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

When renovating spaces in Jakarta, always be aware of the flood season risks!

Despite the onset of banality of the term ‘world class’ (which, in Southeast Asia, seems to signify that something functions adequately without posing gross health and financial risks) my team and I sought to reinvigorate the term when setting up an ecommerce warehouse in Indonesia. What ‘world class’ meant for us was to design an ecommerce warehouse that could sustainably handle a 200% uptake in order growth. Our hot startup ecommerce client has been enjoying an intense surge of ecommerce success and needed long-term scalability, fast and not rely on sloppy patch-work processes typical of fast-growing startups everywhere.

When setting up an ecommerce warehouse in Indonesia, the targets were the following:

  1. Exceed our competitors in terms of magnitude (400+ employees)
  2. Scalability (operational capacity triple initial capacity)
  3. Innovation (semi-automated conveyor system and technology)
  4.  Customer experience (detailed project updates and account management).

With my seven years of solution design and project management experience with notable German global logistics providers, my obsession with efficiency and quality (not only a German stereotype) and a scrappy and clever team, I didn’t think it was out of our reach. But by no means would it be easy.

Our learnings for industrial engineers & logistics PMs in emerging market ecommerce

My advice to young solution designers, industrial engineers or logistics project managers in the ecommerce market, the devil is in the details –critical information gathering is what differentiates one solution designer from the other. A successful implementation depends primarily on the level of details the solution entails.

Here is a recap of our trials and tribulations to setting up said world class fulfillment center in Indonesia.  While not totally comprehensive, you will learn about the key considerations and parameters in crafting or implementing your next ecommerce fulfillment solution or project.

So what was in store for us? First we had to build a complete new warehouse, redesign all existing processes and hire manpower, all within a six months’ timeframe. The challenge was not just in pure size of the project but the tight deadline we were working within.

1.Sizing up the problem – order volume projections

The first thing we did was get our Solutions Design Team assembled to start analyzing historical data against projected volumes. Using detailed solution templates and tools, we submitted a proposal simulating the required warehouse space, storage solution, resource requirement and process maps for the operation.

The expected growth calls for a warehouse design that meets both storage-picking optimization and long term scalability requirements. The projected sharp increase in handling volumes also meant that we had to reassess the current technology and operational processes that could no longer support the projected growth in transactional volume.

2. Choosing the right warehouse & location

There weren’t many options from a real estate perspective as we needed to find a ready space of approximately 7,000 sqm in the heart of Jakarta within two weeks. Fortunately for us, there was an old carpet manufacturing factory in Cawang (East Jakarta) that was winding up and looking to rent out the space immediately.

It was the perfect site based on its location, size, availability and price; it even had a mezzanine floor which could be transformed into offices for our client.

setting up an ecommerce warehouse in Indonesia

Interior of the factory.

3. Redesigning the space to be ecommerce optimized

However, it being a factory, the specifications of the building structure were not meeting our initial warehouse design. Some key areas that we needed to fix asap included the low height of the factory, damaged flooring, excessive interior configurations, poor network and electrical systems etc. The factory was also positioned on a lower ground right next to a river bend making it highly vulnerable for floods.

Often mistaken, the key criteria in designing an optimized storage solution lies in the pick profile of the operation instead of its inventory profile.  

The solutions team started plotting the space requirements based on the blueprint of the factory. The proposed design included a 2500sqm 4 level mezzanine storage structure equipped with 2 cargo lifts, a semi-automated conveyor system, an office space to accommodate up to 150 office staff as well as a state-of-the-art studio room for photoshoot.

The proposal also highlighted the required renovation to the original state of the factory such as roof elevation and demolition of existing columns and rooms.

setting up an ecommerce warehouse in Indonesia

Before beginning, we developed layout design and work flow simulation.

The main focus for the warehouse setup was the roof elevation since nothing can be done until the roof is up. Unfortunately, a considerable amount of waiting time was invested to governmental approval and regulatory certification. The actual roof reconstruction works were then impeded by rain- each time it rained the project paused and when the rain stopped, had to wait for drainage drills to kick in before continuing the construction.

4. Selecting the contractors & sticking to timelines

With the approval from the customer, we proceeded to seek quotations from warehouse vendors. The vendor management process included our assessment and recommendation based on the solution designed as well as the customer’s budget. After almost a month of negotiations, three vendors were selected to participate in 8 key areas of this mega build out.

setting up an ecommerce warehouse in Indonesia

Warehouse setup deliverables

With the sign off on the overall solution, proposal and investment budget, the project implementation timeline started. All in all, we had 3 months to transform the old factory into a “world class” facility. As most activities were interdependent; for example, activities within the factory needed to hold up until the roof elevation was completed, the mezzanine buildout could only start after the required floor repair and site demolition were completed – timeline management was particularly challenging.  

