Southeast Asia Startup Funding

Golden Gate Ventures has raised a $60 million fund from investors including Temasek Holdings Pte and Facebook co-founder Eduardo Saverin as it seeks to sustain its pace of investment in Southeast Asia’s startups.

Golden Gate Ventures is one of the earliest VC firms to target the region. Its $10 million debut fund fueled investments in 30 startups across seven countries, including flea market app Carousell and online grocer Redmart.

“We were one of the earliest funds and we rode the wave that took over the region,” said Lauria, Golden Gate’s managing partner. The second fund was oversubscribed by $10 million, according to the company. “The ecosystem is now significantly bigger and there are a lot more deals. We want to double down on the opportunity.”

Southeast Asia, home to some of the world’s fastest growing economies, is approaching a tipping point, according to a recent report by Google Inc. and Temasek.

The region’s internet economy is predicted to grow six-fold to US$ 200 billion in the next decade and has attracted US$ 1.7 billion in investment capital this year alone. With this new development, Southeast Asia’s startups remain one of the hottest sectors to both regional and global venture capital funds.

A version of this appeared in Bloomberg on June 14. To read the full article, click here.

OnePlus Quits Indonesia

Source: Google Images

OnePlus blames Indonesia’s complex and strict regulations on imported smartphones for its decision. Last year, the government passed a law that requires imported 4G phones to contain 30 percent locally sourced components. OnePlus failed to complete the mandatory certification process on time and the investments needed to comply with the new regulation, set to take effect in January 2017, is too overwhelming for the relatively new brand.

“Chinese phone maker OnePlus is halting its operations in Indonesia. That means the company’s upcoming flagship phone, the OnePlus 3, will not be sold in the archipelago through official channels”

The regulation would require OnePlus to build a new fulfillment center or join a local factory, something beyond the company’s current capability. OnePlus will be missing an enormous opportunity to reach the 326M Indonesians on mobile where foreign companies such as Samsung and Asus are performing well.

Indonesia mobile

The new regulations set by the Indonesian government as an attempt to give room for local players may decrease success found by smaller foreign brands. It also highlights the complexities of doing ecommerce in Indonesia as ever-changing government regulations is often seen as a bottleneck to business growth.

Read the full article on Tech in Asia here.

Guest post by a Baozun Strategic Adviser and former Senior Adviser to various luxury brands’ entering China

Understanding why ecommerce in Southeast Asia and China are Different

For many years now, the world has been a bit obsessed with China – its 1.4 billion people, its single party system and the allure of that emerging middle class.  For many global brands and retailers, China has irresistible appeal.  However, investments and attention have turned toward Southeast Asia and Indonesia in particular. Understanding the differences in China and Southeast Asia’s ecommerce spheres will help  clear misconceptions. Is it really the “next China” or will it always be the not so successful younger sister?

There are vast differences in China and Southeast Asia’s ecommerce retail spheres, so, for those businesses considering entering or growing its business there, here are our top 5 differences to note.

1. Country versus a region 

This is perhaps the most important difference in China and Southeast Asia’s ecommerce outlook – China, is one country, and while there are some significant in-country regional differences (e.g. level of sophistication and dialect), there is one governing party and one focus.  While no one will tell you it’s easy doing business in China, it’s at least one set of challenges, versus trying to navigate the entire Southeast Asia region – from mature English speaking markets like Singapore, to small but sophisticated countries like Thailand and the vast archipelago of Indonesia. Its focusing on six markets versus one. My advice: pick one country then gradually expand, using local partners to help you navigate the challenges.

2. The ecommerce landscape

China’s colossal ecommerce market is now #1 in the world, dominated by C2C , which is still 65% of the total ecommerce market . The stars of this show are Alibaba (Taobao, TMall, Alipay, Ali Express and Ali logistics) and their ecosystem of service providers, Tencent (WeChat, QQ) and JD.com.  While Amazon is present, they don’t dominate; no Facebook, Google or eBay are in China. On the other hand, Southeast Asian online ecosystem is such a mixed bag – in Singapore, cross border reigns as the English speaking citizen/expats happily order from abroad to get the best prices or they just walk down Orchard street where thousands of foreign brands have set up shop.  In Indonesia, consumers are still learning about retail, so ecommerce remains nascent.

