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How Has E-commerce Helped the Luxury Goods Sector Rebound in SEA?

How Has E-commerce Helped the Luxury Goods Sector Rebound in SEA?

When thinking of luxury brands like Gucci, Prada, and Louis Vuitton, images of exorbitantly priced items inside palatial retail spaces might come to mind.

But in recent years, the luxury goods industry has had to adapt to changing consumer habits, preferences, and needs – especially in Southeast Asia.

E-commerce, in particular, has played a significant role in helping luxury goods companies manage

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E-Commerce During COVID-19

The pandemic has hit global retail e-commerce sales hard, with sales of big players such as Moët Hennessy Louis Vuitton (LVMH) sinking by as much as 36% between Q4 2019 and Q1 2020.

Lovers of luxury goods were stuck at home just like everyone else, and many turned to online shopping as a result.

However, the Southeast Asian luxury goods market has been more than resilient, thanks in part to the explosive popularity of electronic commerce – also known as e-commerce.

Related Read: E-commerce – Your 7 Step Quick-Start Guide »

A Shift in Consumer Behaviour

This form of shopping has allowed businesses worldwide to sell their goods and services online, making up for poor retail sales caused by COVID-19. Today, you can see various online retailers and online marketplaces like Shopee and Lazada dominate the space.

Boston Consulting Group (BCG) forecasts that one-fifth of luxury brand sales will be conducted online by 2025.

While we will not be seeing the end of brick-and-mortar luxury stores anytime soon, there has definitely been a shift in the way that consumers are shopping for luxury goods.

To those outside looking in, Southeast Asia’s insatiable appetite for all things luxury might seem surprising. But the truth is, the region’s luxury goods market is actually quite young – and is set to grow even further in the coming years.

In fact, Asia as a whole has become the world’s top region for luxury sales by value, and Southeast Asia has a big role to play in that achievement.

Let us take a quick look at the state of luxury goods in Southeast Asia, how digitisation has helped its growth, and if the domination of the online business is set to continue in the sector.

Related Read: Offline to Online Part 1 – Registering an e-commerce Business in Singapore »

The State of Luxury Goods in Southeast Asia

The first thing you have to consider is where the population of Southeast Asia is heading. ASEAN’s middle class is expected to be 396 million-people-strong by 2030.

That is a lot of people with a lot of new money, and many of them will want to show just how far they have climbed the social ladder.

Semi-westernised places like Singapore have been embracing luxury goods for a while now.

The city-state is currently the Southeast Asian home to some of the biggest luxury goods companies in the world, as well as a large number of wealthy consumers.

So, it is no surprise that Singapore has been one of the strongest markets for luxury goods in Southeast Asia.

However, other countries in Southeast Asia are starting to catch up – and quickly. Attitudes toward luxury are changing, and people are growing increasingly relaxed about showing off their wealth.

And once e-commerce came to play, there was no stopping the rise of luxury goods in Southeast Asia.

Related Read: Offline to Online Part 2 – Establishing your E-commerce business Infrastructure »

How E-Commerce Has Helped Luxury Goods in Southeast Asia

E-commerce has completely changed the way we shop, and this is especially true when it comes to luxury goods.

No longer do shoppers have to physically visit a store or even step outside their homes to browse and purchase luxury items. They can simply make an online purchase on an e-commerce store and have the goods delivered straight to their doorstep.

Related Read: Offline to Online Part 3: Your Singapore E-commerce Success Factors »

Sustainability Plays a Part

Recommerce, or purchasing secondhand items, has also emerged as a trending way for environmentally conscious online shoppers.

Online secondhand retailers and marketplaces like Carousell and Vestiaire Collective have taken the luxury goods market in Southeast Asia by storm in recent years.

These e-commerce sites allow users to buy and sell pre-owned luxury items at a fraction of the original price, making luxury goods more accessible to a wider range of people.

They are also attracting buyers who are concerned about climate change and who look for ways to reduce their carbon footprint.

Of course, the convenience of online shopping is not the only factor that has contributed to the luxury goods market rebound in Southeast Asia. There has also been a change in the way that people are consuming luxury goods.

In the past, many people saw luxury items as not so much as monetary investments, but as investments in their style – something to be kept and used for years, if not decades.

Nowadays, however, people are far more likely to see luxury goods as fungible items – something to be used and then sold on when they are done with it.

Related Read: E-commerce in Malaysia: An Expert Expansion Guide »

Brands Are Recognising the Value of Taking Their Offerings Online

It is also worth noting that many luxury brands have started to embrace the idea of e-commerce business in recent years.

Brands like Louis Vuitton, Gucci, and Hermes now all have their own online store, making it easier than ever for shoppers to purchase their products.

Of course, brick-and-mortar businesses are not going anywhere anytime soon. But the rise of e-commerce has definitely had a positive impact on the luxury goods industry in Southeast Asia.

The Lure of Mobile Commerce

Apart from their computers, consumers also shop online on their mobiles and tablets, and it is not hard to see why.

Mobile shopping, or mcommerce, has been a highly convenient and accessible means where a customer can easily access their preferred online retailer while on the go.

Mobile commerce has also contributed to the rise in online sales. It has the potential to become a significant channel for online shopping with the growing reliance on digital devices.

In fact, in 2021, mobile commerce sales represented over half of the overall e-commerce sales in the Asia-Pacific, except for Japan. It is expected to reach an overwhelming 76% of sales in South Korea by 2025.

The Future of Luxury Goods in Southeast Asia

So what does the future hold for luxury goods in Southeast Asia? Well, if the past few years are anything to go by, it is safe to say that the luxury goods market in Southeast Asia is only going to continue to grow.

E-commerce is becoming increasingly popular in the region, and this looks set to continue. In addition, the ASEAN middle class is only going to get bigger and wealthier, meaning that there will be more people than ever before looking to turn to online purchases, even for their luxury items.

Of course, there will always be some people who are opposed to luxury goods. However, as attitudes change and more people become comfortable with showing off their wealth, it is likely that the luxury goods market in Southeast Asia will continue to thrive.

FAQs in eCommerce in Singapore

  • E-commerce refers to using devices like mobiles and tablets to make online purchases.
  • They are doing so for these factors:
    • Improving the overall customer experience
    • To drive sales
    • As an additional sales channel to mitigate the impact of future headwinds, like COVID-19
  • They may include:
    • The fierce competition between single-brand websites and multi-brand sites/marketplaces
    • Being able to meet consumers’ expectations for a seamless online shopping experience
    • Adapting to the local trends and preferences of the local markets they target

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About the Author

Eric Chin

Eric comes from banking background. He provides consultancy to local and foreign entities on the ideal market-entry strategies for setting up or expanding operations in Southeast Asia. Eric also provides advisory to fund managers and family offices on structuring as well as applicable tax incentives. He has also set up many VCC structures for licenced fund managers.

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