The number of small and medium enterprises (SMEs) is surging in Southeast Asia. Not only are they a major contributor to the GDP of ASEAN’s economies, but they are also responsible for creating and sustaining employment.

Based on the Directory of Outstanding ASEAN SMEs 2015, it was estimated that there are more than 62 million SMEs in ASEAN’s emerging countries, which includes micro enterprises in Indonesia and the Philippines.

It is not surprising given the massive impact of SMEs on the local economy that policy makers are paying a lot of attention to helping SMEs grow. UNESCAP’s report on SMEs in Asia and The Pacific defined a matrix of SME development by the policy makers in 5 different groups:

  1. Training and information: such as vocational training for employees
  2. Financial services:  such as micro-loans, venture capital
  3. Support structures: such as B2B portals and e-business platforms
  4. Policy advocacy: such as government procurement, taxation
  5. Capacity building: for all the stakeholders

While four of the above have been in place for decades, one group is relatively new: B2B portals and e-business platforms. Thanks to the internet, support for the growth of a SME business is now at a whole different level: faster, scalable, and more efficient using a B2B ecommerce platform.

It’s never been easy to trickle down a concept into execution, especially in emerging markets with its unique challenges and opportunities. Take Indonesia for example, with a significant share of SMEs across the region, creating a workable model there will mean a greater chance of replication in neighboring emerging markets.

Bizzy Case Study: SME To B2B Ecommerce, Concept To Execution

Bizzy is one of the leading B2B ecommerce platforms in Indonesia that focuses solely on B2B ecommerce and has become one of the pioneers in educating Indonesian SMEs on how to procure online. Founded in 2015, the platform is backed by both regional and local ventures: Ardent Capital, Sinarmas Digital Venture, and Maloekoe Ventures.

By identifying the top two challenges for doing B2B ecommerce in a leading emerging market like Indonesia, it is easier to see how these challenges are very much related to how multiple segments of customers behave differently and how businesses can overcome them.

Challenge #1: Small Enterprises Reach a ‘Demand Planning’ Dilemma

In emerging markets, micro and small businesses are big fans of “just-in-time inventory”. They rely on a petty cash system to procure their supplies in nearby convenient stores or groceries by cash or personal reimbursement.

There is no rigorous demand planning in this segment. When the copy paper is out of stock, they will go to the nearest stores to buy one pack; no more no less.

In contrast, the concept of B2B ecommerce platforms for this segment suggests a demand planning concept because of two key reasons. First, B2B ecommerce will need a service level agreement (SLA) to fulfill the order, not ‘just-in-time’ or ‘walking distance travel time’ as with convenience stores or groceries.

Second, B2B online procurement expects bulk or higher quantity order levels; not a single unit purchase in the case of B2C. SMEs would be required to create a step-by-step plan in advance, in order to make accurate predictions of which office supplies to buy.

Challenge #2: A Medium Enterprise Encounters Procurement-Supplier Relationship Disruption

A good “traditional supplier” will find a way to be the preferred supplier with negotiated rate cards to their medium enterprise customers. The effort is purely a journey of relationship management over many years. Preferred “traditional suppliers” have a great human relationship with the procurement department.

B2B ecommerce sales also work best at the C level where quantifiable savings, efficiency, transparency, and the increase of productivity pitches will hit the nail on the head. C levels understand the power and obvious benefits of online, strategic sourcing, and market place.

Virtually, any SKU is available at the tap of a fingertip, and more importantly, there is no secrecy on pricing as the internet will give several comparisons. The only fluid piece is the cost of finance for term of payment and the delivery cost if the goods are not sent from the domestic area.

When the “let’s try B2B ecommerce and e-procurement” message is sent to the procurement department from the top level, it will disrupt the existing procurement process, and specifically, disrupt the procurement-supplier existing established relationship that has been built for years with preferred suppliers.

The immediate voice of insecurity will come from the preferred suppliers. This is simply because the B2B ecommerce platform will give access to virtually unlimited SKUs and virtually unlimited vendors with (mostly) more cost effective pricing. In some cases, the feeling of insecurity is also transferred to the procurement department because technology creates more efficiency and likely less human intervention is needed, hereby disrupting the traditional system.

