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

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

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Rimowa?

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

What is Taobao Xinxuan?

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

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Taobao Xinxuan Store Concept Design

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

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Xiaomi Flagship Store in Shanghai

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Xiaomi Flagship Store in Shanghai

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

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

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NetEase’s Yanxuan website

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

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Yanxuan Home & Living Category

Alibaba’s New Trojan Horse?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Monogamy in ecommerce does not lead to happiness.

*Thanks to a ecommerceIQ Community member for sharing the launch of LazMall with us:

In case you missed it, JD Central’s long awaited joint venture went live in Thailand a few days ago:

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And reviews have already come in,

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Though rough, the experience has been positive so far and as expected by JD, delivery reliable and quick. The partnership with Thailand’s largest retail conglomerate Central Group indicates JD.com is attempting to replicate its value proposition in China in Southeast Asia: a high quality ecommerce experience for authentic goods.

“If you promise people to deliver same day, people will more likely buy. Our people will literally cross rivers and climb mountains to get the package to the end customer.” – Louis Li, former Deputy GM of JD Worldwide

It seems Chinese players Alibaba and JD.com are looking to establish its number one and number two statuses in Southeast Asia ecommerce, respectively. Alibaba known for its hit-or-miss products at cheap prices and JD.com for the authentic goods and reliable customer experience.

And now that JD.com has planted its flag in Thailand, Alibaba/Lazada isn’t going to sit back casually – hence, (re)introducing LazMall.

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Consumer newsletter by Lazada Thailand

What is LazMall?

Very simply, it is a replica of the widely successful Tmall in China – a platform for official brands. In Lazada’s own words:

‘LazMall is an exclusive channel featuring items sold by leading international and local brands.’

“At LazMall, we aim to offer an online shopping experience of the highest-quality to garner the trust of our customers and provide the convenience they long for. LazMall will provide customers with the following promises: 100% authenticity and 15-day easy returns.”

There also appears to a number of benefits by becoming a LazMall seller:

• LazMall badge on all your products throughout the customer journey; see LazMall Indonesia
• Enjoy higher visibility on homepage and higher search ranking
• Exclusive access to dedicated LazMall campaigns
• Dedicated customer service team for LazMall customers

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Brand dashing to marketplace

Not quite.

Brands commonly will teeter with the idea of a brand.com and/or marketplace and the answer we always give is “a marketplace strategy is important in Southeast Asia as part of a bigger digital strategy, but it shouldn’t be the only online effort by a company.”

While LazMall aims to create a safe space for brands to promote themselves online by setting strict authenticity procedures and greater visibility over unofficial sellers, activity the US and China have taught us the brand relationship with a marketplace is a tricky one and from it emerges a power struggle.

A well-known American brand saw its Tmall sales plummet 10% to 20% for 2017.

“Based on our sales record, we should have been in a prominent position, but we were at the bottom of the page,” said the brand’s ecommerce director, who spoke anonymously to the Bangkok Post for fear of further retaliation. “That’s a clear manipulation of traffic. That’s a clear punishment.”

Executives soon learn that what Alibaba gives, it can also take away.

How did the marketplace gain so much power?

A few factors. First, all that money business tech sites complained about marketplaces burning was to grab market share and market share translates into influence. If you’re not present on marketplace or selling on your own website, you’re losing an important revenue channel.

As reported by the New York Times about Amazon, Lazada also has an advantage over traditional retailers and its own merchants that no one else has: knowledge and access to data from its platform. 70% of Amazon’s word searches are for generic terms such as “running shoes” or “games”, meaning Amazon can choose what to display in search results. Will it be Nike or Adidas shoes? Well, it probably depends on who is being a better merchant to the marketplace – driving traffic, exclusive promos, etc.

We can expect something similar to take place in Southeast Asia but this doesn’t necessarily mean brands are guaranteed to lose out.

KitchenAid recently launched with us and their revenue was two times than targets,’ – Lazada Singapore Category Manager

The rise of digital has forced brands used to having 100% control learn how to barter for maximum visibility. The birth of a brand to marketplace relationship is also why ecommerce enablers are popping up everywhere in Southeast Asia to mediate the wants and needs of both.

“[Enablers] allow me to focus on my core business capability and rest assured online segment is still moving along” – eIQ Community Member, Ecommerce Enabler survey

Your move brands.

Want to learn more about participating in LazMall? Contact us at hello@ecommerceIQ.asia 

We conducted an online survey (“Mom & Baby Shopper Survey”) in February 2018 to understand the shopping behavior of Indonesian females (N=1,144), specifically mothers, when buying items in the Mom & Baby product category i.e. diapers, milk formula, toys, etc.

