Retail growth and payments strategies with ZALORA

Warren: Hi, this is Warren Hayashi, President of Adyen, Asia Pacific. Today, we're chatting with ZALORA’s Chief Operations Officer, Rostin Javadi, and we want to find out how the top ecommerce site in Asia is catering to customer needs in a changing retail landscape.

ZALORA is one of the top ecommerce retail brands in Asia with a strong presence throughout the region, particularly in Singapore, Indonesia, Malaysia, Brunei, the Philippines, Hong Kong and Taiwan.

ZALORA gets over 50 million visits per month. So it's fitting that Rostin and I will be talking about the evolving retail and payments landscape here in Asia Pacific. In today's chat, we'll also discuss the challenges and opportunities brought about by an accelerated digital transformation in the region. Plus, how ZALORA always delivers the best shopping experiences for its diverse audience across the markets. 

Rostin, it’s so great to have you here today. How are you doing?

Rostin: Hi Warren. Yeah, very good. Thanks so much for having me, excited to have the conversation today.

Warren: Now you have been with ZALORA since the very beginning, joining in 2012, what were the early days like?

Rostin: Yeah. So I've been actually at ZALORA from the beginning in Malaysia as co-founder, MD. We were just in the process of getting the website up and running, products live and, you know, starting to work with some of the brand partners.

Since then, I've been there for almost nine years now. So I had the chance to really see the industry evolve and go from [a] very infancy stage all the way up to where we are today.

Warren: And what were some of the challenges in the early days? When companies are starting up, it's always really challenging at the very beginning. 

Rostin: Yeah, so I think a lot of the challenges were obviously around getting customers used to shopping online, and there's a big trust barrier at the very beginning, you know, creating a name for yourself and basically being able to break through that trust barrier. 

Payments, obviously, was a very big topic for us. So, you know, things have come a long way since then. But back then, the very early days were really all about, you know, cash-on-delivery, over-the-counter kind of bank transfers and not really a very seamless customer experience, let's put it that way. And my role at ZALORA was really all about trying to fix a lot of these challenges and create a more seamless experience for the customers. And of course, at the same time, growing the business. 

Warren: And every business over the last 18 months has faced incredible challenges, probably a challenge like no other. How has ZALORA coped over the last 18 months? So many retailers have really looked at digital transformation because they had to. What were some of the impacts that you've seen in the last 18 months?

Rostin: Yeah, that's a really good question. I think everybody's life has changed a lot over the past one year and a half. Obviously at ZALORA, we're leaders in fashion and lifestyle products. So a lot of fashion categories we’ve seen, you know, kind of the product mix changing quite a bit on the demand side, going from a lot of the going-out kind of categories, which we were very strong in the past. Stuff like dresses,  high heels, et cetera to things that are more the stay-at-home categories. So like loungewear [and] sports products. We also see a lot of shifts towards the wellness categories, so beauty has been really big and growing for us and we did quite a bit of expansion on that front and that helped us a lot over the past one year and a half, as we were quite fast to make some pivots on the overall assortment strategy.

Warren: And Rostin, how has the customer journey changed? We're all buying different things now over the last 18 months, we're going to different places, all our habits have changed, but has the shopping journey changed? 

Rostin: I think the big changes that we're definitely seeing is that customers are more comfortable with shopping online in general. So I think that's obviously very exciting for us in the sense that we've seen big growth in terms of our organic channels when it comes to new customers coming online for the first time. We're also seeing that customers are actually more comfortable to shop again, so the repurchase rate is actually going up within the first three months. So, all of this is pointing at the direction that customers are more confident to shop online – and in our region, that's a big thing.

I think apart from that, in terms of the journey overall, we've been adding a lot of enhancements to the customer experience – whether you look at the catalog overall in terms of personalization and the way that we do our search and sort, or whether you’d go down to the end of the funnel in terms of the checkout and payments – we've been adding a wide variety of new payment options that are basically becoming available in the ecosystem and customers are asking for that.

So I think it's great to see these things coming together. And I think the offering is starting to become more and more compelling and much closer to what you would see in more developed markets like in the States or in Europe, a lot of new opportunities for customers to shop in different ways.

Obviously apart from this, customers are also looking for value in shopping. Basically, they want to see more deals, they want to see better value and so that's why we have a pretty comprehensive, you know, let's call it platform of monitoring pricing across all authentic products on the web, not just within the region, but we also look at the international platforms so we make sure that we are price-competitive and we can give the best sort of value to our customers.

Warren: Everyone's flocking to online. You must be doubling down on moving friction away from the shopping experience.

