It’s amazing how this highly upvoted answer (Ron Rule’s answer to What stops Walmart from beating Amazon in online shopping?) is basically proving, without the author realizing it, why Disruption Theory works. The answer takes an exceedingly narrow view of the entire retail industry and labels the pursuit of leadership in an emerging market/channel (ecommerce), which is clearly where the world is heading over the next few decades, as mere “bragging rights”.

“Disruptive innovations tend to be produced by outsiders and entrepreneurs, rather than existing market-leading companies. The business environment of market leaders does not allow them to pursue disruptive innovations when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations (which are needed to compete against current competition).”

(Source: Disruptive innovation – Wikipedia)

The real answer is, Amazon has already won in online shopping. It is not due to a lack of effort from competitors, which is probably too little too late.

ecommerceIQ

This quote, attributed to Jeff Bezos, sums up why:

Your margin is my opportunity.

Even with Walmart’s massive revenues and profits (compared to Amazon), it cannot compete with the juggernaut that is built by Bezos. Amazon is “not profitable” by choice. All the earnings are put back into the business, either into more capital investments or to sell loss-leading products that lock in customers or drive competitors out of business, vertical by vertical, and market by market.

The investments that Amazon has made over the first two and a half decades of its existence give it momentum such that it is tough if not impossible for any other company to catch up over the coming decades: the technology stack, the deeply integrated logistics/supply chain (they are now getting into competition with FedEx/UPS), the effective third-party seller marketplace, the customer loyalty (through Prime).

Every exponential curve runs below the linear curve in it’s infancy, that is until it suddenly crosses over, goes through the roof and hits the sky. Even though in absolute numbers Walmart is still bigger than Amazon, only one of the lines below is going up and to the right:

ecommerceIQ

On top of all this, in the last couple of years, Amazon is also getting into physical retail, with acquisition of Whole Foods and pilot of Amazon Go. Here’s a great analysis of this: Amazon’s New Customer (I highly recommend Stratechery for tech+strategy topics in general).

At this point it is more likely that Amazon will eventually beat Walmart at physical retail, than Walmart will beat Amazon at online shopping. If Walmart wants to survive till the end of this century and not go the way of Sears, Walmart must come up with a strategy that creates value in a digital, super-connected future where everyone is hooked on to the convenience and choice furnished by online shopping, but in a manner that converts their massive current investments in physical retail from liabilities to assets.

The last thing Walmart should do is to build an Amazon clone. As then, they are playing by Amazon’s rules. And nobody beats Amazon at their own game.

 

Read the original on Quora by Pararth Shah, Software Engineer at Google

Not commonly prevalent in the news, Rocket Internet’s venture Jumia (formerly known as Africa Internet Group) has managed to stay under the radar while slowly dominating one of the largest developing internet markets in the world.

Only after speaking with a team of Jumia Vendor Success Senior Managers was I able to realize the massive potential of the continent’s top ecommerce player, and how it is not so different from Southeast Asia.

“Like every other region, Africa has its own challenges but the internet users [in Africa] are more than that of the US, UK and actually, both of them combined,” said Gaurav Jain, Head of Vendor Success, Jumia Group. “The number is behind only India and China.”

ecommerceIQ

Source: Statista, Africa has over 360 million internet users

During a knowledge sharing session held at aCommerce fulfillment center in Bangkok, ecommerceIQ spoke with the Jumia team to understand the unique properties of their ecommerce ecosystem, and uncover why the company was more similar to Go-Jek than the commonly perceived Lazada of Africa.

Africa’s ecommerce behemoth: The sum of all parts

To understand the extent and ambition of Jumia’s business goals in Africa, it’s important to know that Africa is a continent broken up into 54 countries and according to the company, consists of 1.3 billion consumers and 17 million SMEs/merchants.

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Jumia, started in 2012, was initially an e-tailer selling only electronics and fashion items when it moved into a marketplace model in 2015. It has since become the largest internet player in Africa and first unicorn leading in six regions: Egypt, Ivory Coast, Nigeria, Kenya, South Africa, and Morocco.