The B2B online platform could be seen as a clear and present danger by the ‘traditional procurement’ process.

This situation could bring a risk to the adoption of a B2B platform as it will take a longer time. It needs to resolve the relationship disruption effect that a disruptive technology brings to the equation.

Bizzy’s “Tier Pricing” Solves the Small Enterprise Challenge

To educate small businesses to start using the 21st century online procurement system and move away from “traditional procurement”, internet-first B2B platforms like Bizzy and Mbiz would need to provide a value unit that is perceived higher compared to the ‘just in time’ supplies concept from the nearest convenience store or groceries.

To address some of the aforementioned challenges, Bizzy for example has introduced a “tier-pricing” system that creates a value unit to compete with the traditional way of how small businesses procure products. Tiered pricing gives an upfront discount based on the tier volume. The tiered-price approach is the first and the only in Indonesia today (see picture below).

bizzy b2b

Small businesses can easily see the difference between buying a product, like glue, in small quantities or buying a larger quantity online from Bizzy with an upfront discounted price based on a periodic basis (aka demand planning).

The benefits of consolidated procurement and demand planning of supplies will also give more predictability of spending ahead of time for small businesses.

Buying from a B2B platform like Bizzy will also give them a tax refund as they register their tax ID to the system. If supplies are bought through retail stores, tax ID is not always an option for purchases.  

Bizzy’s ‘Select’ Solves the Medium Enterprise Challenge

It is super important for Bizzy in its sales motion to not position the offering for medium businesses as a “new supplier” who will compete with the existing preferred suppliers and create potential friction within the internal procurement department.

Rather, Bizzy should be seen as a “platform” that serves both internal procurement department and their preferred suppliers.

Recently, Bizzy introduced Bizzy Select as a unique platform for Medium Enterprise customers.

What is Bizzy Select?

  • A personalized e-procurement platform with e-catalog for medium enterprise customers
  • Customers can build their own e-catalog based on needs and Bizzy can onboard existing preferred suppliers to fulfill the requirements.

 

bizzy b2b

For the existing suppliers, onboarding to Bizzy Select will also give them access to new business customers to scale. These customers will have access to an e-Catalog with a virtually unlimited amount of SKUs as well as connection to a much broader list of other suppliers to anticipate both existing and the new needs.

In this mutually beneficial situation, moving both customers and “traditional suppliers” from the “traditional procurement” process to a more strategic procurement process is now doable.

The majority of medium sized businesses have not yet adopted ERP solutions, especially for procurement systems.

The offering of Bizzy Select, which includes approval flow, budgeting, e-quotation, shipment tracking, analytic dashboard, etc., is a compelling tool for medium businesses as they will instantly gain access into e-procurement without additional investment.

The Path forward

All the factors that contribute to the tipping point of B2B ecommerce are already apparent. The adoption of broadband – thanks to the aggressive smartphone penetration – means that consumers are already educated with the B2C and C2C buying-selling processes.

The large, addressable market of SMEs means that B2B ecommerce growth in Indonesia, and most likely other emerging markets in the region, is solid and bullish. The transformation of traditional procurement into strategic procurement for SMEs is happening today.

Now it’s the matter of the players such as Bizzy to switch paper based procurers into paperless.

by Hermawan Sutanto, Chief Commercial Officer at Bizzy Indonesia

In a recent study by McKinsey, Southeast Asia was identified as one of the fastest growing economies in the world with a combined Gross Domestic Product of $2.4 trillion. Southeast Asia is also home to a rapidly growing population of active internet users who are starting to use the internet to research products and shop online.

With an increasingly tech-savvy population used to conveniences offered by ecommerce in their everyday lives, it is only expected that this will influence ecommerce adoption for B2B sales. Decisions for companies are ultimately made by individuals.

And B2B sales are currently anything but convenient. A supplier selling electronics wholesale may have orders coming in from sales representatives by phone call, email, or even physical mail and fax. The difficulty of consolidating B2B orders from a variety of sources have been creating headache since 2001, as according to Richard Jacobson, ex-B2B Internet Research Manager of IDC Asia Pacific, “the biggest driver of B2B adoption is the lowering of administrative costs for buying and selling activities.”