Rostin: Absolutely. So that's exactly what we're doing. We're trying to just make sure that we have all the different touch points in the customer journey seamless, and we basically do that in a very continuous-improvement type approach. So we have a Six Sigma type approach. I'm kind of passionate about Six Sigma being from an ops and engineering background. So that's exactly the kind of approach that we are deploying in ZALORA, and we're constantly looking for new technologies and improvements that we can bring to the platform to be able to facilitate the overall customer experience and journey. 

Warren: And how does payments fit into that equation of removing friction?

Rostin: Well, payments is a really important one for us, obviously like I said, the early days were very challenging with not many options out there and now we actually have a huge plethora of different options. From buy-now-pay-later options popping up to other just more standard digital, credit card and debit card, kind of payment options. The main and most important thing in what customers are looking for is basically the ease and the speed of each of these options and the less clicks and the less effort, the less issues that can come about in that kind of process is really what customers are looking for apart from breadth.

So, I think it's kind of following a little bit what happened in China with, you know, many different options emerging and customers just choosing which ones they like the most. So, we've been trying to facilitate that and not be too selective about which payment options we bring online. We want to test them and allow customers to choose for themselves, which you know, which is the best option that they prefer.

Warren: Yeah, the payment landscape has changed so much, especially here in Southeast Asia from the early days where there were no options, as you mentioned, to almost having too many choices today. And at Adyen, we always hear from our partners on which ones to recommend. How does ZALORA take up which payment options are most relevant?

Rostin: Yeah, so that's a very good question. We have quite a bit of data coming from different industry reports. We start to look at trends, which options are starting to pop up more in terms of Google Search, and you know, just generally the buzz out in the industry. We also, of course, have our customers surveys. So we have NPS surveys that come in with lots of feedback from customers in terms of what they're looking for. We do roundtable sessions, et cetera, as well, but yeah, that's generally the way that we approach it, and we try to identify who are the big, emerging, important, kind of methods that are coming online and what's going to enhance the customer experience overall.

So, I think buy-now-pay-later is something that's come about fairly recently in Southeast Asia. We've been waiting for that for a while. I've been pushing a lot to see these solutions coming in. And we definitely see that with the right offering, the customer uptake is there. So, definitely customers have been waiting for that and are looking forward to these new solutions. 

Warren: And do you find that these new solutions actually attract new customers so that adding a payment method becomes incremental to revenues?

Rostin: Absolutely. So I think that's exactly what we were seeing in addition to our existing customers uptaking the new payment options in many cases. Once they decide and choose a payment option, a lot of times they stick to the same payment option. Also in addition, we see a very good opportunity in terms of customer acquisition from the new payment options as basically customers become aware of our platform and the fact that we have that option for them out there as well. So we've seen uptake, especially when it comes to the newer payment options in terms of user adoption and new customer acquisition.

Warren: You mentioned data earlier. At Adyen, we're big believers that payments data is really helpful in creating more engagement, creating more loyalty for our merchants. Are you using payments data to really enhance the shopper journey and really tailor experiences to your loyal members?

Rostin: Yeah, absolutely. I think you hit it spot-on. For us, we take a very data-driven approach and we look at the granular data in terms of how is the behavior of each step of the process and also for each of the different options because payments as well as a journey so each payment method will have slight differences in terms of the way that the customer journey is. Also, in terms of how intuitive it i; so we monitor every aspect of this, from the time in which the customer clicks for the first time, to the time in which they actually complete their payment overall.

And we also look at, if somebody goes into a certain payment method and then clicks back to the payment page, we try to track that and we want to have really the most seamless customer journey. And, at the end of the day, it comes down to basically how successful customers are at completing the transaction and completing it fast. 

The other thing that we monitor a lot is basically our acceptance rates and this is varying, of course, from payment method to payment method. When I say acceptance rate, it's successful payment at the end of the day. This is incredibly important because you don't want to have a situation where the customer tries to check out, goes to the payment method, and then it's not successful due to one issue or another. So this is something that we have actually a team that's monitoring, a regional team. And we're continuously trying to update and improve and working very closely with partners such as yourself on how we can improve that journey.

Warren: There's nothing worse than a customer that's already intending to buy something, abandoning a transaction, it's lost sales for a merchant, it's nothing worse than that.

Rostin: Absolutely. I think it's at a very, very critical stage of the funnel, of course, because you're right at the very end and that's something that we keep a very, very close eye on and we have involvement all the way up to the top level in terms of the strategy and how we go about payments overall.

