIAS) 2023. Chery plans to set up US$ 1 billion worth of factories in Indonesia, open more dealers and aftersales services around the country, and launch upcoming Chery models. Chery also entered Vietnam in 2022, with plans for domestic manufacturing, offering a diverse range of quality products that fit Vietnamese consumers’ lifestyles and preferences.
MG unveiled its latest EV model, the MG ZS EV, at the Gaikindo Indonesia International Auto Show (GIIAS) 2023 and saw 256 orders placed during the event. The MG ZS Nite Edition Crossover SUV and GT Sport Sedan debut at 2023 MIAS debuted at the Manila International Auto Show. MG has raised the level of after-sales service with express delivery of spare parts 24 hours a day, along with a second spare parts warehouse which supports all models sold in Thailand as demand rises.
Two of Indonesia’s ministers visited BYD HQ in Shenzhen, China to discuss business strategy and BYD investment in the country. BYD’s dominance in the EV industry stood out, with its 1.2 million EV sales in the first half of 2023, beating Tesla. Philippines’ AC Motors partnered with BYD to distribute EVs in response to the growing demand for clean mobility in the Philippines. BYD delivered 274,386 electric vehicles (EVs) in August in Thailand, up 57% from last year. Vietnamese Deputy Prime Minister Tran Hong Ha expressed confidence in Vietnam’s commitment with BYD to facilitate investment and production development opportunities.
Great Wall Motors opened 22 DC Fast Charge electric charging stations in Thailand in August, with plans to further expand the G-Charge station network by adding 33 more by the end of 2023. GWM Thailand announced sales totaling more than 6,222 vehicles for the first half of 2023, comprising five models led by the ORA Good Cat, which had sales of more than 2,600 vehicles.
Southeast Asian Consumers Embracing Chinese Auto Brands Positively
Southeast Asian consumers have generally positive perceptions of Chinese auto brands based on their affordability, technological features, sleek and modern designs, and convenience.
Chinese car manufacturers often offer vehicles at competitive prices, making them accessible to a broader segment of consumers in the region. They appeal to price-conscious consumers looking for budget-friendly options without compromising functionality, smart features, and style.
Key Conversations: From Finance to Road Shows
Vero analyzed key online conversations to find out more about their interests and preferences regarding cars.
We found that keywords related to CAR LOANS, like special interest rates, flexible monthly installments, and wise payment, are major topics of discussion, especially in Thailand, the Philippines, and Vietnam. Many netizens, key opinion leaders (KOLs), and influencers are sharing valuable insights on responsible car loan management and utilizing credit cards.
Consumers in all four markets also showed interest in electric vehicles, as evidenced by significant search volumes of keywords such as ENERGY SAVING, ELECTRIC CARS, and ENERGY EFFICIENCY. Across markets, EVs are highly considered energy-efficient and cheaper to run and maintain than internal combustion engines. In Thailand and the Philippines, CAR INSURANCE is a hot topic of discussion. Many consumers are seeking information and advice on the best car insurance options. Thai consumers are particularly concerned about the high cost of insurance for electric vehicles.
These findings underscore the direct link between finances and car ownership, highlighting the importance of strategic financial planning. Consumers actively seek options that offer excellent value for their money in this context.
Additionally, the prevalence of topics related to ROAD SHOWS and INTERNATIONAL MOTOR SHOWS in Vietnam and Indonesia signifies the growing enthusiasm for exhibition and road show events. These events provide attendees with the opportunity to physically explore various car models and experience test drives firsthand before they make a car purchase.
Southeast Asians View Cars as Essential, but High Maintenance Costs Pose Major Worry
In Southeast Asia, the significance of owning a car as a symbol of financial stability leads consumers to meticulously assess their choices. Individual preferences and lifestyle considerations play a pivotal role, particularly in Indonesia, Thailand, and Vietnam, where cars reflect one’s living standards. The Philippines, emphasizing necessity due to traffic congestion, underscores the essentiality of car ownership in daily life. Chinese car brands, known for their affordability, resonate with Filipinos’ aspirations, making car ownership attainable.