In fact, the opportunities and benefits of B2B ecommerce in Southeast Asia have not gone unnoticed: Singapore Press Holdings is tying up with Industrial and Commercial Bank of China (ICBC) to develop the region’s first bilingual B2B ecommerce platform to enhance cross-border trade between China and Southeast Asia. While UOB is reported to launch a B2B marketplace in the first quarter of 2017.

However, since these partnerships are still in the early stages, businesses won’t have an easy option for a while.

If you are running a B2B business in Southeast Asia and have been through the hassle of consolidating orders across a range of sources, it might be time to proactively move your wholesale business online.

On one hand, you could apply to sell on a B2B marketplace like Alibaba or Indonetwork or you could choose to set up an ecommerce portal on your own. Both marketplaces and private ecommerce portals have their benefits — it’s just a matter of choosing the B2B channel that best suits the size of your business.

1. For manufacturers and large scale distributors: Alibaba’s B2B marketplace

With US$1.49 billion in revenue coming from Alibaba international B2B marketplace and its portal for China-based buyers and suppliers, the wholesale behemoth is the product source for retailers shopping for everything from motorcycles to cashew nuts. For businesses looking to reach as many prospective buyers as possible, Alibaba may be your B2B channel of choice.

However, it is important to note that Alibaba is best suited for large-scale manufacturers who enjoy economies of scale and do not prioritize strong brand identity.

If you’re selling under a B2B marketplace like Alibaba, visitors will see Alibaba’s branding before they see your brand.

If Alibaba looks like the right fit for you, here are some best practices to keep in mind:

Get a paid membership

Alibaba offers “free” memberships, although the “free” option does comes with a catch. Your items will be ranked last, which makes it difficult for prospective buyers to chance upon your products. You will also be limited to only listing 50 products, and without having the product showcases, verified icons, customization, or the ability to quote for buying requests

 

Compete on other things beside price

With products on Alibaba as cheap as they are, competing on price alone can be difficult for SMBs. After all, the cheaper your products are, the lower your profit margin becomes. Instead of falling into a price war, you can offer faster shipping, or faster response time when it comes to customer service.

 

Ensure your images and descriptions are optimized

Take clear, high-quality product photos to give your buyers a good idea of what they’re paying for. Similarly, providing accurate descriptions of your products that outline all necessary specifications — from material to measurements — to provide potential buyers with everything they need to make an informed purchase.

2. For independent designers and distributors: Private wholesale portals

For B2B sellers who run a distribution business, a marketplace like Alibaba may not be the ideal space for business. Some may have exclusive rights to sell certain products or brands in a specific region, or they are selling items unique to their brand.

If branding is an important part of your business, a private wholesale portal ensures that you can maintain control over how your products are presented to prospective buyers.

There’s a big catch when it comes to private portals. Unlike the added discoverability offered by public marketplaces, wholesaling through your private site means that you’ll have to find alternative ways of driving retailers to your site.

A private B2B portal is suitable for businesses that are either already running a wholesale business or looking for a scalable wholesale B2B option. According to the customer satisfaction survey by TradeGecko, a cloud-based inventory management software company, there are some important areas of consideration when choosing a private B2B portal:

Inventory management

As your business grows, there will be more inventory to manage and having more inventory means it will become increasingly difficult to manage visibility of inventory levels, especially if you decide to open a separate store for wholesale purposes. If this sounds like an area of concern, using a system such as TradeGecko B2B ecommerce ordering platform will give businesses the opportunity to sync the inventory levels of a B2B site with shopping cart platform.

 

Automated notifications

Moving to the cloud also lets you link up different business applications like accounting and fulfillment to deliver better customer experiences through automated notifications that update your customer on the status of their order. By sending updates to your customers every step of the way, you’ll save plenty of time on fielding inquiries.

