The Background  

In Japan, there is a renowned chain of stores with an iconic penguin-mascot that is a must-see for tourists, serving almost 300 million customers a year. The famous merchandise stores started with humble beginnings offering a collection of discarded goods and samples from companies on the verge of bankruptcy in 1978.

With insufficient resources to hire workers, founder Takao Yasuda spent long nights restocking shelves and took note of the high number of late night shoppers who mistakenly came into his shop thinking it was still open.

Yasuda opened the first 24-hour store Don Quijote (also known as Donki) in 1989. Don Quijote, pronounced ‘dawn kee-ho-tay’, operates with the rare concept of a compressed display in which items are displayed in clusters, causing aisles to feel like mazes.

Browsers can find anything under the sun, from toilet paper, snacks, sex toys to luxury cosmetic brands and pre-loved Rolex watches.

The point of the display is hard to find, hard to take and hard to buy,” — Takao Yasuda, founder of Don Quijote Co.

Mr. Takao Yasuda, standing in front of handwritten cardboard signs and stacked displays in one of his Don Quijote stores. Source: Reuters

Strange to think that any shop owner would want their items to be hard to find but Yasuda’s compressed display is actually a brilliant strategy that led the business to grow to 350 stores in Japan and the US, with annual consolidated sales topping $7.4 billion in Japan.

Shoppers seemed to have taken to the treasure-hunt mentality making the stores a popular destination for tourists visiting Japan.

Japanese retail is built on the concept of saving time. We want our customers to spend more time at our stores,” — says Yasuda

By adopting a unique retail strategy to become a consumer magnet, what could possibly go wrong with Japan’s largest discount store?

The Challenge

Japan has always been among the world’s most loved destinations for travel and culinary experiences but in 2014, the country fell to 22nd as the most-visited destinations. Due to language barriers, foreign tourists contributed to only 3.5% of revenues, generated in major cities like Tokyo and Osaka.


Being a business that relies heavily on revenue generated by tourists who spend on average more than 40,000 yen ($365) each visit, compared with local shoppers’ 2,400 yen, Don Quijote recognized the need to spur the country’s dwindling tourism or be less dependent on it.

But around this time, the Japanese government increased consumption tax from 5% to 8%, sending Japan’s economy into freefall at an annual pace of 6.8% from April to June in 2014.

Despite the decrease of household spending at a worse-than-expected rate of 4.7%, Don Quijote’s sales rose 2.3%.  

But Yasuda knew it wasn’t enough, the company needed to find another stable revenue stream.

The Strategy

The important thing is to create a framework that attracts visitors to Japan, and that requires cooperation that goes beyond one company or industry,” — Yasuda told Reuters

Don Quijote’s strategy to pack its stores with more shoppers was incentives for more spending. The company signed deals with countless hotels and travel agencies to distribute membership cards that offered 3% cash back at Don Quijote.

The largest discount store in Japan was also reportedly behind the Japanese government’s decision to exempt tax for visitors. Starting Oct 1, all Don Quijote stores allow non-residents to shop tax-free nationwide and even pack the goods to follow airline guidelines.  

With emerging technologies and advancements in digital marketing and logistics, it seemed there was no better time to launch ecommerce.

Don Qujote’s online shopping website.

Don Quijote’s online shopping website positioned itself as the number one source for authentic, popular products from Japan straight to your home.

“When it comes to capturing inbound visitors, Don Quijote is unrivaled,” said Ryota Himeno, retail analyst at Barclays.

Although no official sales records from Don Quijote’s ecommerce site were found, an analysis at Barrons predicted that Don Quijote’s “store is immune [to the arrival of Amazon] because its price points are below the minimum break-even points for most ecommerce sites.” 

But its success, whether from online or offline stores, boils down to Don Quijote’s strong marketing tactics. Not only did the company specifically chose prime tourist locations across Japan to open its stores, the discount chain has adopted its own mascot.

The blue penguin donning a red cap is paired with its very own theme song called “Miracle Shopping” that plays on repeat in stores, bringing the Don Quijote stores to life.

Don Quijote has become woven into people’s lifestyles. For them, spending time at one of our stores has become part of their lives.”