The company not only operates in 23 countries, but has effectively squeezed out the ecommerce players that came before them, namely Kilimall and Konga.

It’s safe to say that Jumia Group is no longer a simple, horizontal marketplace and is responsible for pumping out ventures Rocket Internet is famous for copying and pasting in developing markets: Jumia Food (foodpanda), Jumia House (Lamudi), Jumia Car (Carmudi), Jumia Jobs, Jumia Deals, etc.

But launching online services in a region where ecommerce is only 0.5% of total retail sales is not cheap.

The company posted a Sh14.9 billion ($148 million) loss before tax and other costs in December 2017 compared to Sh11.3 billion the year before.

While it doesn’t paint the entire picture, severe losses was one of multiple factors that spurred the company to create the Jumia One app combining its top services in one place. The app launched in Nigeria earlier in March and allows customers to shop online, order food, buy airline tickets and pay cable and electricity bills.

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“People like to shop on the mobile app. They prefer to have ecommerce handy so they can place an order on the go. The Jumia One app is growing, 42% to 56% in terms of mobile share.”

Other factors for launching Jumia One included:

  • It makes more sense to invest heavily into a single platform versus managing and marketing multiple brands
  • Consumers don’t have enough storage on their mobile phones to download multiple apps as mentioned by a user
  • Mobile penetration in Africa is expected to reach 50 percent in leading countries over the next five years – meaning over 300 million smartphones will be added to the market
  • The app is another revenue stream as Jumia marketplace merchants can buy advertising space for their products
  • It also allows the company to cement themselves as a strong payments player, vital for mass adoption as demonstrated by Alibaba’s Alipay

The company will dabble in micro-financing to merchants given its rich data. A win-win to give merchants more capital to invest in their online businesses and drive more traffic back to its platform.

“We know the patterns, the revenue, the number of orders. We lend out money so they can manage their shops,” comments Gaurav. “It’s a growth opportunity to accelerate their growth as fast as possible.”

“They can use mobile money, not only cash.”

The all-in-one app draws parallel to one of Southeast Asia’s unicorns. Jumia is becoming the superapp in Africa – a Go-Jek for 1.3 billion customers.

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What are then the challenges holding back Africa’s enormous potential? The typical it turns out.

Challenges in Africa mirror Southeast Asia’s own struggles

Africa’s obstacles preventing exponential growth of ecommerce are the same that plague Southeast Asia’s internet economy.

  1. People still want to visit offline stores for the look and feel to buy products
  2. Lack of trust by both customer and merchants who don’t believe in digital transactions
  3. Fragmented markets, different languages, customs
  4. Cash based society
  5. Underdeveloped infrastructure
  6. Shortage of digital talent and training/education

“They need to know that ecommerce is not a Ponzi scheme. Trust is a large issue. We show them how their products will sell, we show them the importance of visibility and assortment until they have confidence in us and they grow their business so it’s mutually beneficial,” says Gaurav.

“Sellers with offline shops aren’t used to waiting for payment. Cash flow is a problem with our vendors,” says Damola Ajayi, Head of Vendor Success, Jumia (Nigeria), when asked about his challenges. “We guarantee a 7 day payment cycle from day of shipment and even daily for our gold vendors.”

The company paved the way for other ecommerce players to come in, but currently there is no standout competitor apart from the expansion efforts of Chinese companies and the country’s predisposition for offline retail.

Creating the next 500 millionaires in Africa

What was most impressive about Jumia wasn’t its ‘superapp’ or the sheer size of the African market, it was the dedication and enthusiasm exuberated by each Jumia employee I met.

ecommerceIQ, Jumia

They understood the massive challenges ahead and were candid about how to tackle them.

Lack of vendor trust, digital skills or education?

