What does the FMCG giant Unilever have in common with grocery retailer The Kroger and a luxury watch brand Audemars Piguet?

The answer is Retail-as-a-Service (RaaS).

Unilever worked with JD.com to distribute goods to both online and physical stores in China, while Audemars Piguet launched its pop-up store on WeChat. In the US, food store The Kroger partnered with Microsoft to increase the level of personalization and productivity in their stores.

The term ‘RaaS’ has clamoring over the headlines over the years, but what exactly is Retail-as-a-Service?

What Is Retail-as-a-Service and Why Is It Becoming a Trend?

An analyst from Kantar Retail, Stephen Mader, defines the Retail-as-a-Service model as when “retailers build open platforms and toolkits that enable brands and third-party sellers to connect with shoppers directly through a physical store”.

Having an abundance of data in hands, these retailers bundle up services, customer data, technology, and its expertise to offer brands a service.

The emergence of ecommerce has reduced the in-store retail visits by billions in the US and part of the reason is because the experience offered by a traditional physical store is no longer enough for the savvy consumers. Besides shopping for products, consumers are slowly and surely seeking an experience when they’re out visiting the store.

“Nearly 3,800 stores are expected to close their doors by year’s end, and the brands that do survive will have done so by creating engrossing experiences.”

In order for the brands to maximize the potential of offline stores effectively, they need to provide engaging experiences to keep the consumers hooked. For example, Sephora combined activities that are completely unrelated to making a purchase into its app, while Samsung’s pop-up store was set up to allows consumers test its technology and experience rather than to focus on sale.

The trend also drives the growth of RaaS platform startups that provide an easy, cost-effective solution to brands wanting to launch physical stores.

In the US, a “Retail as-a-Service” startup b8ta has helped retailers such as Macy’s, Lowe’s, and 15 other consumer brands to set up pop-up stores and physical shops, incorporating technologies and cutting-edge gimmicks to traditional physical retailers.

Chicago-based Leap recently secured $3 million in funding to offer an end-to-end service — that ranges from staffing, experiential design, tech integration, and day-to-day operations — to help digital brands to launch a brick-and-mortar store.

Meanwhile, Fourpost is focusing on providing a ready-to-use retail space for digital native brands looking to open a physical store in the US, lowering the barrier of entry in terms of both capital and time. Each of these companies is tackling the problems that usually came with setting up an offline store and elevate the consumer experience.

“If you shop in one of our stores, you will feel different because we have gone to such a great length to remove the idea of your visit being about buying a product.” – Vibhu Norby, the co-founder and CEO of b8ta.

With over 70 locations, B8ta’s store allows brands to place their merchants and train shop assistants while gaining revenue from space rental and subscription fees from brands; Retail Dive

JD.com spurns the growth of RaaS in Asia

Chinese ecommerce giant JD.com is a big advocate of the strategy.

One of JD.com’s latest initiative to establish RaaS is the partnership with Chinese retailer Better Life. JD.com was also one of the first retailers to develop a mini ecommerce program on WeChat. To date, JD.com has developed and bundled up its marketing, logistics, financial services, and big data as a service and leverage these capabilities to help over 2,000 brands and its merchants.

JD.com also partnered with Google to develop next-generation retail infrastructure solutions by combining JD.com’s supply chain and logistics expertise and Google’s technology strengths.

All of these were the result of JD.com’s mission to go forward by scaling its technology in order to outsource its developments to third-party retailers around the world. Chen Zhang, Chief Technology Officer at JD.com says that making money is not their priority at this stage as he believes that:

“With Scalability, comes profit”

Taking the burgeoning amount of investment coming from China to the region into consideration, it’s only a matter of time for RaaS to kick off in Southeast Asia.

In Indonesia, JD.com has already started the concept on its unmanned store JD.ID X Mart. The store collected data that can be used to understand shopping behavior and optimize inventory, product displays, and other aspects of store management and marketing.

With JD.com’s joint-venture in Thailand, it’s fair to assume that the market will be the next destination for the innovation. And although Alibaba’s Lazada has been quiet on the front, looking at the fierce competition between the companies in the mainland, it seems like a matter of time until Alibaba does so.