The Japanese brand’s ability to attract flocks of young people and tourists to its stores has gained the attention of other notable retailers such as FamilyMart Uny that will transfer a 40 percent equity sake in wholly owned subsidiary Uny Co., a general merchandiser from Inazawa, Aichi Prefecture, to Don Quijote.

The Future

In addition to turning some of FamilyMart Uny’s stores into Don Quijotes, the pair are in talks about developing a service similar to Alibaba’s Alipay, which currently over 4,000 Japanese vendors are accepting, including both Don Quijote and FamilyMart.

Earlier this year, the company announced its goal to reach operating profits of $537 million by 2020 – 20% higher than the current target.

In order to achieve this, the company also opened its first store in Southeast Asia in Singapore, a country-state Yasuda actually relocated to for retirement. Why did he choose Singapore as HQ for the region?

Singapore is a very important market for us. It is also a good base for us as people speak English here and it makes it easier for us to expand globally.”

Singaporeans queueing outside Don Quijote (debuted as ‘Don Don Donki’ in Singapore) before it was officially opened on December 1. Source: Straits Times

The 1,397 sqm double-storey building is also offering in partnership with Hokkaido Marche, a themed retail and dining experience. There are also plans to launch at least 10 more stores by 2022.

This is exactly what Yasuda wants – having customers staying in the stores longer.

Yasuda looks to capture the hearts of Thais next, where about 901,400 of Thais visit Japan every year, ranked as the 6th highest foreign visitors to Japan. In fact, Thais were among the top overseas customers of ‘Donki’, after the Koreans, Chinese and Taiwanese.

If Yasuda gets his way, there will be a piece of Japan everywhere in the world.

 

[Updated July 27 11:12am]: A light version of Amazon Prime, Prime Now has become available in the App Store for Singaporeans (previously only a redirect) as well as the website is live: https://www.amazon.com.sg/primenow.

Updated July 26 6:23pm]: The Amazon Prime Now app has become available to download in Singapore (Prime Now is the two-hour delivery service for Prime members meaning). It can only be downloaded through primenow.amazon.com redirect.

Amazon in Singapore

Amazon Prime Now app now available for download in Singapore.

Amazon in Singapore

Available inventory for Amazon Singapore Prime Now.

Recent headlines, first reported by TechCrunch, say that the US retail giant is finally (finally) coming to Southeast Asia, Singapore first.

There hasn’t been any official word from Amazon as the company told e27 it would not comment on speculation.

Taking a look at the Amazon website for job postings in Singapore also hasn’t given any further signs of an aggressive hiring spree for local retail employees though it would be wise to keep an eye for updates.

So what points to the retailer’s confirmation landing in Singapore?

Social media influencers.

Popular accounts such as “theramengirl” and “superadrianme“, each with thousands of followers have posted sponsored photos in the last week alluding to Amazon’s Prime service soon to be available in Singapore.

Amazon in Singapore

Source: superadrianme

Amazon in Singapore

Where could that familiar ‘a to z’ blue packaging be from? Source: theramengirl

Impact of Amazon in Singapore

Everyone, e-marketplaces and traditional retailers alike, has been holding their breath ever since the circulation of Amazon’s Singapore Q1 launch rumours began in November 2016.

It’s not wrong to be worried if one has followed the disruption caused by Amazon in the US retail industry. Brick and mortar businesses have filed for bankruptcy, 25% of shopping malls in the US are expected to shut down by 2022, and brands (Nike) that were likely to never go ‘marketplace-strategy’ have hopped onto The Everything Store to gain control over third-party pricing and distribution.

In Southeast Asia, ambitious plans to build more stores in the next five months by retailers in Thailand may slow down. Service providers, namely logistics players with strong regional networks, are ready to offer a helping hand in Amazon’s initial business growth but should stay weary if the giant plans to replicate its impressive logistics network in-house in the region.

Alibaba has recently doubled down on its Southeast Asian efforts by investing another $1 billion in Lazada for 83% stake and rumoured to be competing with JD.com Inc to lead a funding round in Tokopedia, one of Indonesia’s largest marketplaces.

JD.com Inc, China’s number two ecommerce player has also announced plans to enter Thailand by end of the year to increase their regional footprint.