  • Launch training 2 to 3 times a month to advise on marketing, pricing, and inventory management
  • Maintain a ‘fair’ playing field by enabling local businesses to offer COD (cash on delivery), whereas cross-border merchants don’t have this option
  • Spend heavily on marketing for its high performing vendors
  • Share insightful data with vendors on a weekly basis about top selling products across multiple categories, propose assortment and price forecasts

Lack of talent?

  • “The company brought in expats who managed senior roles and groomed locals to move up,” says Damola. “This was necessary for our early growth.”

Lack of cashless adoption?

  • Add convenience through JumiaPay allowing payment by debit card or bank accounts
  • Offering cash on delivery

ecommerceIQ

“We are able to cover the entire vendor journey,” comments Gaurav. “We offer services at every point the customer needs.”

So how are these band-aid solutions working out? At the knowledge sharing session, top performing Jumia vendors shared their experiences with me:

“If you dedicate yourself to Jumia in top product categories, mobile phones, there is no need for you to go offline. You can grow 70% [in sales] if you know what you’re doing.”

“Target the demands of the market and Jumia helps you focus. They will give you foresight.”

“We started with Jumia since 2013, we were selling a small number of products. During Black Friday, we sold 1,000 phones but for “Mobile Week” in March, we sold 15,000 Xiaomi phones, and broke the record for the Middle East.”

The company, while struggling with the perils of other companies prioritizing high growth over all else, is taking baby steps to expose its merchants to the world’s possibilities.

“We [Jumia] want to enable African customers to enjoy best products from the world at their doorstep,” shares Gaurav.

What can I say? The more the merrier.

 

Editorial comment: a quote was adjusted April 22 8:51am

The big deal about Ramadan in Retail

Once a year, approximately 2 billion Muslims worldwide observe a month of fasting to commemorate their Islamic beliefs. This year, Ramadan will start on May 16 and end June 14, 2018.

In Southeast Asia, more specifically the pre-dominantly Muslim countries Malaysia and Indonesia, family members scattered across the region travel home to celebrate the holy month together. In addition to fasting every day from dawn to sunset, there are other consumer behaviors that have awoken retailers and ecommerce players alike.

Eid al-Fitr, the three-day celebration of breaking fast at the end of Ramadan is similar to Christmas in the West. And what is commonly associated with these holidays? Gift giving, new clothes, and feasts.

While the month is a joyous celebration among loved ones, it’s also one of the largest shopping events in the retail calendar – think of Black Friday and Cyber Monday in North America. It pays to pay attention to the Muslim buying power.

ecommerceIQ was invited to speak at Facebook Indonesia’s event a few weeks ago to share its findings about Indonesian shopping behavior during Ramadan based on its new segment Consumer Pulse. This is what we learned.

The average Ramadan shopper profile

Regardless of online or offline shopping preference, majority of Indonesians will buy more during Ramadan.

Based on our survey results, the average Ramadan shopper in Indonesia is a female, between 31 – 40 years of age and spends the most on items in the fashion and groceries categories.

Ramadan 2018

The more indulgent spending may be explained by the fact that prior to the start of Ramadan, working Indonesians have a major influx of disposable income as they receive their bonus for the year.

Unsurprisingly, the more income made, the more they will spend during Ramadan as shown by our survey.

Ramadan 2018

What is important to note is the middle-class household count in Indonesia is expected to rise to 23.9 million in the next 12 years from 19.6 million in 2016.

The country already holds the fourth largest middle-class count on a global scale.

A growing middle-class means emergence of middle class characteristics – more spend on travel, holidays and gifts for family. This is why companies are spending to build credibility early on as reliable brands and influence the behavior of future generations.

This is also what makes the archipelago such an attractive and exciting market.

Shopping peaks during Ramadan

Given the growing popularity of ecommerce across the mobile first region, what trends can we identify in online buying behavior during Ramadan such as what device are they shopping with and at what times?