Once the project timeline was set, weekly meetings were held with all vendors as well as key project stakeholders to make sure the timelines were met and that all potential risks raised were mitigated.  

Fortunately, it didn’t rain much during the construction phase and the skeleton of the warehouse was completed on schedule.

setting up an ecommerce warehouse in Indonesia

Before and after the roof construction. This was one of the toughest parts due to weather.

5. Building the inside

The setup proceeded with parallel work on mezzanine installation, workstation setup, office buildout, roadworks and electrical setup. It was a good learning experience for the team as we participated in electrical distribution layout design, network cabling blueprints as well as water reservation and supply including the number of toilets required.

Just when we thought the rain could no longer serve as a threat to the project, a heavy downpour in the middle of the night coupled with a broken dam leading to the river resulted in a flood in the warehouse through the overflowing reservoir at the back of the warehouse.

setting up an ecommerce warehouse in Indonesia - jakarta floods

When renovating spaces in Jakarta, always be aware of the flood season risks!

6. How we dealt with the Jakarta floods

This led to an additional project milestone on enhancing flood preventive measures. Corrective action plans were immediately put in place. A response team was formed to drain the water out of the warehouse – sandbags and temporary floodgates were installed in preparation for the next heavy down pour while deliverable items such as enlarging reservoirs, renovating the walls as well as installing additional drainage facilities were carried out in phases.

Fortunately, no assets were damaged during the process but the overall timeline definitely took a hit; since then, a rain-phobia was developed throughout the project.

Other challenges such as the overall safety of the mezzanine as well as the levelness of the conveyor led to several assessments and trial and error to achieve the most optimal setup for the operations. By mid May, the warehouse was completed.

setting up an ecommerce warehouse in Indonesia

Cawang fulfillment center completed.

7. Operating the warehouse – hiring the manpower

Using productivity numbers collected from existing process cycle timings and calculated assumptions made on new operation processes, we simulated how many people we would need to handle the projected volumes.

The resource modelling tool allowed us to define clearly the number of manpower required by positions, functional roles as well as shifts – making it easy for hiring. The challenge however was to have all 408 headcounts qualified, interviewed and hired on time for training, migration as well as Go live.

We overcame this by engaging with local established headhunting firms and manpower agencies and successfully hired 80% of the required manpower with the outstanding positions filled out by the existing team to add experience and stability to the run operation. Unfortunately, the hiring process was not all straightforward, replacement or rehiring processes was an ongoing procedure due to natural attrition and absentees.

It is important to note that an influential warehouse manager is the key to staff retention. An effective warehouse manager creates strong family-like bonds within the team, develops a team of trusted leaders and is respected by all.

Two key responsibilities of a warehouse manager are 1) Ensuring the team’s commitment towards go live and 2) Sustain operation excellence after Go live.

8. Training & knowledge transfer to local management

There will come a stage in the project where the project manager will start transferring ownership and controls to the warehouse manager. The warehouse manager will take over on training deliverables, shift planning and overall discipline of the team.

The team sat down to plan out the rotational training schedules and deliverables targeting to get all 408 employees ready for the launch- Go live. The topics covered product knowledge, system processes as well as hands on operations in the existing and new warehouse. Each employee was assessed on what the topics covered at the end of each day to ensure that we have everyone in sync before we moved forward.

Workstations readiness and network connectivity were stress tested during the User Acceptance Test (UAT) exercise to ensure all potential risk were managed prior to go live. To curb with the intensive operational requirement, we had installed a backup line for network as well as power distribution.

The last week of training was held in the new warehouse where dummy orders were created to simulate end to end operational process in the new warehouse. There, situational tests were created to assess the employees’ response and rectification initiative.

9. Migration challenges & Jakarta’s travel ban

The lead-time given for migration from old to new location was five days.  Using the same solution templates and tools, we were able to define the targeted letdown and the number of trips required per day. These targets were translated to the team to ensure we stay on track for each day.

The main challenge during migration was the travel ban that only allows vehicle movements after 9pm. As such, coordination between the operations and transport team were crucial to ensure we optimize the letdown and loading process effectively before the travel ban is lifted.  

Other considerations such as inventory accuracy, quality assurance and system management were key to the successful migration. All in all, approximately 1.4 million units over 90 trips were transferred.   

Setting up an ecommerce warehouse in Indonesia

Migration process of 1.4 million items to the completed center

While there is no perfect project where all factors can be foreseen when setting up an ecommerce warehouse in Indonesia; experience and dedication are what minimizes that inadequacy and in order to get there, it takes no less than pure focus, passion, structure, top management commitment and hard work and maybe some luck with mother nature.