Lazada, arguably the leading online retailer in Southeast Asia, began offering a Prime-like membership program called LiveUp in April in hopes of keeping customers loyal.

Sign-ups for the program have been quite healthy, tells a source from Lazada to eIQ.

Aimone Ripa di Meana, co-founder and Chief Marketplace Officer at Lazada, recently commented that Lazada was confident about its position in the region.

“It’s not an easy balance [being local and nimble], but it’s something that we’ve invested a lot of time to get to and I don’t think it’s acquired or built in a day,” says Aimone.

Shopee, another strong contender affected by news of Amazon’s arrival, has also been quite active in strong arming its retail strategy. The once only C2C marketplace announced “Shopee Mall” earlier this month, a new in-app platform that follows the same Lazada B2C model and already offers products from over 200 brands.

Shoppers can enjoy free shipping with no minimum spend and a 15-day return policy when they make a purchase. But will it all be enough?

Survival in one of the last battlegrounds Amazon has not yet stepped into will boil down to which company has successfully created a loyal fan base by fulfilling promised perks of fast shipping, cheap prices and an endless assortment of products.

These are already the cornerstones of Amazon thanks to Bezos’ long-standing and highly touted ‘customer obsession’ and what will ultimately give them an advantage in acquiring shoppers without any heavy marketing

For those holding their breath, it’s time to let it go because the “Amazon Effect” is coming.

Amazon in Singapore

And you’re done. Source: Flickr


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Are online shops a fad?

There is an estimated 12-24 million ecommerce sites around the world of which, only roughly 650,000 generate more than $1,000 per year. While this may be an approximation, it does put in perspective how competitive the industry has become.

Some digital experts, on the other hand, see an opportunity. Arcadier, a Singapore-based company has developed a platform that lets businesses easily set up a marketplace online for a monthly fee.

Why? Because Kenneth Low, Arcadier co-founder and Chief Commercial Officer, is certain that exchanges from one person to the other, whether it be in marketplaces or offline, is something embedded in human DNA. His company is simply facilitating it online.

Fight for the single merchant

A textbook case to build a successful business is to find a problem and provide a solution as either a product or service. This was exactly how Arcadier founders came up with the idea to build a software platform for multi-seller marketplaces. It helps bootstrapping entrepreneurs develop their own ecommerce venture without any coding knowledge.

Arcadier started out in 2013 when the founders built customized marketplaces on a project basis. After working several years in PayPal during the eBay era, Kenneth and the other co-founder of Arcadier Dinuke Ranasinghe saw an opportunity for the provision of a marketplace platform enabling entrepreneurs to build their  “Uber for X” models.

Arcadier received inquiries from startup entrepreneurs, but a quotation scared off too many of them – no one had the minimum $50,000 to build an application. Kenneth says to build a minimum viable product for an online marketplace can cost around $500,000.

“We realised there was a whole market that was underserved. There were many software providers for building single merchant online shops cheaply and affordably, such as Shopify, PrestaShop or Magento and the big boys would go to Demandware and Hybris, but there was no commoditized product for cash-strapped entrepreneurs,” explains Kenneth.

“We couldn’t believe it. We were thinking, “Surely, Shopify would have done this!?,”” says Kenneth.

He explains that the back-end is much more complex setting up an online marketplace than for a single seller shop as it requires features such as multi-seller listing, inventory management for each of the sellers and split payment settlement.

Because existing players were all fixated on capturing the attention of single merchants, no one had invested in a platform for building marketplaces.

The hyper-localized hyper-niches

 Kenneth believes an online marketplace can create a win-win for sellers and customers, but Arcadier is not about helping others build the next Lazada or eBay, there can only be so many such global marketplace companies.

Instead, the trend is shifting towards hyper-localized and hyper-niche marketplaces, such as an Airbnb equivalent for female travelers in Asia or Christian travelers in Jakarta.

“Owners of these niche marketplaces never dream of being the next big thing, but they understand enough of the local market to know how it can work for them,” says Kenneth.  

Over 2,000 marketplaces spanning 45 countries and over 150 cities have been created using Arcadier’s platform.

Even without much spending on marketing, signups increase at 60% compounded growth rate month-on-month.