The expanding ride-hailing market in Vietnam influences purchase decisions, especially for business use. This trend opens strategic opportunities for Chinese car brands to collaborate with ride-hailing platforms, following the successful model of VinFast and Be partnership. Additionally, the increasing demand for energy efficiency fuels the interest in electric vehicles among consumers in Thailand and the Philippines. China’s position as a major electric vehicle manufacturer, offering diverse options and bolstering charging infrastructure, aligns well with this trend.
Despite the positive perception of affordability associated with Chinese car brands, the high cost of car ownership remains a significant hurdle in Southeast Asia. Complexities in car loan processing, expensive insurance, maintenance, and fluctuating gas prices compound financial concerns, particularly for consumers in Indonesia, the Philippines, and Vietnam. Chinese car brands’ competitive advantage lies in their perceived affordability, a crucial factor as consumers expect electric vehicles to be reasonably priced.
Moreover, limited parking spaces and worsening traffic congestion pose significant challenges, notably in Vietnam and Indonesia. Addressing these concerns, along with worries about the environmental impact of car ownership and the origin of the brand, presents an opportunity for Chinese auto brands. By offering eco-friendly electric vehicles and enhancing the desirability of Chinese-made products, they can effectively tackle these barriers and establish a stronger foothold in the Southeast Asian market.
OVERCOMING ENTRY CHALLENGES: CHINESE AUTO BRANDS IN SOUTHEAST ASIA
Dominance of Japanese Brands
Southeast Asia’s growing automobile sector attracts global manufacturers and investors due to the expanding middle class and favorable trade agreements, creating a competitive industry.
Currently, the Japanese auto brand Honda holds a dominant position in the Indonesian, Thai, and Filipino markets in terms of share of voice (SOV). Honda has strategically set up several production facilities in all four markets and has gained recognition among consumers for its diverse range of vehicles that cater to different segments. In Vietnam, however, the German luxury brand Mercedes-Benz is the most talked about brand.
Toyota, another renowned Japanese brand, enjoys widespread popularity across all four markets, consistently ranking in the second or third position. Other Japanese auto brands that dominate the market include Nissan, Suzuki, Mazda, and Mitsubishi.
In Vietnam, the Chinese brand Chery has surpassed Subaru and Nissan in terms of SOV. Chery launched a #FunToDrive campaign earlier this year, which raised brand awareness and increased sales by 12%. Geely, FAW, and BYD have also achieved significant market share, thanks to their partnerships with local businesses and government agencies.
MG, a British-Chinese automotive company, has also established itself as a leader in electric vehicles in Thailand with significant SOV, aided by the brand’s collaboration with many Thai influencers to build brand awareness of its new MG ZS series in 2023.
Issues on Quality and Safety
While Chinese-made products have gained popularity and positive perception in recent years, brands still face skepticism, especially toward cars. Chinese automakers need to overcome consumer prejudice and showcase their quality, technology, and competitive advantages.
According to insights from Vero’s social listening tools, most consumers in Southeast Asia find the reliability and quality of Chinese auto brands a major concern. These consumers express significant reservations about the durability and long-term performance of these cars, comparing them to other foreign brands that have already established superiority.
In Thailand and Vietnam, consumers have highlighted the poor safety standards associated with Chinese car brands. Thai EV owners have reported incidents of batteries catching fire due to rapid overheating, raising serious safety concerns.
In the Philippines, where many view car ownership as an investment, consumers are worried about the low resale value of Chinese car brands, adding another layer of concern for potential buyers.
Additionally, Indonesian and Thai consumers have expressed concerns about the unavailability of spare parts and delayed maintenance services, indicating that after-sales service significantly influences brand choice.