As soon as the sun goes down, the spending spree begins. Data from aCommerce Ramadan in 2017 show that mobile browsing on ecommerce sites peak at 4-5am and 5–8 pm when people are sitting in traffic.

Ramadan 2018

While the average web session length is longer on desktops, there is more traffic coming from mobile during Ramadan making a great mobile UX important to encourage conversions.

The data also shows that males tend to browse more than females, but females have a higher conversion rate. While marketers should tailor campaigns appealing to both, converting males can be a bit trickier.

Ramadan 2018

Males tend to appreciate a straightforward and simple online shopping versus social and comprehensive experiences. They also buy based on logical steps (versus emotional) and like to research before buying, which can account for the increase in browsing activity.

Capturing the Ramadan shopper

Based on our survey, the most popular online channels for shopping during Ramadan are Shopee and Lazada Indonesia.

While the top players have moved past the question of whether they should have an official online presence, having a shop-in-shop isn’t enough given the number of sellers available.

Questions brand managers need to ask themselves include: how well do my products rank in search? What’s my pricing strategy? How are my product reviews? How attractive is my brand presence? How quick is delivery?

Consumers in Indonesia shared the top three reasons that would convince them to shop online more often.

  1. Special Ramadan promotions on products they need i.e. food and fashion
  2. Payments option cash on delivery
  3. Same day delivery with no additional fees

Sites that did not feature lower priced items suffered a hit in conversions. Indonesians are price conscious and even with disposable income from their bonus, thriftiness is a major factor in consumption behavior.

While it is okay to mix normal priced items on the homepage, lower priced items should be brought to the forefront. This is a great time of year to flush out inventory.

Ramadan 2018

Logistics and payments remain the toughest challenges in Indonesia ecommerce due to infrastructural immaturity and lack of financial knowledge. Most companies have been smart to outsource the two pain points to improve their shopping experience efficiently.

Ideally, fulfillment partners should have a strong local footprint across Indonesia through hubs/sorting facilities and offer multiple payment options to shorten delivery times and give customers flexibility.

Ramadan retail takeaways

During this period, retailers, brands, companies, social merchants are all vying for the same consumers making competition fierce. Everyone is spending more in hopes to catch more customers.

Because not every company has million dollar budgets to burn, marketers have to be smart with their spend and the first step is understanding consumer habits and preferences.

If you’ve been in Thailand and toured its popular landmarks, it’s most likely you have passed by a store packed with Thais and tourists alike buying bags and bags of…well, bags. Crowded stores filled with unmistakable colorful patterns distinguish NaRaYa from other locally produced labels and its popularity among Chinese, Japanese and South Korean tourists speaks volumes.

The famous brand can be found at over 20 domestic stores scattered around Thailand and 13 international branches and after 30 years in the retail business, shoppers can finally go online to buy NaRaYa products.

ecommerceIQ sits down with the decision makers at Narai Intertrade Co,. Ltd. to understand what plans they have for 2018 and what their definition of successful retail is.

Obstacles to a fruitful online journey

For a brand that has enjoyed immense popularity among women in Asia across all age groups, it seems the company is actually late to the retail game given the prevalence of ecommerce in Southeast Asia.

A few factors explain why it took NaRaYa so long to finally focus on digital.

Narai Intertrade Co,.Ltd., the parent company of NaRaYa, is a family owned business established in 1989 and is the manufacturer, distributor and official retailer of its own brand, making the supply chain a tangled web of complexities.

But a common obstacle that keeps manufacturers and distributors from going direct to consumer is channel conflict. By selling online, the brand would be competing directly with its partners in other markets.

“Initially, we wanted to focus on selling traditionally in our physical stores, and on being a wholesaler for our overseas partners,” shares Mrs. Wasna Lathouras, President of Narai Intertrade Co.,Ltd.

“Doing ecommerce would mean cannibalizing our partners.”

“If you notice on our website, you will be directed to the online websites of our overseas partners such as in Japan. If we were to go online, our cost would definitely be cheaper but reduce the opportunity of our partners to market and sell our products in their local markets.”