Arcadier operates on a software-as-a-service (SaaS) model charging its customers a monthly fee that can range from $0 to $399 per month – the free version is limited to 250 transactions per month. As the number of transactions increase, so does the platform subscription fee, but there are no transaction fees.

The platform is appealing as there are marketplace templates for selling goods (equivalent to eBay), booking professional services (similar to ServisHero), renting spaces (similar to Airbnb) and equipment.

In the recent years, Arcadier has gained a few competitors, a company in Finland called Sharetribe, another in Silicon Valley called Near Me,  and one two others, but Arcadier is leading in terms of sign-ups, asserts Kenneth.

While Arcadier is Singapore-based, 21% of all sign-ups are from US, 11% from the United Kingdom and 9% from Australia.

It also has users from India, Canada, Brazil, France, and Spain.

 “Our value proposition is to be the global leader in multi-vendor technology and our mission is to make sure we provide this technology to anyone, especially those who don’t understand tech,” says Kenneth. The tricky part is to make this technology simple to use, highly scalable and highly configurable, but Arcadier has got it covered.

Signup takes 5 minutes and the administrator’s user interface is very easy to set up the marketplace layout, what information is required from sellers, choosing languages and currencies of the marketplace, payments methods, etc.

The power of B2B

Kenneth gets passionate when speaking about how the trend of sharing economy is driving the growth of online marketplaces and not that much contributing to the single–merchant shops.

“Since the days of Agora in Rome and Grand Bazaar in Istanbul, marketplaces have always been the way people discovered things. A single merchant store isn’t sustainable – this trend is only now happening online,” argues Arcadier’s co-founder.

“Whatever you can think of, people build marketplaces for it. Marketplace for trading horses among owners, booking freelance DJs or belly dancers, these are some of the examples of what has been built using our platform,” says Kenneth.

He is also convinced that Southeast Asia in the long run will be the bedrock of ecommerce growth.

“The environment of trade is disorganized in countries like Thailand, Indonesia, Malaysia and the Philippines, which offers many opportunities for disruption.”

But the sleeping ASEAN giant has additional challenges of its own. Kenneth, a native Singaporean, counts language, regulatory systems and payment acceptance as the three biggest impediments to adoption of ecommerce and trading.

What does he believe makes a good marketplace?

Having seen a fair share of online marketplaces created, Ken shares his best practices.

  1. Own at least one side of the market

Online marketplaces always have the chicken and egg issue – buyers attract sellers and sellers attract buyers. If you don’t own at least one side of the equation, you should not be starting an online marketplace.

Entrepreneurs tend to think technology is the biggest hurdle for marketplaces while the biggest challenge is actually finding buyers and sellers.

  1. Know the market which you plan to serve

Not all B2B marketplaces are the same. Some industries require merchants (or sellers) to provide a letter of credit, some need vetting of merchants. So, be sure to know the existing workflow of the industry that you’re in.

Don’t use technology to change market participant behavior because that is impossible and you will fail. Make sure your technology works with the existing behavior, just automate it differently.

  1. Be patient

Building an online marketplace is not a sprint, it is a marathon. Don’t build a marketplace and wait for customers to come. You have to actively market it – know your customer acquisition channels and constantly manage them.

  1. Integrate with key service providers, not all

Many clients ask for an integration with all fulfillment, payment and other service providers, but that isn’t necessary. What you need is to find the key service providers in your vertical and integrate your systems with them. If it is SAP for accounting  or aCommerce for fulfilment, integrate it.

  1. Solve the trust issue

Trust between sellers and buyers is a fundamentally important part of building a successful online marketplace. Accept you will never fully solve grey market issue when some sellers and buyers decide to make the transaction offline and cut out the middleman’s (your) charge.

Customers still trade on eBay because they have buyer protection i.e. Airbnb has insurance for homeowners. Trust can be strengthened in the form of guarantees or you can use escrow services when funds are held by a third party until seller and buyer report a successful transaction. In any case, do think about how to encourage trust in your marketplace.

By: Aija Krutaine

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Singapore is the most mature ecommerce market in Southeast Asia where 60% of respondents report shopping online. Singaporeans also spend the most online in the region – on average a shopper purchased online goods worth $1,022 in 2016.