KEY RECOMMENDATIONS FROM VERO AND WEBRIDGE
Leverage Current Positive Perceptions of Chinese Auto Brands
—CASE STUDY: Wuling Air EV launch in Indonesia
Wuling launched its first electric car in Indonesia in 2022 with the strong USPs of affordability and a charming design with various color options. It positioned itself as a ‘fashion car’ that Indonesians want because of its uniqueness.
LAUNCH: Wuling held an exclusive event for the first 100 buyers of Wuling cars in Jakarta. Wuling also carried out the first convoy of 100 cars on the streets of Jakarta and received a good reception from the public.
INFLUENCER CAMPAIGN: Wuling collaborated with at least 5 big influencers in Indonesia, with each associated with a different color: Arief Muhammad as a young father (Avocado Green), Den Dimas as a lifestyle enthusiast (Lemon Yellow), Om Mobi with a passion for car modifications (Peach Pink / Lemon Yellow), Ridwan Hanif the renowned automobile YouTuber, represents the epitome of superb automotive performance (Galaxy Blue), and Fitra Eri as the representative of an older demographic (Pristine White).
PR COMMUNICATION: In addition to the stories of the cars themselves, Wuling also emphasized the message “Chinese cars assembled in Indonesia,” showcasing its commitment to further developing the Indonesia market.
RESULT: Wuling Air EV sales skyrocketed, even outselling its competitors by a significant margin. The brand was also named an “Omni Brand of the Year” by Marketeers.
Take a 360-Degree Stakeholder Approach to Build Trust
—CASE STUDY: VinFast collaborates with Be Group and Cake by VPBank to support beBike drivers switching from gasoline scooters to electric bikes
VinFast, a multinational automotive company founded by Vingroup, the largest private conglomerate in Vietnam, has partnered with the ride-sharing service Be Group and the multi-service consumer platform Cake by VPBank, a local Vietnamese bank, to support beBike drivers in transitioning from gasoline to electric motorbikes.
VinFast offers Be drivers a 4% discount on the VinFast Feliz S electric motorcycle, while Cake by VPBank provides favorable loans with starting interest rates as low as 0%. All loan procedures are conducted online, making it convenient for drivers.
Through this partnership, VinFast is familiarizing Vietnamese people with its products, making them a common sight on the road and allowing many people to experience a ride on the back of one.
Think Global, Act Local
Brands can leverage their global strengths in ASEAN markets but need to deliver those with a tailored narrative based on local insights. Brands entering a new market do not need to cover all sub-communities initially, but rather cultivate an enthusiastic base then scale up to others.
—CASE STUDY: Hyundai Motors and its locally-driven 360-degree stakeholder activation strategy
Hyundai has been actively expanding its presence in the Indonesian market, intending to make headway in a market traditionally dominated by Japanese automakers like Toyota and Honda. These Japanese giants have long held a strong position, with their brands gracing more than 80% of passenger cars sold in the country. Hyundai Motors Indonesia (HMID), the local sales company of the Korean automaker, began at the 13th spot with 3,005 cars sold in 2021 but quickly rose to the eighth position, selling 31,965 units in 2022.
The IONIQ 5 represents Hyundai’s latest electric vehicle offering and its first all-electric model manufactured outside Korea. Under the banner of “Power Up the Future,” Hyundai has built trust with its customers through a locally-driven 360-degree stakeholder activation strategy:
- Establishing a corporate presence via an assembly plant in Indonesia. This step demonstrates support and dedication to local authorities and customers, aiding the country in addressing its mobility challenges more effectively.
- Fostering an image and lifestyle association. In addition to collaborating with local influencers such as Ridwan Hanif and Fitra Eri, the product has earned recognition as “a Ministerial Mobility Vehicle” by providing 117 cars for use as official operational vehicles during the 2023 ASEAN Summit.
Supporting this stakeholder activation strategy is a locally tailored approach designed to cater to the unique needs of the Indonesian market and share stories from a local perspective.