Inside JD.ID X Mart in Indonesia. It is JD.com’s first unmanned store outside of China and it is a demonstration of JD.com’s mission to implement RaaS; Pandaily

With the ‘offline is the new online’ trend carried over to 2019, we can expect to see more traditional retailers offering their service and retail space to help online brands expanding their reach and getting more foot traffic in return.

A win-win strategy for the ever-changing landscape of retail.

Chinese ecommerce platform JD is lesser known amongst international audiences, but its mid-annual 618 shopping festival generated almost $25 billion in gross merchandise value this past June. The company has a 33% share of China’s B2C ecommerce market and generates more direct revenues than Alibaba. Google’s latest $550 million strategic investment in the company is the latest in a series of partnerships JD has orchestrated, as it seeks to challenge Alibaba and Amazon for ecommerce dominance in both China and the rest of the world.

JD’s Direct Retailing Model Gives it a Strong Competitive Advantage

JD’s business model is distinct from that of Alibaba’s in that it is a direct retailer – meaning that it purchases inventory wholesale and sells products directly to individual customers, rather than simply acting as an intermediary between buyers and sellers. Approximately 92% of its business comes from direct sales, whereas for Amazon this figure hovers around 50%.

JD stocks its own inventory in its vast proprietary network of nearly 500 warehouses across China, each of which is situated strategically close to consumers to ensure fast delivery. JD also employs an in-house delivery force of over 65,000 warehousing and delivery workers. During the 618 festival this year, JD was able to deliver 90% of its goods within two days.

This dedication to customer service requires a significant amount of capital to sustain, but JD has been able to stand out from its competitors.

JD claws its way up to a 33% market share in an industry where Alibaba was previously thought to be unbeatable.

Richard Liu, CEO of JD.com delivering goods during their ‘618’ Mid Year Sales Source: Internet

The Borderless Retail Alliance

To compete with Alibaba, JD has enlisted the help of numerous partners. In China, this includes internet giants Tencent and Baidu, in addition to its partnerships with the likes of vertical-focused ecommerce platforms Vipshop and Meili Inc. Tencent owns 18% of JD’s shares and partnered with JD to invest $864 million in China’s third largest ecommerce platform Vipshop this past December. JD made its claim to fame by selling electronics to a predominantly male user base, and such partnerships with Vipshop and Meili, both of which sell a combination of apparel and cosmetics, help the company appeal to a broader female base.

America’s largest retailer Wal-Mart owns 10% of JD’s shares and has been a strategic partner since 2016 when it first sold its ecommerce division Yihaodian to JD Google, despite having a limited presence in the China market, announced a $550 million investment in JD this past June. Both of these strategic partnerships will be key as JD prepares to expand its business overseas.

Google’s Data Will Help JD Catch Up Overseas

Ecommerce platforms such as JD spend an enormous amount of money on search ads every year, to ensure that their products show up in search results. As they grow bigger, however, internet users can go directly to ecommerce platforms to search for products, which presents a threat to Baidu’s and Google’s search ads business. Partnering with JD allows Google to hedge against this problem.

Google’s extensive ecommerce data can give JD better insights into the buying behavior of users, and JD will have a better idea of how to target users via Google’s broad ads network. This will be a significant asset as it attempts to catch up with local competitors in Southeast Asia, Europe, and the US.

Wal-Mart and JD Make the Perfect Couple

US retail giant Wal-Mart has been partners with JD since 2016 when it sold its online business Yihaodian to JD in exchange for a 5% equity stake worth $1.5 billion. That stake has since grown to 10%. In China, Wal-Mart leverages JD’s marketplace and users to sell directly to Chinese consumers online, complementing its offline business in the country. For JD, Wal-Mart is a key supplier for the JD Daojia platform, which is an on-demand delivery service that delivers groceries to customers within a one-hour time frame.

JD also sells its goods offline in Wal-Mart stores and uses them as distribution centers from which last-mile delivery can be carried out. Since JD is an online retailer without many offline retail stores, the addition of Wal-Mart’s physical locations across China is a considerable asset as it looks to expand its user base via omnichannel marketing strategies. JD is planning to expand to the US market by the end of this year, and the potential expansion of this partnership model means that JD may have a chance to catch up with Amazon, especially since the two can leverage economies of scale and source goods in bulk.