Statista data shows that Singapore’s ecommerce market is expected to increase from $3.3 abyillion this year to $5.1 billion in 2021 growing annually by 11.2%. And the number of online shoppers is forecasted to rise from 64.8% of the population in 2017 to 80.9% in 2021.

Which categories present good opportunities in Singapore’s ecommerce market in the near future?

Singapore ecommerce outlook

Singaporeans mostly shop online for electronics & media

Electronics & media is currently the leading ecommerce vertical in Singapore, similar as in Thailand. It’s predicted to remain as such in the near future, Statista data shows.

  • Electronics & media ecommerce market in 2017: $918 million or 27.6% of total ecommerce revenue
  • Electronics & media ecommerce market in 2021: $1.345 million of 26.5% of total ecommerce revenue
  • Annual growth rate (CAGR): +10%
  • Market’s largest segment: Consumer electronics with a market volume of $679 million in 2017

Currently, there aren’t many players in Singapore who sell online physical media (e.g. books, DVDs, games), consumer electronics (e.g. TVs, stereo systems) and/or communication devices (e.g. computers, smartphones, tablets).

The annual growth rate of online sales in this category is not the fastest, but ensures that in five years time, more than one fourth of all projected online sales in Singapore will come from selling TVs, computers, books and other devices and media.

Furniture & homeware to grow the fastest

This vertical is expected to grow by nearly 15% annually within the next five years from 2017.

  • Furniture & appliances ecommerce market in 2017: $452 million or 13.6% of total ecommerce revenue
  • Furniture & appliances ecommerce market in 2021: $782 million or 15.4% of total ecommerce revenue
  • Annual growth rate (CAGR): +14.7%
  • Market’s largest segment: Furniture and Homeware with a market volume of $317 million in 2017

Selling online furniture and household goods such as kitchen and bathroom accessories, textile furnishings will account for nearly half of the market volume in this vertical.

Below is a few examples of companies currently selling products in this vertical.

Some local players like Horme and Star Living are already seizing this opportunity whereas global giants like Ikea have not yet taken advantage but will most likely move online.

Fashion to become the second largest vertical

Fashion ecommerce in Singapore is expected to have the second highest annual growth rate following furniture. This will make fashion the second largest vertical by sales by 2021, up from the third largest vertical in 2017.

  • Fashion ecommerce market in 2017: $769 million or 23.2% of total ecommerce revenue
  • Fashion ecommerce market in 2021: $1.243 billion or 24.5% of total ecommerce revenue
  • Annual growth rate (CAGR): +12.7%
  • Market’s largest segment: Clothing with a market volume of $584 million in 2017

The fashion ecommerce vertical is unsurprisingly quite crowded in the Lion City. From local marketplaces such as Reebonz and Megafash to local brands like Charles & Keith and global brands like Uniqlo, many have already added online to their sales channel to be where their customers are – in the digital environment.

Hobby and stationery products are big in Singapore ecommerce

Selling toys, baby items, sports and outdoor products, and stationery online is also a big market in Singapore. It is projected to be the third largest vertical in sales by 2021 making up 23% of Singapore’s total ecommerce.

  • Toys, hobby & DIY ecommerce market in 2017: $844 million or 25.4% of total ecommerce revenue
  • Toys, hobby & DIY ecommerce market in 2021: $1.178 billion or 23.2% of total ecommerce revenue
  • Annual growth rate (CAGR): +8.7%
  • Market’s largest segment: Hobby & stationery (e.g. musical instruments and office supplies) with a market volume of $529 million in 2017

Food & personal care to grow 55%

This category is expected to grow to $528 million within the next five years. Although it is the  smallest of all verticals in terms of sales, it is still projected to produce a steady annual growth rate of nearly 12% in the period from 2017 to 2021.

Singapore’s online grocery segment is quite advanced compared to other Southeast Asian countries, while there are limited numbers of beauty online sellers.

