Social commerce, monetizing returns, and AI-driven pricing and personalization create exciting opportunities for retailers in Asia Pacific.
Introduction: Embrace the Innovation
At SAP, we’ve seen a lot of trends come and go over the last 50+ years. The pace seems to only increase as platforms, technologies and apps rise, weaving in and out of one another’s ecosystems, driven by customers whose ever-increasing appetite for impeccable service, distinctive products, sustainability, convenience, and competitive pricing shows no sign of abating.
The retail industry’s trajectory is inspiring, particularly in the Asia-Pacific (APAC) region. This is where we look for innovation and digital transformation, for new modes of action and interaction at the vanguard of the evolving shopping experience.
APAC is not just a participant in the global retail revolution; it sets the pace. The region’s rapid adoption of digital technologies, combined with its large, tech-savvy population, creates a fertile ground for retail innovation, and it’s picked up with enthusiasm.
Asia has well over a billion social media users, on multiple platforms. But even if we just look at influencer marketing, while India, China and Indonesia all have higher penetration rates than the global average, the rest of the APAC region does not necessarily follow suit.
For retailers – in fact all businesses – building engagement and trust is critical. But there’s no one-size-fits-all playbook for the region.
Using industry data and insights alongside our own research and best practices from FLASH, SAP’s proprietary enterprise maturity and benchmarking assessment, we’ve compiled a series of hot takes that examine the dynamic landscape of retail through the lenses of social commerce, monetizing returns, AI-driven pricing and demand strategies, and the importance of robust data management.
Join us as we delve into these exciting developments and insights, and discover how as retailers, you can stay ahead in a competitive market.
Chapter 1: The Power and Promise of Social Commerce
HOT TAKE: Social Commerce Grows Up: Trends and Opportunities
Social commerce is revolutionizing the way consumers shop, blending social media and e-commerce into seamless experiences. The main social platforms and Super Apps have integrated shopping features that drive engagement and sales. Influencer marketing, live streaming, and targeted retail media are key drivers, with APAC leading the way in innovation and adoption.
Opportunity: Social media use may have peaked, but influencers and community allow ways to build relationships with customers
At SAP, we see social commerce as a fusion of social media and e-commerce that is transforming the retail world. This dynamic phenomenon leverages the power of social media platforms and Super Apps, together with retail media, and influencers to craft immersive shopping experiences. APAC (Asia-Pacific) is the hotbed of innovation and early adoption, setting the stage for global brands to expand their best practices to new regions and territories within APAC itself.
The Rise and Shine of Social Commerce
Social commerce is skyrocketing, fueled by the pervasive influence of social media on shopping behaviors – and the fact that the average user logs into 6.7 social media platforms a month(1). Globally, SAP FLASH data shows a 46% increase in retailers using personalized Instagram ads, and an 80% increase in retailers using personalized Facebook ads(2). Together with TikTok/Douyin, WeChat et al. retailers are not just connecting people—they’re revolutionizing how we discover and buy products.
One standout trend is the integration of retail media. A powerful part of the media mix for advertisers in Southeast Asia and India, 70% of which are seeing an improvement in performance from retail media networks over other channels, and 78% of which plan on using off-platform programmatic targeting in the future(3). The end-goal? Not just highly targeted ads, but entire environments that resonate with shoppers based on their behavior and purchase history, making marketing efforts more accurate and impactful.
Influencer marketing is another powerhouse that drives social commerce. SAP FLASH figures show a 105% increase in APJ from 2022 to 2023(4). Influencers are the new-age brand ambassadors, promoting products to their followers with authenticity and relatability. Their recommendations hold significant sway over purchasing decisions.
Live streaming has become a particular game-changer for influencers. By showcasing products in real-time, answering questions, and interacting with viewers, influencers create engaging content – and communities that drive instant sales and foster deeper connections with their audience. It works. Businesses are making an average of $5.79 for every $1 spent on influencer marketing(5), an ROI that outstrips many other channels.
APAC: The Innovation Powerhouse
APAC is at the forefront of social commerce, with trailblazing countries such as China, South Korea, and Indonesia (and their Super Apps) leading the charge. These markets offer a crystal ball to retail’s future, showcasing innovative strategies that can be adopted worldwide.