 

Bulk data import

When new retailers start purchasing, you don’t have to manually enter in all the customer’s data into the system. Instead, you can set up online application forms that enables the bulk import of data — reducing man hours and transcription errors.

This means that next year, whether adding 600 new customers or 6 million new customers, the amount of time spent on data-entry won’t change.

Adopting ecommerce for the B2B side of your business will enable you to stay ahead of the curve as you’ll be making it easy for your buyers to purchase products when they need it. After all, buyers are expecting the immediacy, transparency and accuracy of retail ecommerce to carry over into the B2B world now that it’s well infiltrated the B2C world.

By Vera Lim, Inbound Marketing Manager at TradeGecko

The “O2O2O Solution”, jointly developed by UBM and Alibaba B2B business units, aims to improve the B2B trading experience reports Yahoo Finance.

The partnership includes:

  • Alibaba B2B business units (includes Alibaba.com and 1688.com, the platform for domestic B2B trade in China)
  • UBM, Asia’s leading trade show organizer

What is O2O2O?

The “O2O2O Solution” is targeted at small industrial companies that are looking to expand their businesses beyond their local market, with the partnership facilitating that expansion. In the future, Alibaba will also offer ecommerce integration via Alibaba’s B2B transactions, payment, protection and logistics services for companies that sign up.

Essentially, this partnership will allow Alibaba to consolidate the smaller industrial players in China who are looking for the know-how to expand online.

The ‘O2O2O Solution is expected to reshape the B2B trading experience by integrating the online and offline trading scenes, resulting in unprecedented convenience for buyers to search and contact sellers, arrange meetings and place orders online.

The ‘O2O2O’ Solution will launch at SIGN and LED CHINA events where all participating exhibitors are given online product and company showrooms by Alibaba B2B through the O2O2O Solution System, allowing potential buyers to search and view their listings, contact the exhibitors, and even request a meeting ahead of the event.

“Through our strategic partnership, we have discovered the keys which unlock a greater potential for enabling better trade sourcing through the online and offline world,” says Jime Essink, President and CEO UBM Asia.

It seems that Alibaba is making a move to consolidate the B2B arena in different countries, as seen by the company’s recent partnership with DHL and Dehlivery in India, a move that will reinforce the buyer-seller relationship.

With O2O2O Solution, Alibaba is inching closer to facilitating the entire B2B landscape in China.

A version of this appeared in Yahoo Finance on September 18. Read the rest of the story here.

Ecommerce delivery in Nigeria 2013. Source: Pius Utomi Ekpei — AFP/Getty Images

Ecommerce delivery in Nigeria 2013. Source: Pius Utomi Ekpei — AFP/Getty Images

Excerpts from Fortune.com

Rocket Internet is falling behind its emerging market targets and investors are beginning to doubt its ambitious goal to be the Amazon outside of America. Rocket now has a market capitalization of $3.3 billion, well below the $5.89 billion valuation it put on its portfolio at April 30, and only just above the $3.1 billion in cash held by Rocket and its operating companies as of March 31.  Its African fashion retailer, Jumia, made a loss of $18.8 million in the first three months of 2016 on sales that fell more than a third. The devaluation of Nigeria’s naira last week is a new blow for Jumia.

Its slowdown is the consequence of Rocket’s shift to rein in spending on marketing and logistics as it seeks to stem losses, which it said peaked at $1.1 billion in 2015.

The stock has been on a downward trajectory since peaking in February 2015 after it surprised investors with a new capital hike and shifted strategy to invest in the food-delivery business in developed markets.

The latest share price tumble started in April when Sweden’s Kinnevik, Rocket’s second-biggest shareholder after the Samwer brothers, slashed the valuation for its emerging market fashion websites by two-thirds.

Neil Campling, head of technology research at Northern Trust Securities, who rates the stock a “sell,” doubts the Rocket businesses can replicate Amazon’s success because its markets are so underdeveloped and the cost of logistics so much higher.

“As soon as they reduce marketing, you see revenue growth decline substantially,” he said. “They haven’t got the scale.”

Oliver Samwer says Rocket has more than enough capital to fund its main startups until they turn profitable.

Read the full Fortune article here, published on June 29.