  • Food & personal care ecommerce market in 2017: $339 million or 10.2% of total ecommerce revenue
  • Food & personal care ecommerce market in 2021: $528 million or 10.4% of total ecommerce revenue
  • Annual growth rate (CAGR): +11.7%
  • Market’s largest segment: Personal care with a market volume of $231 million in 2017

Looking ahead

Although the country’s ecommerce growth is not the fastest projected in the region, an online shopper in Singapore is expected to spend on average $1,234 in 2021, according to Statista. This stands to be three to four times more than annual online shopping spending in Indonesia and Thailand, nearly 10 times more than in Malaysia, 13 times more than in Vietnam and 26 times more than in the Philippines.

Following the ECOMScape series that revealed the ecommerce landscapes in Southeast Asia’s largest six economies, eIQ is sharing a comparison of each country’s top e-marketplaces.

A marketplace is defined as the arena of competitive or commercial dealings. An e-marketplace can be horizontal – offering products from various categories – or vertical – offering only products of a specific category. Read more

Southeast Asia’s largest e-marketplace has released its first go at a loyalty program called LiveUp. Lazada’s new annual membership will cost $49.90 SGD (roughly $35.73 USD) after a free 60-day trial period and is currently discounted to $28.80 SGD ($20.62 USD). What goodies do subscribers get?

  • 10% rebate and free delivery in Singapore, rebate capped at $50 SGD per month
  • Free delivery for shoppers on Taobao’s shop-in-shop on Lazada
  • 5% rebate in RedMart credits and exclusive promotions
  • 2 months of Netflix during trial period and 4 months after LiveUp paid membership begins
  • $10 SGD off every 10th Uber ride, up to 12 times a year
  • Refunded delivery fee on orders over $35 SGD for Uber EATS up to 4 times a month
Lazada Prime

Lazada Singapore promoting LiveUp on its homepage

 

Why Lazada LiveUp? 

The company is well aware that acquiring customers through paid channels can be just as costly as a loyalty program – Forrester analyst estimates that Amazon loses approximately $1 billion annually on Prime-related shipping expenses.

But rather than attempting to change the mind of the masses, why not better satisfy current customers? It will also in turn lead to a higher repurchase rate.

One also needs to look to Lazada’s biggest upcoming threat, Amazon, whether the company is or isn’t entering the region. How has the giant been able to disrupt retail over and over?

For those who aren’t aware, the Amazon Prime program has been available since 2007 and evolved over the ten years. Subscription provides members with a long list of Amazon only benefits that include:

  • Free two-day shipping on eligible items to addresses in the contiguous US
  • Free same-day delivery in eligible zip codes. 
  • Prime Now: free two-hour delivery or scheduled delivery on over 10,000 items, from groceries to electronics and more. Plus, get free delivery from your favorite local stores.
  • Amazon Restaurants: one-hour delivery from popular restaurants for Prime members in eligible ZIP codes. [LiveUp Uber EATS]
  • Prime Video: unlimited streaming of movies and TV episodes for paid or free trial members in the US and Puerto Rico. [LiveUp Netflix]
  • Amazon Elements: access to Amazon’s own line of everyday essentials. [LiveUp Taobao] 
  • Amazon Dash for Prime
  • Prime Pantry: members can purchase and ship to addresses in the contiguous US low priced grocery, household, and pet care items for a flat delivery fee of $5.99 for each Prime Pantry box. [LiveUp RedMart]
  • Kindle First: early access for members in the US to download a new book for free every month from the Kindle First picks. 
  • Amazon Music Unlimited: discounted Amazon Music Unlimited monthly plans and exclusive annual plans.
  • Membership Sharing and a lot more.

Amazon Prime is one of the few things that currently enables the giant’s retail operations to make a profit.

“Amazon’s total operating profit for its retail operation came out to $2.66 billion. Revenue from our membership estimates covers 143%. Without Prime membership revenue, Amazon’s retail operations result in a $1.1 billion loss.” – The Motley Fool

By rough estimates, Amazon probably has at least 46 million Prime members paying $99 a year and more importantly, their customer loyalty. Prime members said they spent an average of $538 annually with Amazon, far more than the $320 by non-Prime members.

Subscription has become a very sharp tool in Amazon’s threat to all retailers and it makes sense for Southeast Asia’s largest online marketplace, Lazada, to finally equip itself with the same firepower and speed up its path to profitability.


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