Warren: And Rostin, as over the years as you've added payment features and enhanced and optimized payments, were there any Eureka moments, any surprises?

Rostin: I think some of the real Eureka moments were when we introduced a new option for the first time. So I can give an example in Taiwan, which is an interesting market for us because it's not really part of Southeast Asia. We call it the greater Southeast Asia region. Basically, what we saw was when we introduced over-the-counter, so there's a convenience store, delivery and payment on the spot. This is something quite big in the Taiwanese market. We actually saw almost a 50% increase in our order volume. So, we didn't have that option before. Just by introducing that option, we saw a huge conversion rate increase and basically new customers increase as well.

So I think that was probably the Eureka moment, it’s like payments is not just about facilitating and making things easier for customers or giving them options that can help the overall purchasing experience. It's also really about adding to our conversion rate and adding to overall revenue as a whole for us and our growth. That was what also drove, really our strategy in terms of making sure that we are leading in terms of the local payment options coming available and supporting and working very closely with startups and the ecosystem that's emerging.

So rather than closing in and saying, okay, we only want to limit customers to one or two options that we feel are the best from a customer experience standpoint. Instead, we took a more collaborative approach of working with new players and helping them basically bring their solutions and their technology up to speed in terms of, hitting the benchmarks on the payments front. 

Warren: The diversity in this part of the world is really challenging. We probably live in and operate in one of the most diverse parts of the world. Merchants always have to balance the need between having a consistent shopping experience – even the frontend design, in different countries, different cultures look at what a good website looks like – how do you draw the balance of having a consistent experience versus tailoring payments and offering very localized payments methods?

Rostin: Yeah, I think for us, it's really all about making sure that we have an approach that's listening-first. We take also a very data-driven approach in terms of the way that we test various features. So, strong A/B testing kind of culture to any new feature, any technology that we roll out. 

Everything is by design. I don't think we have any major surprises coming out there when we roll out a feature because we've been testing it so much with various segments of users across the region. And indeed it's very different - the shopping experience – whether you talk about the shopping experience in one of the remote islands in the Philippines versus the shopping experience in Singapore or Hong Kong. 

Not just from the way the platform works, the payment options and, even product offering to some extent – in terms of what they see from a personalization standpoint – but also in terms of the way that we do our overall end-to-end, let's call it fulfillment and the supply chain portion. 

So the physical part of ecommerce is also very, very critical. Working across such a diverse group of countries with big challenges on the supply chain, from local: being able to have sizable enough fulfillment centers to get goods to customers fast enough, all the way through to cross-border: when it comes to customs regulations and other issues. We need to be at the top of our game on all of these aspects.

And I think over the past nine years, we've been really fine-tuning that in terms of our platform, and now we start to reach a scale where we can deliver with very high consistency in a very complex region. So I think that's one of the reasons why we've been so successful.

Warren: I’ve been a big fan of ZALORA since the early days, most recently I've seen that ZALORA is working directly with brands. Is that a change in the business model?

Rostin: No, that’s not a change in the business model. I think we've basically always been partnering with brands, and we see our place as a platform, really, and offering solutions to brands.

In fact, over the past few years, we've really been building up to what we've started to offer in terms of partner-service offering. And that's something that I'm also very heavily involved in, as COO. Now we have two or three different, let's call it product offerings that we have for brand partners. So, whether that's basically from fulfillment solutions. So, we have our 1SS,  our single-stock solution, we call it. So that allows almost fulfillment as a service to our partners where they can leverage the platform and supply chain capabilities of ZALORA and they can use that, not just for fulfilling the orders and basically shipping orders for the ZALORA platform. They can also open that up to their own brand.com or even broader into other marketplaces.

So I think that's the first one. Apart from that, we're offering some data solutions as well to our brand partners. So, anonymized data, opening that up so giving the ability to our brand partners, to kind of slice and dice the data and understand where are the pockets where there might be a bit under-penetrated in terms of their current offline offering and seeing where the orders are coming in and where they can focus and actually create more synergies between offline and online.

So I think this had a pretty tremendous success in terms of the uptake, brands are very happy about that. So, all of these things that we're offering, I think it really provides a full 360-enablement approach, where we can just help and support brands to come online and basically marry their offline strategy together with online strategy in a very complex region. 

Apart from that, being a fashion and lifestyle vertical specialist, we need to offer a hundred percent authenticity and that's a big challenge in our region. Having these deep ties with the principal brands allows us to ensure that every time the customers are getting an authentic product, we can control the whole supply chain all the way from the source. 

