As online retailing is growing, and Zalora rapidly increasing its outreach in Southeast Asia, it is also working on how to enhance differentiation in the fast-pace e-commerce ecosystem.
Every month, Zalora announces new collaborations, offline brand activations, and different initiatives aimed to raise awareness about the brand Zalora, but also its partners across the region. This is representative of the dynamic Zalora’s business model, which is among the most innovative within the online ecommerce world.
Retail in Asia visited Zalora’s office in Singapore, and interviewed Giulio Xiloyannis, Chief Operating Officer at Zalora, to know more about Zalora’s operations in Southeast Asia.
RiA : Zalora is one of the main players within the e-commerce ecosystem, what is the value proposition that has enabled the platform to be appealing to very well established brands?
Giulio : We are one of the main players in e-commerce in Southeast Asia and one of the pioneers in the market. I remember 6 years ago, when we first introduced Zalora, it was difficult to explain brands in the region what e-commerce was. Since then, e-commerce has developed in Southeast Asia more rapidly than anywhere else in the world.
At Zalora, the DNA of a tech company is blended with fashion. We are the fashion platform and the fashion destination in Southeast Asia and with our unique value proposition we differentiate ourselves from other e-commerce platforms in the region.
At Zalora, we want all our brands to get the right branding and exposure particularly for both season collection and more exclusive rare limited editions.
The localization element is another point of differentiation. Indeed, we understand brands and all the adjustments that might be required for each region. Logistics operations, for instance, are very peculiar in Southeast Asia, as there are multiple regulations to take into account.
Hong Kong and Taiwan customers are instead more sensitive towards return policy, so we worked to ease people’s life in this direction.
This element of localization of all aspects of the customer journey within the region has been key to differentiate Zalora from other platforms.
RiA : When retailers wish to penetrate the Southeast Asian market, Zalora definitely comes to their mind, but besides logistics, why choosing your platform?
Giulio : Along with our localization and logistics advantages, there is also the centralization benefit.
Zalora is one localized player, so one team. That is, you have one set-up with us from a supply chain perspective, from a marketing collaboration perspective, and so on. This gets brands, as a resulting end, 6 tailored different market approaches.
Thus, regardless of whether they are contacting us through the Philippines, Indonesia or Singapore, ultimately, we ensure companies to receive one point of entry to the fashion market in Southeast Asia, but 6 points of exit. This is part of our uniqueness. I can be operating one pool of stock from a HK or Singapore office, allowing brands to auto-manage their working capital with us, while having 6 different marketing, branding, and payment differentiation strategies.
RiA : People tend to simply think of China when we mention e-commerce. How would you say the markets in Southeast Asia differ from the Chinese one, but also among one another as they are all different?
Giulio : When we talk about China, supply-chain and linguistically-wise, it is one market, divided into different segments based on cities, for instance, or the different demographics profiling customers. Southeast Asia, instead, for Zalora, includes 6 different countries, each of them different from each other, in terms of language, geography and cultural layers. Complexity seems to be the word, that, more than others, defines the region.
Managing this complexity and understanding and embracing it is what I believe to be the competitive advantage a company that fully operates in Southeast Asia holds over an external player who would look at the region as one entity and would try to go in with a single strategy and value offering.
We try to break it down and simplify it for our partners. We love fashion and we do it with an e-commerce angle, but what we firstly do is embrace that complexity call.
RiA : The Millennial segment and following Generation Z is on everybody’s minds, could you tell us who are those notorious millennials and Generation Z in the Southeast Asian markets?
Giulio : In Southeast Asia, I would define millennials as a very young group of people, either at the very beginning of their career, at university or just before entering university. They have some common, but also different, defining factors even within the same country.
Speaking from an e-commerce point of view, I know that thinking mobile first is of paramount importance to approach millennials. I know I have to integrate and adapt all my platforms to what I can show on mobile, and it has to be equivalent or better in terms of data and experience to what is displayed on a desktop or an iPad. Millennials don’t use iPads, their dads do.
Millennials use the smallest screen in the family and it is quite a barrier when it comes to fashion due to the definition and sizing of images and all the other technical factors to be taken into consideration. A millennial also has a much faster browsing behavior. That is, whenever he is shopping for fashion on electronics, he wants to find it fast. This is the reason why our search functions needs to be onpoint, hence the introduction of functions such as the visual search.
There are other characterizing elements for millennials. They use Instagram more than Facebook, so I would use the visual social media to reach them in terms of marketing. Also, a millennial is a lot more tech and search savvy, and therefore more price sensitive. I don’t mean that millennials will look for discounts, but they will know who prices the same product best.
Therefore, being true to the millennial customer means being true to the price and having the right price. This means mobile first, good search elements, but also other small defining factors. For instance, millennials tend to be more Android skewed than IOS skewed so the Android app should be more tailored to them. Millennials are also more careful about the amount of data they use, especially university students as most of them are on prepaid-fix packages rather than mobile packages and as such the size of the app makes a big difference to them.