Promote Electric Vehicles
As Southeast Asia moves toward a more sustainable transportation and mobility sector, consumers’ attention are now directed towards electric vehicles. Chinese auto brands, known for their superb BEV and hybrid cars, can take this opportunity to help further propel the region’s EV industry.
- Embrace authentic sustainability messaging, but don’t overplay it.
- Dig deeper and try to address consumers’ pain points in EV adoption.
- Introduce EV models tailored to local preferences.
- Promote green mobility as a lifestyle.
- Partner with like-minded industry leaders.
- Promote thought-leadership and pioneering activities of China in the global EV industry.
Work with us! Contact firstname.lastname@example.org to explore vast opportunities for Chinese brands in Southeast Asia.
|Do Duy Quang
Vice President, IMC Consulting, Vietnam in IMC Team
|Tran Kim Hoang Yen
Associate PR Account Director, Vietnam in PR
|Nguyen Quang Thach
Director, Data and Insights, ASEAN
|Tran My Ha
Senior Data Analyst
Data Innovation in IQ and Media, Thailand
|Dzikri Sabillah Anwar
Senior PR Executive, Indonesia
Digital Account Executive, Philippines
Live shopping has transformed selling and purchasing behaviors in Indonesia, enabling real-time interaction between merchants and buyers – simply online.
Indonesia was the first and largest market for TikTok Shop, until it became the first country to ban it.
Early in October, the Indonesian government shut down TikTok’s retail feature “to protect local merchants, prevent algorithms from dominating the market, and stop using personal data for business purposes.” The closure discussion was months in the making, with the trade ministry accusing the Chinese social platform of monopolistic practices and predatory pricing that are hurting local merchants.
Since its launch in 2021, TikTok Shop has amassed 6 million sellers in the country, and last year, it captured about 5% of Indonesia’s booming $52 billion e-commerce industry.
Indonesian sellers who relied exclusively on the app to connect with customers said their sales “dropped to almost nothing,” others said they might need to redo their content to fit other retail platforms’ requirements.
But, the closure of TikTok Shop is only a part of Indonesia’s e-commerce evolution.
Live shopping is a thriving trend – and it’s here to stay
Live shopping has transformed selling and purchasing behaviors in Indonesia, home to approximately 233.73 million active internet users. E-commerce, coupled with video live-streaming, has created another shopping experience that allows for merchant-buyer interactions like those in stores but without the need for either party to leave home.
Instead of reading descriptions or searching for reviews online, customers join real-time conversations and make direct purchases from the broadcast while sellers entice them with engaging and creative content. And because it’s happening live, customers feel the sense of urgency to buy right there and then.
This business trend saw tremendous growth during the pandemic when shopping at physical stores wasn’t an option. According to the SEA Ahead Wave 5 findings, 78% of consumers are aware of shopping alternatives via live streaming, 71% have accessed it, and 56% purchased products through live streaming during the pandemic.
On the seller’s side, more MSMEs (micro, small, and medium-sized enterprises) are switching to e-commerce. In 2022, the National Bureau of Statistics in Indonesia saw an increase of 500,000 businesses involved in online selling, for a total of 2.8 million e-commerce businesses.
E-commerce giant Tokopedia was one of the first to introduce livestreaming in Indonesia in 2019, though it was only initially available to select whitelisted merchants.
On the Tokopedia Play platform alone, the average livestream can increase product viewership and shop visits by 40% and 20%, respectively, while driving 29% of orders for the day, a report by Tech in Asia read. Livestreaming can also lead to an increase of up to 625x more product detail page views, a 262x increase in shop visits, and drive up to 100% of the shop’s daily orders.
However, according to a survey conducted by consumer insights platform Populix, the primary competition in Indonesia’s live shopping market was between Shopee Live and TikTok Shop. Shopee Live, the livestream feature on the Singapore-based e-commerce platform Shopee, stood out due to its attractive promotions like discounted products, cashback, and free shipping, as well as its diverse product range. The survey revealed that 69% of Indonesians frequently use Shopee Live, compared to TikTok Shop’s 25%. Moreover, Shopee Live is more memorable to the public, with 60% of respondents recalling it, whereas TikTok Shop was remembered by only 30% of respondents.