So how did they get around upsetting current partners?

Simple.

“We launch ecommerce in markets where none of our dealers exist.”

Channel conflict aside, the owners share a few factors that drove them to tilt the scales in favor of ecommerce. One, it was hard for the company to ignore the pressure to sell online, especially as the executives took to social listening to understand the needs of its customers.

“We have really high demand for our products from customers that don’t live in major cities in Thailand. Being online, everyone with a mobile phone can get NaRaYa products in a few days,” says George Hartel, the company’s Chief Operating Officer. “It opens a new market and opportunity for us.”

Two, they found a partner able to handle multi-channel retail and provide enough flexibility to expand across the region when the company was ready.

Left to right: aCommerce Group COO Peter Kopitz, Narai Intertrade Co,.Ltd. President Mrs. Wasna Lathouras, Assistant CEO Mr. Pasin Lathouras, COO Mr. George Hartel

“Both NaRaYa and aCommerce need to grow together. That’s why we need to have our backend and distribution center ready for offline distribution, while aCommerce will take care of the online distribution,” says Mr. Pasin Lathouras, Assistant Chief Executive Officer.

Three, they realized what online could mean for new retail opportunities in the US, India and China markets and expansion even within home market Thailand.

“I would say that 80% [online revenue] will come from overseas, and 20% from Thailand,” shared George. “This is because Thailand is a tourism based country and ecommerce is relatively early in Thailand so primarily people are still shopping offline.”

And four, given their existing footprint, could they reach retail’s pinnacle, omnichannel?

“We are starting an evolution with pure ecommerce in the beginning and in the future, we could roll out an omnichannel experience, for example, tourists can preorder at the airport and deliver to hotels.”

But George is very clear in stating: “We are not substituting offline with online.”

NaRaYa offline also gets a makeover

The evolution of retail isn’t a sign that companies should close down shop and open webstores. What the headlines and trends instead point to are the expectations of a new shopper generation.

What factors will nudge Thais to spend their newfound middle-class income?

Shoppers waiting outside the mall with their bright yellow NaRaYa shopping bags.

Part of creating a wholesome and attractive brand is greatly affected by the user’s sensory engagement in brick and mortar stores. As one loyal NaRaYa shopper put it,

‘Every time I visit NaRaYa, it makes me feel relaxed and free to choose my new bags with quality staff, if you want any help you can talk with them.’

Enter the rise of ‘smart stores’ and new technologies bridging offline and online channels like RFID tags, smart mirrors in change rooms and even robots handing out cards to act as virtual baskets in Sephora’s case.

While Thailand’s commerce industry is not ripe for robots, NaRaYa has plans to heighten its in-store shopper experience.

Mrs. Lathouras shares details of the brand’s newest two-floor flagship store at ICONSIAM, scheduled to open in October of this year and estimated to span 1,450 sqm.

Not only will the flagship introduce four new brands, making a total of seven sub-brands available for long standing fans, it will also incorporate a cafe serving local tea.

The cafe will accommodate customers waiting for friends and family browsing in stores and offer a palatable drink menu suitable for its typical Asian shopper.

The care placed in the customer experience is vital to building any successful business but creating a memorable shopping experience doesn’t come cheap. The company plans to spend up to 2 billion THB ($64M USD) on its distribution channels, existing and new, to not only expand its presence offline but also modernize its traditional brand image.

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New Lalama product line by NaRaYa freshen the brand

“We want to rebrand our look and feel to be less housewives and domestic. We want to look modern and international but remain a luxury affordable brand.”

The company’s soft launch online will be on Lazada Thailand next week and offer an initial 300 SKUs, while the official launch scheduled for May will look to imitate what is seen in physical stores.

“NaRaYa wants global recognition, ultimately. Of course, it is a dream to see NaRaYa in fashion capitals but we are very conservative when it comes to our goals,” closes Mr. Pasin.