Then, when it comes to fashion, millennials not only differ by market, but also within the same market. I like to take the example of Malaysia, which is such a diverse cultural place, whereby we have Penang – a very chinese oriented city- where millennial customers have very similar habits to Taiwan versus Jodhpur, where millennial customers buy modest wear and their key identifying influencers are Nilofar, a hijabista, or Yuna, big pop star with hijab and turban life.
Additionally, as millennial customers have been our obsession too, we have recently developed an express delivery subscription service, which revolves around the convenience of delivery.
I believe e-commerce has an evolution path. We have seen it in Europe and a lot of other markets. That evolution goes from the ebay concept, very auction-driven model to the deals model and then you have the entrance of Zalora which is about providing selection and products. The last stage in the process is, to me, where the UK and US currently stand and that is the experience.
I trust the fashion South East Asian market is increasingly heading towards that direction and that fast delivery is a huge part of it. We want our customers to shop for fashion at the right price and in total convenience. To reach this goal, we have developed a new subscription model currently available in Singapore and Malaysia. It is an extremely aggressively well-priced one year next day delivery guaranteed model whereby for less than 20 Singaporean dollars you get one year of express delivery and never have to think again whether you want it fast, slow or what not. We guarantee our customer remediation should we fault and be late for delivery. We hope to offer this new model to all our markets by the end of the year.
RiA : What is Zalora Premium and which reasons are there for collaborators to reach this new side of Zalora portfolio?
Giulio : We launched Zalora Premium a couple of months ago, but it is the result of a long-term project. There was always this back and forth about whether or not we had enough premium brands to have a premium tab.
Getting a variety of great brands was quite a long process, but I think we managed to get a good representation which keeps improving every month.
As a company we want to be true to customers, but also suppliers and brands. We wanted to create a spotlight for high-end brands and be able to show limited editions, collaborations and capsule collections without always having to renegotiate space on our website and our app with fast fashion brands.
Therefore, we engaged in this mostly contemporary premium page, where we aim at elevating the concept of exclusiveness, rarity and uniqueness of products. Some of the brands we launched go from the J.Crew collaborations we just had to the limited edition we got from Luxottica in eyewear but we are also working on collaborations exclusive to Zalora and never launched before in South East Asia.
As a matter of fact, we have just launched a collaboration with Jason Wu, the Taiwanese-USA designer. He went live on Zalora with vegan leather which also includes a CSR aspect. Jason got his inspiration from his line Grey by Jason Wu and by looking at paintings from Josef Albers. This is one of our biggest recent exclusive collaborations but we are looking at other ones that are along the same line with either South East Asian based designers like Nilofar or more broadly in other regions such as North Asia, Korea, and Japan. The key element for them all is to be exclusive and unique. Jason Wu had never launched a collaboration in South East Asia, not even in Taiwan, which is where he comes from. However, he has now done it and he chose us as partners to do it.
RiA : It seems like we are going to see Zalora becoming more of a luxurious platform on the wave of Toplife by JD.com or Luxury Pavillon. Is it a strategic direction you are heading towards or will Zalora Premium be more about limited editions and exclusivity solely?
Giulio : I think it will be more about exclusivity without tapping into luxury. The reality of these collections is that they are very competitively priced. We are going live with a Jason Wu exclusive collection at about below 250 USD line. We strive to create the ready to wear for the South East Asian pocket. We are exploring the J.crew, the Kate Spade or The Coach, not the Gucci or the Prada. At some point we do aim at representing all sectors of fashion but I think at the moment we need to be true to our customers which are not USD$5000 per piece spenders. They are somebody who loves fashion and wants access to something exclusive without splurging on it.
We call it the WoW strategy. Our objective is to start having 6 or 7 release per season across categories. We are not there yet but we are building up the pipeline.
RiA : We have seen few Zalora offline temporary store experience in the region, what was the response and is there any need for an offline permanent store?
Giulio : We started in Malaysia in 2014 then we moved to Singapore and we also did one in HK.
We recently launched the first offline presence of Abercrombie & Fitch in the Philippines, beautiful store and a launch very appreciated by the company which, we know, is very particular about store layouts, interior design, and store experience.
For us, it is all about the educational path of the customer and providing him/her with a combined online-offline experience. It is about touch and feel, especially for our exclusive brands. We want to allow customers to experience a brand they didn’t really have access to before due to geographical distance with physical stores.
Customers should know us, but we believe they should also know the brand. However, as it is an experiential rather than transactional element, we do not believe in having a permanent presence. We think we can maximize by opening for limited periods of time in different places and touching as many customers as possible rather than creating repurchasing habit for a store. Hence, the current strategy is to keep on working with pop up stores and to increasingly do it with our exclusive brand partners so that we introduce the brands as much as Zalora brand.