How will Southeast Asia ecommerce grow up?  Part of the Alibaba or Tencent family or more aligned with the global market, dominated by Google, Amazon, Apple & Facebook?

One thing is for sure – the marketplaces are here to stay – so if businesses don’t have a channel management strategy, get one soon because whether you like it or not, your brand will be present in the regions various marketplaces.

3. Infrastructure

China is at least five years ahead of Southeast Asia in terms of the infrastructure necessary for retail and online commerce.  China, most retailers/etailers guarantee delivery 1-2 days in Shanghai & Beijing, and 2-3 days in most Tier 2 and 3 cities. Once outside of Singapore and Malaysia, there is a lack of quality providers – a major reason why aCommerce, has placed its investment in being a trusted fulfillment and delivery service.  This is particularly true when it comes to ecommerce.  While second and third tier cities hold some of the greatest potential for ecommerce, getting a package to its destination outside of major cities can be a major challenge.

4. Local competition

Here, China and Southeast Asia have some similarities – don’t underestimate your local competition in either country!   Just two examples, – in China, Ochirly, a young woman’s fashion brand, was invested by L Capital (the venture arm of LVMH) which paid $200MM for 10% of the company.  Yes, that’s right, a company you’ve probably never heard of has 400 stores in China and a valuation of more than $2Bn.  Your competition in China could be a multi-national corporation or a guy in a one-room apartment in Shenzhen who is happy to make 10 RMB more this week. In Indonesia, local marketplace Tokopedia raised a whopping $100MM from SoftBank and Sequoia to become the dominant C2C platform.  Across Southeast Asia, LINE – although not a “local” company – dominates the messaging space over Whatsapp or Viber with over 60m users in the region and Thailand being its biggest market outside of Japan.  LINE partnered with local ecommerce enablers to ramp up their ecommerce and mobile commerce initiatives.  This is also why local full service ecommerce companies such as Indonesia’s 8commerce, SingPost and aCommerce have popped up to help service the market with better local knowledge and resources.

5. The cost conscious consumer

Arguably, most consumers are value conscious but the Chinese take it to a whole new level.  Many take delight in negotiating (or haggling) the price down.  Consumers in Southeast Asia are very similar in terms of price sensitivity.  A small move such as a 10% increase in price can tank orders by 100x in a matter of few days, as an agency discovered under a client’s request.  Ecommerce in this region was accelerated by the daily deals wave spearheaded by companies such as Groupon and Ensogo that catered to customers’ need for great value.  The increasing popularity of price comparison sites like Priceza or Rocket Internet’s PricePanda are a testament to this as well.  Recently, Lazada ran it’s Singles’ Day promotions and was able to achieve record sales by offering steep discounts to customers.

With a half billion people, ecommerce in Southeast Asia has potential but one must remember it is a long way from being the massive consumer market of China.  Plus, it’s a region with different cultures, regulation, and retailer market infrastructure and dynamics.  For brands and retailers interested in the region — pick one country and invest, working with local or regional partners that can help you learn.  If it works, we may just see this little sister become “the belle of the ball”.

zurich insurance launches ecommerce in indonesia for ramadan

Staying healthy during the Ramadan season is a growing concern for Muslims. Source: AFP

The Zurich Insurance Group has newly launched the “protect your mudik with a ZurichClick” program, an online platform to facilitate travelers in buying travel insurance using credit or debit cards. The program provides travel insurance, aiming for people who will journey back to their hometown during the Eid celebration holiday.

“Indonesians are still, for the most part, unprotected as seen on the low insurance penetration rates,” Zurich Indonesia president director Philippe Danielski.