JD Dao Jia partnered with Wal-Mart on sales promotion Source: Internet

JD Goes Global

With an impressive set of partnerships under its belt, JD has the capability to challenge Alibaba and, potentially Amazon, on the global stage. JD has already set up international ecommerce site Joybuy in Spain this year and is looking to expand to Germany. JD has also launched local websites in Thailand and Indonesia under the JD brand. JD has publicly announced its intention to enter the US market by the end of 2018, with a beachhead office located in Los Angeles. The company plans to undercut its competitors and also help Chinese brands like Xiaomi expand to the US.

While it is still early stages, what is certain is that JD’s global expansion will be very interesting to watch going forward.

Written by Don Zhao, Co-founder and Executive Director of Azoya 

 

I put out a survey two weeks back about ecommerce enablers to find out the sentiment towards these companies in ASEAN, if brands actually use them (why or why not), and areas where they believed partners could improve.

The answers I received were not what I expected.

60 percent of respondents reported using an “ecommerce enabler”, but given their answers, most didn’t understand the difference between a marketplace and an enabler.

ecommerceIQ

Very simply put, ecommerce enablers are service providers that help a brand execute its digital strategy through a one-stop solution. This solution encompasses content production, web platform optimization, performance marketing, technology to integrate all digital channels, all the way to customer care, fulfillment and/or delivering it to the end customer’s doorstep.

Ecommerce enablers provide a client with whatever it takes to sell successfully online.

Popular examples in Southeast Asia include: aCommerce, iCommerce, etc.

Lazada, Shopee, 11street are not ecommerce enablers, they are the platforms for businesses to sell on. Sure, they might lend a brand an account manager who periodically checks in but their goal is to push for lower product prices and exclusive channel promotions.

The marketplace is neither charging the business for this service or providing special treatment – if a better performing merchant comes along, it catches you later.

This is why Alibaba’s Tmall has its own list of Tmall Partners – specialised agencies that build functional stores for businesses on the Tmall platform. Tmall itself is not the enabler.

The same goes for marketing platforms such as MailChimp, payment gateways like Paypal and delivery companies like Kerry Express or NinjaVan – they may not be ecommerce enablers but they are important pieces of the ecommerce supply chain.

This distinction is vital to the growth of ecommerce in Southeast Asia, especially as most global brands – Samsung, Unilever, L’Oreal, etc. – are choosing to outsource their ecommerce BUs to other experts.

Why? Because inhouse teams aren’t sure how to structure themselves. Over 65 percent of global marketers feel teams are “somewhat integrated” or “broken out by channel”. For ecommerce to work, Marketing needs to align with Sales, and Service.

 

ecommerceIQ

But ecommerce isn’t a magical band-aid capable of fixing all problems – especially not corporate silos.

Aื FMCG industry leader recently asked me, “what is something you would do to improve my brand’s digital strategy?”

My reply?

“Establish internally what the business wants from ecommerce, who’s in charge of this division and the resources the business is willing to dedicate before even bothering to bring on an enabler. Without internal alignment, it becomes one inefficient mess and everyone ends up pulling hair.”

After working with some of the world’s top brands – Unilever, Microsoft, Reckitt Benckiser, Payless, Samsung – I’ve been fortunate enough to see how these well-oiled machines function and why it doesn’t necessarily work for ecommerce.

The beauty of digital is that it’s instantaneous, which is the complete opposite of how decisions are made in these enormous corporations. It’s new, it’s disruptive.

Online moves quickly and requires constant care because a store that never sleeps means inventory, pricing, recommendations, customer support need to be up to date 24/7. It gets even more complicated when the ecommerce enabler needs to manage a brand.com and a marketplace shop-in-shop (SIS).

What often gets overlooked by brands is the shift in power.

Dangling more visibility over the thousands of grey market and official sellers on its site, a marketplace will push aggressively for more deals, more exclusivity, more vouchers, now, now, yesterday, while the brand pushes back with the same tenacity, touting “channel conflict”, and scrambling to squeeze funds from other departments.

