Route-to-market challenges in Asia

Identifying the key challenges . A critical element of any business strategy is to identify the optimum combination of traditional and digital channels to reach customers, clients and consumers across a chosen market:

Asia’s commercial landscapes vary significantly, so understanding where your current and potential customers are located, and how to reach them, is crucial. For example, Thailand has many modern malls and hypermarkets, yet a large part of sales are derived from around 300,000 traditional stores. The invoice value per store, however, is small, so aiming to cover all those stores may not be profitable without a diversified product portfolio.

Diverse regulatory environments can provide unique challenges especially for companies operating in the healthcare or performance materials sectors, as the registration procedures for pharmaceutical products and ingredients vary in different markets, while the import or manufacture of certain products may be prohibited altogether.

In several Asian markets, distribution networks have developed based on local market characteristics, geographies and infrastructural limitations. In some cases, active and passive wholesalers, distributors and sub-distributors may all be operating in the same market, which can reduce transparency and obstruct the desired distribution coverage.

Getting your product to customers is vital and in-depth knowledge of markets is crucial. For example, when sourcing ingredients for cosmetics and food products, Japanese companies look for ads from suppliers in printed industry magazines, Chinese purchasers use WeChat and Baidu, while European and US markets rather use product databases and online search engines.

View from the business: how we define a route-to-market strategy

At DKSH, defining a new route-to-market strategy for a client working in, for example, the consumer goods industry is all about coverage and distribution goals. Once the market is clearly defined – so consumer type and distribution format – we then set the right go to market (GTM) model to achieve it. This is normally a combination of direct distribution (modern trade, national key accounts, etc.) and indirect distribution (via wholesalers, sub-distributors, etc.). The goal is to achieve the distribution objectives with the right cost and profitability mix for our client.

View from the business: route-to-market in Malaysia’s consumer goods industry

Malaysia is a geographically vast market, but the east and west are very different areas. As such, they need differentiated route-to-market approaches:

  • East Malaysia represents 20% of the population but 60% of the total land area in Malaysia; it is therefore best covered by wholesalers. They will serve the market better and have more market pressure on customers. To ensure that you keep control of the numbers, however, you need the right IT tools for transparency in their business implementation
  • West Malaysia has four main areas to cover, and three of these are economically developed. This is different from other markets where you often get one city that is much more developed than the rest of the country. In these areas, there is a combination of international accounts (Tesco, 7-11, etc.), local national chains and independent retailers. It’s an ecosystem that requires proper management to avoid channel conflict

Omni-channel challenges. Implementing a seamless omni-channel strategy is no easy task in a vast, diversified region like Asia that is overlaid with multiple currencies, political and legal systems, population bases, ethnicities and religions, plus polarised levels of wealth and poverty.

Rapid and differentiated demand. A central factor of Asia’s 21st-century economic reality is the pace and scale of change in both consumer and business markets. The growth of Asia’s middle class is creating demand for differentiated products and customized services, while business customers are newly empowered by a multiplication of interactive touch points. 

B2C and B2B. At the same time, geography is a declining obstacle. B2C businesses are scaling up their urban, suburban and rural sales point strategies to confront the challenges of mass urbanization, while B2B sales are becoming more modular and complex with more touch points combined with elevated expectations from better informed customers. 

Close to customers. Asian markets demand that competitive players are agile and fast to react to market conditions. Companies must seamlessly navigate the proliferation of channels for connecting, engaging and selling to clients, customers and end-users. This means being on the spot in local markets, close to customers so that you can anticipate and prepare for changes and new developments. 

Focus on core competencies. A focus on core competencies and awareness of the value of customer relationships improves market coverage. It also helps build resilience to risk. For example, in a worst-case scenario, strong customer engagement and channel management capabilities can soften the backlash if a product recall – a not infrequent occurrence in Asian markets – needs to be undertaken.

Consumer and healthcare markets. In Asian consumer and healthcare markets [link to case studies], increased discretionary spending is being spurred by several concurrent factors, including mass urbanization, wage inflation, greater product choices, modernization of shopping outlets and the expansion of online purchasing channels. These developments require brand holders to place a greater emphasis on data analytics to ensure they are capturing value, and reaching and satisfying their target customers.

Industrial and technological markets. In industrial and technological sectors [link to case studies], the competition for business contracts, sales and tenders is intensifying. Digitization provides new channels for marketing, selling and servicing complex machinery. At the same time, heightened competition and cost pressures are exacerbated by the emergence of ambitious non-traditional players and “disruptive” technologies.

Manufacturers add value. Manufacturers, who used to have little direct contact with customers, are responding to new demand patterns by producing custom modifications and bespoke enhancements to improve product quality and durability. Packaged after-sales services, technical support and customer training increase customer value. Real-time analytics, technical data and customer usage statistics are combined to inform customer-centric service strategies for highly complex products in competitive marketplaces. 

Adding value through innovation. Investing resources into research and development can bring products to markets where they don’t currently exist. In the performance materials sector, the reengineering of products provides a competitive edge for selling raw materials. Innovation also enables adjustments in marketing for a product in a given country. For example, different promotional approaches may be used for a skin cream, which in Japan is marketed as a skin-whitening cream but in Europe is marketed as sun-spot coverer.

New business models. Across Asia, service-focused companies are nurturing a culture of innovation and foresight. Omni-channel business models encourage different divisions within a company to collaborate and map the purchasing journey for each client through the sales funnel – while a longer term view of each market creates closer relationships with customers that enable it to be more nimble as trading conditions change.

Even if companies know change is coming, it is very hard to recognize exactly when to shift business models. And surviving the transition is no easy feat. Switching from old to new often requires not only building new capabilities to support the journey but also cannibalizing familiar models with new, untested ones.

Forks in the Road: Navigating Industry Disruption, The Boston Consulting Group, 2016