The newly launched website is the answer of the growing customers who prefer the digital platform, he said.

Zurich Insurance’s move into online in Indonesia aligns with a growing regional trend. Other insurance companies are also tapping into the digital opportunity in Southeast Asia, for example Manulife in Thailand.

It’s also a common marketing strategy – testing that focuses on a specific population segment before scaling.

A version of this appeared in Jakarta Globe on June 17. Read the full article here.

Every year millions of Muslims prepare to fast from sunrise to sunset for the holy month of Ramadan, and while that would traditionally mean a time to switch off and live minimally with family and rituals, online consumption vastly only goes up. In effect, the shift in daily behavior due to Ramadan affects online habits in Indonesia. Google data recently released confirms this in an article by Nadine Freischlad that appeared in Tech in Asia. 

Ramadan related search trends starts to rise 1 week before fasting starts. Ecommerce marketers in Southeast Asian Muslim markets should consider starting promotions and online only specials right before Ramadan.

Ramadan affects online behavior

Ecommerce spikes. People receive their work bonuses around this time, according the the Ramadan Case Study by aCommerce, and as a result also have higher average basket sizes. Clothing grew by 29% and travel crew by 30% according to Google.

Ramadan-shopping-season-google-data

Entertainment online rises too. It’s not just a time for family. Streaming video peaks a week before the fasting month ends and ends at Lebaran. Mobile video goes up by 13%.

Ramadan-entertainment-curve.png-indonesia

Food cravings run high, not surprisingly (even the most pious are prone to feel hungry after a day of no eating). Google found fourfold increase in search frequency for terms like “menu for breaking fast” and popular recipes.

Ramadan affects online behavior in Indonesia

 

Ramadan affects online behavior in Indonesia but how to make this useful in ecommerce? These trends are important for markers in ecommerce in Southeast Asia because with this data, one can pin point when, where, what and predict why their consumers are acting as they do.

“A smart way to win the Ramadan moment is to tweak the ads based on demand. Tailored ads with food & travel will be one of the way, but tapping the ads on the entertainment channels will be another important play,” said Aditya Jamaludin, Head of Marketing at aCommerce Indonesia, “In the end, timing is everything during Ramadan.”

Original version of this post may be viewed on Tech in Asia here.

Does Ramadan Boost Ecommerce in Indonesia?

This is the question aCommerce sought to answer this Ramadan 2014. With over 200 million Indonesians concluding the holy month of Ramadan with Eid celebrations on Monday, July 28, aCommerce released a case study that analyzed the ecommerce data of five clients during Ramadan in Indonesia. We were interested in the implications of how 88% of the Indonesian population eliminating food and water from their daily life for religious reasons, 66.8 million of whom are online, would affect consumer behavior in ecommerce. Would consumerism decline during this holy month, or simply shift? Would the type of goods being purchased change? Are people spending more or less?

Our sample set includes five diverse clients in both size and category such as beauty, Muslim wear, general (department store), sports and fashion. Given the range of ecommerce development of these various clients this case study is intended to provide a snapshot of consumer behavior and may not be indicative of the whole Indonesian ecommerce market at large.

The data analyzes a data the period two weeks prior to Ramadan, June 7-20, and two weeks during Ramadan, June 28-July 11, and looked at the following data points:

Peak shopping hours: When were Indonesians shopping online?
Strongest performing shopping categories: What were they buying?
Average basket size: How much was being spent?

Below is a summary of the key learnings.

Traffic stayed constant, but shifted earlier

Overall traffic saw a marginal increase of 3% of visitors shopping during Ramadan, but the most important take away was that there was a major shift as to when they were shopping. This stems from the fact that the day starts and ends earlier. Instead of going to the office at 9am Indonesians start the day at 8am and leave around 5pm. See Figure 1.

However, for clients with Ramadan targeted or conscious campaigns and products such as Muslim Wear and Sports, these categories saw spikes in traffic of 29% and 18% respectively.