The brand finally ends up throwing paperwork at the problem two weeks past the deadline.

Who wins?

No one.

Certainly not the enabler.

How is it in 2018, we still don’t know how to do ecommerce?

As a marketplace, its job is to offer the best deals and shopping experience to customers to grab market share. It does this by subsidizing prices, and by nudging its merchants to sell more and offer exclusives.

As a brand, its job is to sell to as many customers as possible, keep its distributors civil, maintain brand consistency across channels and mitigate the amount of friction between departments. It does this by offering the same promotions to each channel partner, allocating resources in a democratic fashion and following processes to a tee.

As an ecommerce enabler, its job is to work with its client and ecommerce partners (marketplace, 3PL, payment gateways, etc.) to increase GMV by optimizing digital channels. It does this by executing on behalf of the brand a strong digital strategy, which sometimes means bartering with the marketplace for more visibility for its clients.

Ecommerce enablers are by far nowhere near perfect. Imagine a marriage counsellor trying to find compromise between two hot-headed and egotistic partners refusing to budge but still looking to have a long term relationship.

Oh, and sessions aren’t once a week, it’s an uphill climb everyday. This respondent hit it on the head when describing what they did not like about its enabler.

“Not mature business yet.”

While the concept of ecommerce is not new in the world, the execution, talent and best practices are still nascent in Southeast Asia.

Customers in APAC need education on ecommerce, a company’s ecommerce team in APAC needs education on how to work with other departments, and marketplaces in APAC are still figuring out how to be more like Alibaba and Amazon, two companies with over 10 years operating experience.

An ecommerce enabler is supposed to have all the answers. While a challenge to take on, especially in Southeast Asia, it’s a hot business with a lot to gain, and probably why ecommerce enablers have popped up all over Southeast Asia and India.

And it’s been somewhat positive for respondents using an enabler as majority would recommend it to a friend or colleague.

“Getting an ecommerce enabler should definitely be considered, regardless of what stage a business who wants or is doing ecommerce is in.”

“Allows me to focus on my core business capability and rest assured online segment is still moving along.”

ecommerceIQ

Now what?

Now that the distinction has been made between a marketplace, a payment gateway, a marketing tool and an ecommerce enabler who ties them all together, a business needs to decide whether it needs marriage counselling.

Is it more cost effective to invest and build a team to manage digital channels inhouse or outsource it to a third-party partner? The survey respondents listed reasons why they work with an enabler:

“Aligned with brand principal interest and cost effective”
“Short time to market, revenue growth”
“Strong communications, effective operations”

Now you’ve identified you need one, how do you choose an ecommerce enabler?

  • Assess the experience of its leaders – do they have a strong track record in high-performing digital businesses?
  • Assess the existing clientele – are you in a similar tier/size/industry?
  • Assess the company’s own digital footprint – their performance marketing will be telling of the performance marketing they do for you
  • Assess the scope of work – is the enabler incentivized to sell more for your business?

And now take a look at your own business and decide whether it’s ready to commit to ecommerce. Is there an efficient approval process in place for resource allocation and commercial sign off for digital channels? Is there a C-level stakeholder responsible for P&L?

If not, time to move fast because in the digital world, it’s either give all or risk losing a lot.

 

Want to build an ecommerce strategy in Southeast Asia or speak to an enabler? Send an email to hello@ecommerceIQ.asia or fill out the contact form below





    On June 28, 2018, Alibaba announced the launch of Taobao Xinxuan (淘宝心选), which translates to ‘Taobao Selected’. After a year in alpha testing, the company’s new concept is finally available to the wider public.

    Through the website or one of two physical stores in Hangzhou and Shanghai, users can shop for affordable quality lifestyle and functional daily necessity goods including home fragrance, smart power sockets, underwear, and sonic-control toothbrushes.

    ecommerceIQ

    Rimowa?

    According to TechNode, the recently opened store in Shanghai was raided and emptied by eager customers in a mere two hours.

    What is Taobao Xinxuan?