By Mitch Bittermann, Group CLO and Kenneth Thean, Regional Director of Solution Design at aCommerce

 

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”.

Why you’re reading this article

Harvard Business Review calls it a “management revolution”. McKinsey released a whopping 156 page report touting it as “the next frontier for innovation, competition, and productivity.” Palantir, a startup that used it to help the US government track down Osama Bin Laden, is now one of the hottest companies in Silicon Valley valued at $20B based on their latest funding round. Forget Google, Facebook, and Twitter, bright college grads have already shifted their sights set on Palantir. Big data has become the new black.

The big data wave isn’t simply creating companies slated for multi-billion dollar IPOs and exits, it has also created new job opportunities. What used to be a boring number crunching chore is now called data science, which Harvard Business Review coined the “sexiest job of the 21st century”. Every cool startup now boasts a data science team led by some chief data scientist. As usual, digital agencies are jumping on the bandwagon with some of them creating new units that supposedly “bring together data sciences, social, new age content, and emerging marketing technology with sound business thinking to create a proposition that’s truly integrated.” Whatever that means.

“There’s gold in the streets, just waiting for someone to scoop it up.” – Walter White in Breaking Bad

Using big data to look at big data, Google shows that search volume for ‘big data’ follows a nice hockey-stick trajectory envied by many startups. It’s pretty clear – big data is big business.

The Real Reason why you’re reading this article

“Big data is like teenage sex: everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it…” – Dan Ariely

Despite all the media hype about big data, the sad reality is that no one actually truly understands it. What’s causing all this misunderstanding and why are we long overdue for a paradigm shift in big data?

Mythbusters: Debunking Big Data myths

1. Big Data requires an expensive enterprise platform

The biggest lie in big data is that it’s complicated and tech-heavy. It’s also the primary reason why companies fail to adopt big data. We’re talking specifically about fear of technology and/or obsession with technology. The notion that big data requires a tech-savvy professional puts off a lot of people and prevents them from taking initial baby steps towards working with data in their organizations. On the other hand, there are those that focus too much on technology for technology’s sake. Big data platforms are a means to achieve business goals, not an end in itself.

Peter Thiel, the billionaire venture capitalist who founded Paypal and Palantir, argues against over-emphasizing technology. In his bestseller Zero to One: Notes on Startups, or How to Build the Future, Thiel says that “we’ve let ourselves become enchanted by big data only because we exoticize technology. We’re impressed with small feats accomplished by computers alone but we ignore big achievements from complementarity because the human contribution makes them less uncanny.”

Only until people see through this smokescreen of big data complexity created by what we’d like to call the “Big Data-Industrial Complex” – the sum of companies with three-letter acronym names that peddle big data technology products – we’ll be able to move on towards addressing the real challenges of big data.

Doing a simple search on Google for ‘big data’ shows how competitive this space is and how much money is at stake for the Big Data Industrial Complex.

This supplier-side bias is compounded by a consumer-side that’s often clueless about big data. CXOs in Fortune 500 companies insist on purchasing the latest big data platforms and technologies in order to ensure their “competitive advantage”. In reality, most of what these companies are trying to achieve can be done at a fraction of the technology and cost. The reason why people still go for the flashiest platforms is because of fear – “a fancy tool just gives the second-rater one more pillar to hide behind,” says Hugh MacLeod, blogger, cartoonist, and best-selling author.

2. Big Data needs a lot of data (Duh?)

The second myth in big data is that we need to have a lot of data in order to do “big data”.

“Today’s companies have an insatiable appetite for data, mistakenly believing that more data always creates more value. But big data is often dumb data,” says Peter Thiel.

The reality is that most companies don’t need that much data. If your company is not in the business of finding a cure for cancer or tracking down terrorists; there’s no need for mountains of data to properly sell your product.

The reason why people in mostly large companies end up obsessing over endless data is very simple: it’s because they’re afraid. Afraid of making decisions based on less than perfect data. Afraid of having to do actual work. Afraid of taking responsibility because they can hide behind the smokescreen. People fail to realize that the real value lies in the action that comes after analysing the data set, big or small.

“Companies brag about the size of their datasets the way fishermen brag about the size of their fish. They claim access to endless terabytes of information. The advantages seem obvious: the more you know, the better,” says Slater Victoroff in his brilliant TechCrunch article.

Not enough data Just enough data

Like the Lean movement that encourages companies and employees to take an “MVP” approach towards building businesses and products, big data is long overdue for an MVP revolution. You don’t need a lot, you simply need enough.