Warren: And what's next? If there is a wishlist of what you can do with payments, what would it be?

Rostin: So, I think what's next is, I think it's just going to continue the acceleration that we're seeing in terms of ecommerce adoption in the region and basically new users coming online for the very first time.

So I think that's incredibly exciting for us in terms of our positioning and we have a very solid base to be able to build and scale. I'm excited to see once things also open up a bit, and that's what we've seen in Australia, in Europe and in some of the Western markets. As things start to open up just generally the population is able to go out more, have more of an outside life and I think we're going to see that not only our stay-at-home categories are continuing to grow, we're going to see those going-out categories start to explode. So, very excited to start to see that. 

And then, I think from a payments landscape standpoint, we just want to continue to partner with basically the specialists and those who know the landscape the best. And I think [with] Adyen, we've been very happy about the partnership. Historically, we've been working for quite some time together. We know that there's basically peace of mind in terms of processing huge payment volumes, so we don't worry about our growth when we're basically partnering with a platform like Adyen. We know that we're going to be able to scale very fast. 

Then in addition to that, we also know that the payment options are very localized and we're basically addressing what the customers are looking for because at the end of the day, that's what matters – what do they want and what are they asking us for – we need to be very fast in terms of opening those new options up and adapting them in a way that is, let's call it the Southeast Asia version and how customers want to basically shop and how they want to get their orders in this region.

Warren: That's interesting. I think what's next is the continuation of digital transformation. Even just having this conversation, connecting Singapore and London is possible because of all the technologies. And I think what we're seeing is that the world is getting smaller and smaller. And for merchants, it's an opportunity to reach out to consumers all over the world, especially in the world where everyone's flocking online, buying something from a different country is not so different than buying something from across town.

And that also means that Adyen is able to help bring new payment methods to reach more consumers but also help merchants localize and hyper-optimize their existing payments so that you can bring the best payments experience. I think that's going to be more critical for all merchants. We talked about hyper-local merchants, but in the ecommerce world, every merchant has an opportunity to go global.

Rostin: I think we're definitely seeing that, not just from a payments technology standpoint, but also from the product side globally through the ecommerce network. 

One of our big strategies is to support local brands with their global expansion strategy. As we're part of a much larger group – the Global Fashion Group, we basically have a presence over 26 countries and we have a much larger platform than just ZALORA. So, we are able to make those connections and allow for some of the new emerging brands and designers to get product[s] out into the world, which is something that just hasn't been possible in the past.

Warren: And Rostin, there's been so much digital transformation and so many retailers are looking towards the leaders like ZALORA. What's the advice for retailers looking to improve their payments?

Rostin: I think for me, it always comes back to kind of listening to the customer, and keeping the feelers out in terms of the market and industry overall. So I think as well, partnering with the big established players who are specialists in this area like Adyen, it helps tremendously because, you know, we can get a lot of, kind of heads-up on what's coming, what's the new thing and how can we improve overall. So I think the two combined is very powerful, for sure. 

I think the other thing is just to have an open mind to new options, because at the end of the day, we don't know which option or which offering is going to be the one that becomes more dominant and becomes a bigger and widespread one.

So I think getting in there early and working closely with the innovations that are coming is actually very important from my perspective. And at the end of the day, that kind of bet pays off for sure in the long run. Meaning that if you're already in early, you get the chance to scale and some of these options can scale very fast and very big like we've seen, for example, with Afterpay over in Australia and the States, like just exploding or other digital wallet solutions like we've seen in China and other parts of the regions. So, I think those two things combined, would probably be my advice overall.

I think that Adyen is probably sharing the same. You guys are sharing the same kind of approach in terms of customer-centric values and everything that we've been asking for is definitely responded to very fast and I must say I'm very impressed in terms of how agile you actually are – considering the size and scale that you're able to deliver at. So I think that's very cool and also wishing the best to you guys for the future and during this, let's call it,  “interesting and fast and furious time”. 

Warren: And Rostin, we really appreciate those comments and we're really looking forward to continuing our partnership. It takes two to be very innovative and I think it's part of the reason that we're very successful in the region, is working with innovative partners like ZALORA.

Rostin, thank you for joining us today. It's a wonderful conversation and some great advice for retailers that are trying to mimic your success.

Rostin: Thanks Warren and thanks to all the Adyen team for having me and looking forward to the next one.

Warren: You’ve been listening to Adyen’s Behind the Figures podcast. We look forward to sharing more business stories with you. Be sure to follow and subscribe to get the latest updates.