    Appearance wise, the Taobao Xinxuan concept will remind many of Japanese retailer Muji, whose clean and simplistic stores offer a wide range of quality and affordable clothing, stationery, bags, and even furniture.

    ecommerceIQ

    Taobao Xinxuan Store Concept Design

    From a business model perspective, Taobao Xinxuan is actually more like Xiaomi, the smartphone-manufacturer-turned-global-electronics brand. Its Manufacturer-to-Consumer (M2C) approach and short supply chain allows the company to quickly go from the latest consumer insights to manufacturers to create products and achieve go-to-market in a few months.

    ecommerceIQ

    Xiaomi Flagship Store in Shanghai

    ecommerceIQ

    Xiaomi Flagship Store in Shanghai

    Arguably, Taobao Xinxuan could be considered a clone of the M2C ecommerce platform launched by Chinese gaming company NetEase called Yanxuan. Since its release in 2016, Yanxuan has seen rapid growth in a unique vertical that avoids direct competition with Alibaba and JD.com.

    The Yanxuan model can be described as an ODM (Original Design Manufacturer) model as well. By going directly to Chinese manufacturers creating products for established global brands, NetEase is able to get the same quality while selling at a much lower price by skipping over distributors.

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    NetEase’s Yanxuan website

    By targeting young, mainly urban consumers who value quality and design but are also price sensitive, Yanxuan has been able to achieve rapid growth in the Chinese ecommerce space. The company reached a monthly GMV (gross merchandise volume) of RMB 60 million (about US$9 million) by Q3 2016, only a few months after its initial launch. This allowed Yanxuan to break into the list of top 10 Chinese ecommerce platforms based on GMV.

    ecommerceIQ

    Yanxuan Home & Living Category

    Alibaba’s New Trojan Horse?

    For a business to execute the M2C model well, it needs to understand what consumers want and then act on it swiftly. Considered the pioneer in M2C in China, Xiaomi is well known for asking its users directly what they’d like to see in terms of new features and products.

    Another company that knows what its users want is – surprise, surprise – Alibaba. Being the largest ecommerce company in China, Alibaba has extensive data on what brands and products people are buying and when and where. This doesn’t even include the additional data it gathers through its other businesses Ant Financial, Ali Health, and its offline Hema supermarkets and ‘New Retail’ initiatives.

    Alibaba’s US counterpart Amazon hasn’t shied-away from using its data to introduce its own private label brands to compete directly with the other brands selling on its platform.

    “The company now has roughly 100 private label brands for sale on its huge online marketplace, of which more than five dozen have been introduced in the past year alone. But few of those are sold under the Amazon brand. Instead, they have been given a variety of anodyne, disposable names like Spotted Zebra (kids clothes), Good Brief (men’s underwear), Wag (dog food) and Rivet (home furnishings).”

    New York Times, ‘How Amazon Steers Shoppers to Its Own Products’

    And this move by Amazon isn’t a small pilot project. Amazon private labels have a large impact on revenue:

    “The results were stunning. In just a few years, AmazonBasics had grabbed nearly a third of the online market for batteries, outselling both Energizer and Duracell on its site.”

    Amazon’s home court advantage gives it a leg up versus other brands:

    “Take word searches. About 70 percent of the word searches done on Amazon’s search browser are for generic goods. That means consumers are typing in “men’s underwear” or “running shoes” rather than asking, specifically, for Hanes or Nike.

    For Amazon, those word searches by consumers allow it to put its private-label products in front of the consumer and make sure they appear quickly. In addition, Amazon has the emails of the consumers who performed searches on its site and can email them directly or use pop-up ads on other websites to direct those consumers back to Amazon’s marketplace.”

    Alibaba has been flying under the radar with regards to any private label initiatives, and for good reason. Unlike Amazon, which started out as a retailer buying and selling products, Alibaba’s Taobao and Tmall properties are pure marketplace plays from the beginning. Because Alibaba’s main goal is helping connect merchants and buyers via its platforms, a neutral stance is essential to the platform’s success.

    It’s not surprising then that Alibaba decided to launch Xinxuan as ‘Taobao Xinxuan’ rather than ‘Tmall Xinxuan’. Originally a part of Taobao, Tmall spun off to provide a more premium B2B2C marketplace for authentic brands to sell their products online. Mixing in Xinxuan’s private label products would only upset brands competing in similar product categories.