3. Big Data is the domain for data scientists

There are countless cases where companies invest millions of dollars into big data tech but still fail because they don’t have the right people in place to analyse and execute. As Thiel said, “Computers can find patterns that allude humans, but they don’t know how to compare patterns from different sources or how to interpret complex behaviors. Actionable insights can only come from a human analyst.”

According to McKinsey,

There will be a shortage of talent necessary for organizations to take advantage of big data. By 2018, the United States alone could face a shortage of 140,000 to 190,000 people with deep analytical skills as well as 1.5 million managers and analysts with the know-how to use the analysis of big data to make effective decisions.”

Data Scientists are not the solution

Hiring ‘sexy’ data scientists won’t fix the problem. According to Josh Attenberg and Foster Provost who teach the practical data science course at NYU Stern, “one of the complaints about the data scientists trained in computer science departments is that they’re “just technical”, understanding algorithms well, but lacking important skills in problem formulation, evaluation, and analysis generally. On the other hand, those trained in business schools tend to have underdeveloped technical skills.” Getting organizations up to speed on working with big data requires more than just hiring traditional data scientists or MBAs; instead, everyone needs to be able to work with data.

There have been positive changes though, especially in marketing. “The new job title of “growth hacker” is integrating itself into Silicon Valley’s culture, emphasizing that coding and technical chops are now an essential part of being a great marketer. The role of the VP of Marketing, long thought to be a non-technical role, is rapidly fading and in its place, a new breed of marketer/coder hybrids have emerged,” says Andrew Chen who popularized the term growth hacker.

Auren Hoffman, CEO of LiveRamp, shares on Quora: “The role of the chief marketing officer (CMO) is changing dramatically and is becoming “moneyballed” and very data oriented. Today’s Moneyballer CMO plans her marketing initiatives the way Billy Beane built the Oakland A’s. She leverages granular data on customer actions to expand beyond the traditional CMO role, influencing product strategy, customer service, and optimized sales pitches.”

Buzz words aside, a quick look at job postings for marketing positions at Facebook and Uber for example illustrates the transformation we’re going through. Uber’s growth marketers are expected to use tools like Tableau and understand languages like Python and SQL in addition to being able to process and analyze complex data sets. Where to find these folk? Graduates with majors in engineering, computer science, math, economics, or statistics. Meanwhile, traditional digital agencies are still stuck in 2005 and hiring communications majors for “performance marketing” roles (good luck with that).

Ashley Madison leak reveals if bigger is better…

To illustrate our point that a smaller data, people-focused, and lean approach can lead to useful insights, we’ve analyzed the leaked Ashley Madison data dump to answer the following four questions:

  1. Are Sagittarius men more likely to cheat?
  2. What are the most popular sexual kinks?
  3. Do sexual preferences change over time?
  4. What is the churn rate and LTV (lifetime value) of Ashley Madison users?

Tools and technologies used: MySQL, Python, PHP, Excel, Notepad++

Q1: Are Sagittarius men more likely to cheat?

“He’s the main cheater of the zodiac. He may espouse high morals, but these can loosen when he sees a pretty face or nice body. Tie your Saggi to the bedpost,” says one believer.

But is this really true? After running our SQL query, we get the results below. There’s obviously one outlier, Capricorn, caused by the default month and year settings in the (previous) Ashley Madison registration dropdown menu. After removing the Capricorn outlier, we see that contrary to popular belief, Saggies are not the biggest cheaters in the zodiac.

Q2: What are the most popular sexual kinks?

When signing up on Ashley Madison, users indicate their sexual preferences. We used a combination of SQL and Python to parse the preferences and map them out by gender.

Q3: Do sexual preferences change over time?

Yes, apparently they do. By mapping out sexual preferences by birth year, we found that the younger generation is more open to experimenting and one-night flings whereas older people enjoy cuddling and naughty talk.

Q4: What’s the churn rate and LTV (Lifetime Value) of Ashley Madison users?

As marketers, we’re naturally interested in measuring churn rate and LTV because these numbers can make or break a business. According to Andrew Chen, investors usually don’t fund dating startups because of the built-in (and typically high) churn rates as well as high customer acquisition costs (CAC) associated with the industry. Typical annual churn rates can go as high as 93%. Looking at the Ashley Madison data, we’re seeing churn rates of 80%.

Ashley Madison LTVs are roughly $400 USD. Their monthly cohorts show a jump in user quality starting October 2013. This could be due to new product initiatives such as pay for mobile access, business travel, pay to get noticed, and, ironically, pay to get your account fully removed.

A few parting words

Everyone can utilize big data as long as you emphasize people over platforms, processes, and politics and understand that small (data) can be beautiful if you know minimal SQL and/or Python. Don’t be afraid, learn the critical tools, and make big data your friend.