Shopee Live’s market share is evident in transactions, capturing 56% of the volume and 54% of the value over the last six months. Local brands like BHUMI, Geoff Max, and Tally have benefited from Shopee Live, increasing their sales during campaigns like 9.9.
While Shopee Live is clearly banking on its extensive customer base and well-established marketing tools, TikTok Shop’s popularity comes from a different angle. The social media platform is centered around video content and social engagement, often leveraging impulsive buying tendencies among young Indonesian shoppers. TikTok’s social nature makes it excellent for visually appealing products, like fashion and cosmetics, and it can reach global audiences (considering the 1 billion people actively using the app). TikTok Shop also leverages the presence of influencers and content creators on the platform through campaign collaborations. During one of its campaigns, TikTok Shopping Hoki Sale, it generated IDR 70 million (~4,300 USD) in the first 19 minutes of its livestream event.
Other live shopping market players in Indonesia include Alibaba-backed Lazada and homegrown platforms Blibli, Bukalapak, and Bhinneka.
Doing live shopping right: Strategies for Indonesian brands
Indonesia’s new trade regulation of banning e-commerce transactions on social media platforms was a big blow to TikTok’s big plans in its fastest-growing market, but it is an opportunity for brands to diversify their presence and consumer engagement and leverage the thriving live shopping trend.
When done right, live shopping enables brands to expand their reach, earn trust, generate excitement, collaborate with content creators, and boost sales. Here are a few ways to do that:
Give your audience a good time
Live shopping, just like any other content on the Internet, faces the challenge of capturing the audience’s fleeting attention span. It only takes a few seconds for viewers to get hooked or continue scrolling. The main feature of live shopping is entertainment, as customers often join livestreams to watch for fun rather than with the intent to buy something. Doing Q&As and organizing games are great ways to keep a live broadcast interactive and engaging. Live shopping should be able to deliver the instant gratification customers crave, leaving them feeling satisfied with their purchases after the broadcast.
Set expectations – and make sure to fulfill them
A crucial challenge in online shopping is the inability of buyers to physically inspect the products before making a purchase. They rely on how sellers describe the products – their functionality and effectiveness, design, and material. It is, therefore, the responsibility of sellers to manage expectations about the product by being transparent and accurate about their brands. Online sellers must understand that live selling is not just about attracting audiences and generating sales but also crafting an experience that matches the customers’ expectations.
Take the soft-selling approach
Any tactic that makes consumers feel they are being forced to buy or patronize a product is likely to push them away. Sellers can use soft-selling approaches—product tutorials, buyer testimonials, or interviews with key opinion leaders—to capture the audience’s interest. The goal of soft selling is not just generating sales but rather evoking a positive emotional response from the audience. Even if they don’t buy that day, they’ll be more likely to return or recommend your stream.
Creativity draws crowd; consistency fosters loyalty
Online selling is centered around creative content — the more out-of-the-box a selling technique is, the bigger the crowd a livestream draws. Sellers often go for techniques that have the potential to go viral, like comedic monologues, talent showcases, or even cosplay, to please their virtual audience. But it’s consistency that turns viewers into loyal customers. Sellers that engage with them consistently raise brand awareness and build strong merchant-customer relationships.
Exercise responsibility and uphold ethical standards
Live shopping happens in real time and is often unscripted or unrestricted. Sellers bear the responsibility of exercising responsibility and upholding ethical standards in how they conduct their live broadcasts as well as how they select and present the products they sell. With Indonesia tightening e-commerce trade policies, it has become imperative for brands to abide by the law, consistently demonstrate ethical behavior, and make consumers who join their livestreams feel comfortable and respected.
Senior Digital Account Executive in IMC & Influence Team
Digital & Social Media Manager in IMC & Influence Team