    Lazada’s LazMall a stepping stone towards introducing Lazada private label in Southeast Asia?

    Last week, Lazada officially launched LazMall, its Southeast Asian version of Tmall. It’s a move towards splitting Lazada (‘b-to-C’) and LazMall (‘B-to-c’) and aims to offer a premium place for big brands to sell online, away from the grey market sellers on the platform.

    ecommerceIQ

    From the outside, this looks like an obvious move against JD, known to offer a better customer experience according to our recent Indonesia online marketplace survey.

    However, seeing Alibaba’s new concept in China with Taobao Xinxuan, it’s not far-fetched the LazMall spin-off will lead to Lazada M2C private label brands in the near future.

    The Chinese ecommerce market, being about 10 years ahead of the Southeast Asian one, acts like a crystal ball for brands operating in our region. Battle-tested brands with operations in China know better to diversify their channels before putting all their eggs into a single basket.

    Southeast Asian-native brands are recommended to shake off their naivety and learn from China’s history.

    Monogamy in ecommerce does not lead to happiness.

    The importance of Islamic financing

    Indonesia is the world’s most populous Muslim nation – out of the 260 million people living in the country, 87 percent identify as Muslim. But the country remains a laggard when it comes to developing a robust finance industry.

    One of the factors contributing to the slow growth of inclusive economic development is lack of Islamic financing.

    What is Islamic finance and how does it differ from conventional practices?

    The main difference between Islamic and conventional finance is the treatment of risk, and how risk is shared. In a conventional loan, the financier has a contractual right to receive interest (and capital repayment) irrespective of the condition of the borrowers’ business.

    The main principles of Islamic Finance is the avoidance of all haram (harmful) activities such as charging interest. Islamic financial institutions must ensure that ambiguity (gharar) or gambling/speculation (maysair) is minimised in transactions and contracts. Complying with Shariah law also means these Institutions are not permitted to invest in alcohol, pork, pornography or gambling. – Financial Times

    Promoting risk-sharing instead of debt-financing, reduces poverty and inequalities, which are the necessary objectives that need to be addressed by economic development policy makers. – Journal of Business & Financial Affairs

    Indonesia has long been a contestant to become a global hub for Islamic financing, and created a road map for its development since 2017. The government believes Islamic finance will be an engine of stability and drive financial inclusion. Both Muslims and non-Muslims can benefit from Islamic Finance as it aims, by principle, to be a more transparent system of finance.

    The risk-sharing features in Islamic financings also help ensure the soundness of individual financial institutions and discourage the types of lending booms and real estate bubbles commonly seen as precursors to the global financial crisis.

    By focusing on asset-backed and shared-risk principles, Islamic financing has the potential to persuade more financing by small and medium sized enterprises (SMEs) to kick start their businesses. With so many beneficial qualities, it seems strange Islamic financing isn’t more widespread in the country, why is that? Without the right financial literacy, people are reluctant to shift from conventional financing.

    Lack of Islamic finance in Indonesia

    The establishment of Islamic banks in Indonesia 25 years ago is considered late compared to other Muslim-majority countries such as the Philippines (in 1973) and Malaysia (in 1983).

    Indonesian authorities were reluctant to support it for a long time because the country was colonized by Dutch adopted Western-led financial institutions that dominated international finance since the end of World War II.
    But after the global financial crisis in 1998, Indonesia was keen to find alternatives to broaden its financial base and better protect itself from global financial shock.

    Indonesia’s President Joko Widodo (Jokowi) put together the National Committee for Sharia Finance (KNKS) in 2017 to boost Islamic finance and tackle the challenges surrounding Shariah banking in the country.

    And while Shariah banking assets continued to increase in 2017, amounting to IDR 435 trillion (US$32.2 billion), or about 5.8 percent of total assets of Indonesian banks – up from 4.83 percent in 2015 – it was still small compared to Saudi Arabia’s 51.1 percent, Malaysia’s 23.8 percent, and the United Arab Emirates’ 19.6 percent.

    The adoption of Islamic finance is also in line with government initiatives working to address barriers to SME growth, such as limited access to finance, which is frequently cited as a problem for smaller firms that lack sufficient collateral for loans.