In China, platforms such as WeChat and Taobao Live deliver comprehensive social commerce experiences, blending messaging, social sharing, and live streaming with e-commerce and creating a market that’s predicted to be worth $3.565 trillion this year(6). This year, AliExpress launched its livestream shopping in the UK(7), with influencers (and their followers) building brands on its fashion channel in the country.
South Korea leverages its cutting-edge digital infrastructure and high social media engagement through platforms such as KakaoTalk and Naver Shopping. South Korean consumers, known for their quick adoption of new technologies, drive continuous innovation in social commerce.
Based in Singapore, ShopBack now has over 35 million users across Southeast Asia, all incentivized to use its platform and buy bulk with cashbacks of up to 30%.
Indonesia, with its distinctive digital landscape, and platforms such as Tokopedia and Bukalapak, integrates social features with e-commerce, tapping into its large, young, and tech-savvy population. And as social media use, blogs and vlogs have all declined(8) influencer marketing thrives, with local influencers generating significant engagement and driving sales. Promotional efforts, such as coupons and discounts – play a role too, as do flexible payment terms and authentic reviews.
The lesson here – across the region – is that the personal touch is everything. And while it’s not always easy to deliver this when chasing consumers across platforms, every interaction can offer an opportunity for growth.
Chapter 2: Revenue Returns: Cash in on the Comeback
HOT TAKE: Rethinking Returns: From Financial Drain to Money Maker
Returns don’t have to be a financial burden. Forward-thinking retailers can transform them into revenue opportunities through subscription-based and VIP return services, as well as green returns initiatives. In-store return bonuses and second-chance sales further build loyalty, drive additional sales, and can recover revenue.
Opportunity: Second chance and second hand sales both look like untapped areas for retailers. The right technology can help recover revenue and transform your returns process into a competitive advantage.
Rethinking Returns: From Financial Drain to Money Maker
Returns are an inevitable part of retail, especially with the rise of e-commerce. While many retailers view returns as a necessary evil, at SAP, we see an opportunity for forward-thinking companies to build both revenue and customer engagement.
Shoppers in APAC are keen to try new things, but whether they do this in person or online differs across the region. In Indonesia, 56% prefer buying online, while in Hong Kong, it’s just 29%(9). The dawn of the age of ROR (return on returns) is upon us, so what could you be doing about it?
Monetize Returns
Dealing with Damage
Concept: Huge amounts of apparel is rendered unsellable during the returns process. If it can be repaired, cleaned, or repacked though, it can be returned to a sellable condition and some of the original value recovered. Businesses may lack the infrastructure to take care of this themselves, but it can be outsourced.
Example: (Re)Vive, which has a footprint in both India and the U.S., uses proprietary technology to streamline the conversion of distressed fashion and retail inventory into sellable assets, dealing with both the data and the physical aspects of damage and repair.
VIP and Membership-Based Return Programs
Concept: Not brand new, but it could gain traction. Customers pay a fee for free, unlimited returns. This model generates a steady revenue stream, enhances customer loyalty, and allows high-value customers more opportunities to shop.
Example: Amazon Prime’s return policy offers convenience as a key value proposition, driving membership and repeat purchases.
In-Store Return Bonuses
Concept: Encouraging customers to return items in-store can drive additional foot traffic and increase the likelihood of new purchases. In fact, SAP FLASH research shows 65% of retailers offer the ability to return online orders to a store or partner location(10).
Example: Kohl’s attributes accepting Amazon returns in store and offering a shopping incentive to winning 2 million new customers in a year(11).
Green Returns and Second Chance Sales
Concept: Charging a small fee for carbon-neutral shipping or offering discounts or incentives for opting into sustainable packaging can appeal to environmentally conscious shoppers. Meanwhile, returned items in good condition can be refurbished and resold through dedicated platforms. This recovers value from returns, appeals to bargain hunters, and protects the brand from counterfeiters.
Example: There are already great examples from international brands such as Patagonia, which has thriving platforms dedicated to used and second–hand garments, to Carousell, which is the leading recommerce site in Southeast Asia, and has a certification service for luxury items. There is still opportunity. In China, for example, while only 15% of consumers have bought second-hand clothes before, 40% are willing to try(12).