Indonesians eat, pray, shop shop shop

152% increase in traffic at 4am in all categories except fashion. Instead of waking up, praying, eating and then returning to bed, Indonesians are increasingly using the time to browse online. See Figure 2.

There was a 400% increase in traffic at 4am and a 7x increase in orders for our Muslim wear category. But these gains are not only seen for religious related retail. Sports saw a 189% increase in traffic and 26% uptake in sales at 4am. Lunch time browsing boosted during Ramadan with 12% more than normal at 11am, suggesting Indonesian Muslims are turning to ecommerce and retail consumption instead of going to lunch. See Figure 1.

6pm is the lowest time for ecommerce as people head home, but during Ramadan that drop off was even steeper with a 19% decrease. During Ramadan Indonesians are leaving work earlier and gathering with friends and family to break the day long fast at 6:30pm. See Figure 1.

The majority of shopping still takes place between 11am-2pm, but evening shopping hours were being shifted to early morning. See Figure 1.ecommerceIQ, aCommerce, eIQ

Religious related retail rules

Muslim wear category saw its sales skyrocket during Ramadan. The night long dinners, socializing with families and people returning home out of the city capital means that the demand for traditional and conservative clothing ran strong. There was a 96% increase in transactions of Muslim wear and 84% increase in revenue after Ramadan started.

And shoes. The majority of the sales in Sports rose in the shoes category.

Provocative sells, but not during Ramadan

Contrast this with modern female fashion, which saw a sharp decline in orders per day, suggesting that while Indonesia is a progressive Muslim nation, marketing provocative fashion during Ramadan needs to be done with care. We saw that the CTR for Ramadhan themed fashion (not necessarily including a hijab) but with long sleeves and little skin exposure performed stronger during this month. “Indonesians find it distasteful to see bare legs and bikinis during Ramadan,” MatahariMall.com CEO Hadi Wenas said.

A tisket, a tasket, a big sporty basket

Ramadan is not like Christmas where gift giving is the norm. Nonetheless average basket sizes saw significant increases. People were buying in much bigger quantities. For example, our sports category saw average basket size increase by 67%. The more decadent 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. The median basket size was around 120,000 IDR or 10.3 USD.

ecommerceIQ, aCommerce, eIQ

4 Strategic Recommendations for Ramadan Ecommerce

1. Shift marketing to 3am

Boost SEM, online marketing and promotional offers to between 3am-6am. Indonesian Muslims are waking up and staying up and they are shopping online as Figure 1 shows. Save money from marketing spend (online or offline) during the traditional prime time of 6pm-8pm. Prime time has shifted to the morning as families are eating together and going out in the evening. Do not miss the opportunity to capture the new age Indonesian customer.

2. Remove provocative images from homepage

That doesn’t mean you have to change your whole product to be religiously targeted or non-secular but use this month to feature more conservatively dressed models, long sleeves, no cleavage or bare chests, longer skirts etc. Or else risk facing major bounce rates (if you receive traffic at all). As a time for family and religious sacrifice, Indonesians find provocative imagery especially distasteful during Ramadan.

3. Rethink your bestsellers

For non-Muslim wear categories rethink your bestsellers and home product page to reflect Indonesian values and culture. What sold best last month will not necessarily work during Ramadan. Consider products and marketing that focus on family, community, their upcoming vacation time, etc.

4. Feature affordable items

Sites that did not feature lower priced items suffered a hit in conversions. Indonesians are price conscious year round and even if they are playing with a spike in disposable income from their bonus, thriftiness is a major factor in consumption behavior as we saw with our brands. Be aware of mixing up high priced items on the homepage with bringing the lower priced items to the forefront as well. This is a great time of year to flush out some of that inventory.

Conclusion

Ecommerce during Ramadan has the potential to be explosive as seen with the amazing shift in behavior as Indonesians woke up and immediately hit the internet for online shopping. Whether those potential shoppers are captured or not depend fully on strategic timing of marketing and a consciousness of traditional values integrated into product choices and campaigns.