    In the last five years, SMEs have played a large role in Indonesia’s economic structure. Last year, SMEs accounted for 60.3 percent of the total GDP from 57.84 percent in 2012.The Governor of Bank Indonesia Agus Martowardojo hopes the role of SMEs to GDP can increase to 70 percent by this year.

    A new early stage fintech startup hopes to help the government achieve their ambitious goal. Ex-bankers and friends Bembi Juniar, Dima Djani, and Harza Sandityo created Alami to boost Shariah financing and focus on educating SMEs about its benefits.

    “Alami is a technology company that aims to facilitate small businesses to obtain Islamic financing from banks. It will accommodate Shariah financing, filter and provide accurate ratings for prospective borrowers and facilitate communication between banks and prospective borrowers,” explains Dima.

    “I hope through the technological advancement that we offer, we will speed up Shariah banking processes and increase efficiently by at least 50 percent.”

    Popularising Islamic-based finance in an unbanked country

    Alami was founded in December 2017 and was the runner-up start up in the INSEAD Venture Competition held in Singapore and Paris. The company has raised at least US$100,000 in pre-seed funding round from undisclosed angel investors.

    Bembi Juniar, Dima Djani, and Harza Sandityo the founders of Alami Shariah

    Dima Djani, one of the founders of Alami, shares with ecommerceIQ that the lack of infrastructure, lack of support from key opinion leaders, and lack of education on Shariah finance are main roadblocks to the country’s slow adoption of Islamic financing.

    “People don’t learn about this at school, and we believe technology is needed to spread the benefits of Shariah finance,” says Dima.

    “Me and two other founders are young professionals with banking backgrounds. We create technology to simplify the loan process for SMEs to get financing and for bankers to easily focus on SMEs,” says Dima.

    “Fintech is a strategic opportunity for Shariah finances to expand their market segment,” Financial Service Authority chief Wimboh Santoso said as quoted on CNN Indonesia.

    The startup positions itself as a strategic partner to the few existing Islamic banks, not as a direct competitor and has already partnered with three prominent Islamic financial institutions: BNI Syariah, Bank Mega Syariah and Jamkrindo Syariah, with a total transaction value of IDR 9 billion and IDR 50 billion.

    “The most common deals SMEs need money for is working capital to expand, either through trade finance or plain working capital financing and they are coming from the chemical and construction industries,” shares Dima.

    How does Alami services work?

    There are two simple steps SMEs need to follow to use Alami’s service:

    1. .SMEs register and fill out a form on Alami’s website – data to be shared includes corporate and some historical financial information
    2. The system assigns a rating indicating the SMEs risk and matches the business to Alami’s bank partners

    According to Dima, Alami is an abbreviation of Alif-Laam-Meem, the first sentence of the second Surah or chapter of the Al-Quran (the meaning which only God knows according to Muslims).

    But philosophically for Dima and his two other founders, Alami means to motor Islamic finance 2.0 in Indonesia.

    “We see Alami as the second chapter trying to improve the Islamic finance sector in Indonesia through technology, creating value for our partners and being a unique Islamic-based fintech startup,” Dima elaborates.

    “It is thought that wealth should be created through legitimate trade in assets,” – Dima, co-founder of Alamai

    In Indonesia, there are other Shariah-based financing platform such as Cermati and CekAja, but these platforms focus on individual loans, not on SME financing.

    What’s next for Islamic financing in Indonesia?

    The startup announced its collaboration with Kapital Boost, the Singapore-based Shariah-compliant crowdfunding platform for SMEs to address the lack of financing available to SMEs in Indonesia earlier this year.

    Under the partnership, Alami will leverage its SME network in Indonesia to direct businesses to Kapital Boost, who will facilitate fundraising and financing from global investors.

    “We believe SMEs are a huge economic contributor for Indonesia and by helping them to grow, we are impacting positively on Indonesia’s economy,” shares Dima. “That’s our aim.”

    “Our plan is to be one stop solution for Shariah finance in Indonesia, we are committed to popularizing Islamic finance in Indonesia and work hard to create easy to use technology for both SMEs and our bank partners,” says Dima.

    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