Data Goldmine
Concept: Returns can offer valuable data on customer preferences, product quality, and buying behavior. Monetize this by using it to improve product offerings, optimize inventory, and personalize marketing efforts. With the advent of AI, this can be turned into a competitive advantage to improve measurements and sizing.
Example: Zara uses return data to adjust inventory and design decisions. This ensures better alignment with customer preferences, reduces future returns and shortens time back to the hanger.
Change the Record: Profitable and Painless for All
The returns process, often seen as a headache for retailers, holds immense potential for monetization and customer engagement. Technology is the key to transforming returns into a profitable venture. AI-led analytics and service, together with seamless omnichannel integration, would all streamline the returns process, reduce costs, and enhance the customer experience.
It all comes down to perspective. By rethinking returns as an opportunity rather than a cost, retailers can create innovative solutions that drive revenue, build customer loyalty, and set themselves apart in a competitive market. Embracing this untapped opportunity requires creativity, investment in technology, and a willingness to experiment, but the rewards are well worth the effort, transforming an old problem into a new profit center.
Chapter 3: AI will completely change the way you think about price elasticity
HOT TAKE: AI Combines Power and Flexibility
The Asia Pacific consumer base is large but fragmented. AI adds the potential for personalization and loyalty-building alongside dynamic pricing and precise demand forecasting. It’s an exciting crossover, adding personalization in the form of pricing, rewards and offers to traditional views of price elasticity and demand. By analyzing vast datasets, AI could help retailers optimize prices in real-time in a far more sophisticated way than ever before, building loyalty and improving customer retention, while also reacting quicker to pricing changes.
Opportunity: Complete dynamic pricing could be disruptive and innovative. Not a trend so much as a unique market opportunity.
AI-driven pricing strategies are no longer a luxury; they are a necessity. Traditional pricing models, which rely heavily on historical data and static rules, often fail to capture the dynamic nature of today’s markets.
In contrast, AI algorithms analyze vast amounts of data in real-time, identifying patterns and trends that allow for dynamic price adjustments based on various factors such as competitor pricing, inventory levels, and external conditions such as weather and economic indicators.
On average, businesses that use AI in their pricing enjoy an ROI 2.6 times higher than those that rely on traditional methods(13). For Asia Pacific, with complex borders and regulations, this alone is worth serious attention.
At SAP, we’ve seen how AI-powered demand forecasting can significantly improve inventory management. Retailers can anticipate shifts in consumer demand with greater precision, allowing them to adjust their supply chain operations proactively. This leads to reduced costs, improved customer satisfaction, and increased sales.
Personalizing Promotions
But there’s more to it. Deployed correctly, AI can also revolutionize how promotions are personalized. By analyzing individual customer data, it can be used to quickly work out the optimal discount or promotion for each customer segment.
This personalized approach drives higher conversion rates and builds stronger customer loyalty. For example, an AI system might identify that a particular customer responds well to limited-time offers, and send targeted discounts accordingly, while another customer might receive different types of promotions based on their price sensitivity. Yet despite these advantages, the SAP FLASH database shows only a 1.3% increase in retailers using personalized promotions from 2021 to 2023, indicating there is still a significant opportunity.
AI’s potential to revolutionize the retail sector in the Asia Pacific region cannot be overstated. By integrating dynamic pricing models, it doesn’t just optimize pricing; it personalizes the entire shopping experience, enhancing customer satisfaction and loyalty, not to mention self-learning algorithms that offer insights into both product and customer behavior. One such service is already available from GK AIR. Its AI-led solution portfolio adjusts prices to market conditions, but also offers tailored recommendations and personalization.
By embracing integrated AI-driven price elasticity with personalized pricing and promotions, retailers across the region can optimize their operations, enhance customer satisfaction, and drive significant revenue growth. The future of retail is here, and those who quickly get to grips with the power of AI will lead the way.
About SAP Retail
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About SAP FLASH
SAP, a global leader in enterprise cloud technology supporting 87% of global commerce, provides the FLASH Maturity Assessment to measure end-to-end company performance worldwide.
FLASH analyzes companies’ business capabilities and calculates maturity scores against industry benchmarks to identify strengths and opportunities and recommend strategies and best practices to drive business improvements. The FLASH proprietary market research database leverages SAP’s Value Lifecycle Management (VLM) technology to provide unique insight into industry trends and identify financial and strategic value for business transformation initiatives.