The results revealed whether these women preferred to buy baby products online or offline, how much they spent on average per order, what item they purchased on a frequent basis, their age, the family household income and what would convince them to increase shopping frequently.

The survey sheds light on the following topics:

  • What factors are causing consumers in the Mom & Baby category to continue to buy offline rather than online?
  • What aspects of ecommerce marketplaces are most important to Indonesian female shoppers and which marketplaces are most popular?
  • What items do Indonesian female consumers prefer to shop for online in the Mom & Baby category?
  • How do Mom & Baby category consumers start their online purchasing journey?
  • What is the shopper profile and annual spend of Mom & Baby shopper in Indonesia?

Chapter 1: The Online Potential for Mom & Baby Brands in Indonesia

The birth of a baby is a life changing event for a household in regards to its finances, hours of sleep received per night, and especially, the ongoing adjustment to becoming parents.

For every minute that passes, approximately 250 babies are born into the world.

Indonesia is a country with a population of more than 260 million and on average, 2.44 births per woman in 2015/2016 – the fourth highest among all Southeast Asian nations. It is approximated there are 1.6 million births per year in the country.

Figure 1: The average number of live births per woman in Southeast Asian nations. Source: Statista

To care for each new life, parents need to invest heavily in categories like diapers, milk formula, toys, clothing, education and especially, time. Over the next eight or ten years as the child grows older, starts school and requires different products and nutrition, certain shopping habits in the parents have already cemented.

This includes what brands they trust, what products they will recommend to friends and family and which channels to buy them from.
As the median age of new mothers in Indonesia at first birth is 22.8 years of age, younger than found in Thailand, Singapore and the Philippines, she is commonly already digitally savvy.

Indonesia is predicted to have the fourth largest middle-class consumption on a global scale by 2030.

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Figure 2: Middle class consumption around the world. Source: The Emerging Middle Class in Developing Countries, Brookings Institution

Considering the country’s middle-class household count is also expected to rise to 23.9 million in the next 12 years from 19.6 million in 2016, retailers are looking to capture common characteristics of middle class consumers – more spend on travel, holidays and family.

The purchasing power of Indonesians will also rise for the next two years as the country’s gross domestic product is expected to reach US$1.7 trillion by 2020 (Figure 2).

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Figure 3: Forecasted GDP of Indonesia is expected to reach US$1.7 trillion in 2020. Source: The Economist, World Bank, Badan Pusat Statistik Indonesia.

This is why companies are allocating massive budgets to build credibility with customers early in the journey of motherhood and more importantly, influence the behavior of future generations.

Not only does Indonesia house 132.7 million internet users, 1 out of 4 of the internet users in the country is a mother (Google & Kantar WorldPanel Indonesia). The number is expected to rise over the next three to five years as the majority of the population are females aged 10 to 19 years of age (Figure 3), meaning Indonesia can also expect a rise in new mothers.

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Figure 4: Indonesia’s demographic by age and gender. Source: Central Intelligence Agency

All of this makes the Mom & Baby category a highly attractive and rampant industry in Indonesia in the coming years.

How can companies capture new mothers and help them adapt to parenthood?

Sign up here to receive the full report of Digital Mom & Baby Shoppers Profile in Indonesia.

Uber seems to be doing well after its abrupt exit from the competitive Southeast Asia market after selling to local competitor Grab. The ride-hailing company made $2.5 billion in profit on $2.6 billion revenue in Q1 2018.

“Uber gained $2.9 billion after it merged its businesses in Russia and Southeast Asia with local competitors.” – Recode

How has Grab spent this time and opportunistic time to grow market share?

Well, the Singaporean based, ride-hailing Grab celebrates its sixth birthday this year and its founder and CEO Anthony Tan recently took the occasion to announce the launch of its new investment arm: Grab Innovate.

This is a good sign pointing to healthy coffers and without Uber, the company has a relatively a smooth path to a ride-hail/all-in-one super app monopoly in Southeast Asia markets (that are not Indonesia).

A lot has changed since Uber’s exit two months ago.

Grab’s Timeline Following Uber’s Exit

March 25th – Uber exits from Southeast Asia, sells to Grab
May 7th – Grab rolls back discounts for customers and incentives for drivers
May 7th – Grab Singapore launches three new services: GrabAssist, GrabCar Plus and GrabFamily
May 7th – Grab allows cash top up feature in the Philippines
May 17th – Motorbike taxi drivers protest in front of Grab Bike office in Bangkok
May 28th – Grab launches GrabFood in Singapore
June 4th – Grab announces launch of Grab&Go allowing riders to try up to four free samples such as cereal bars, shampoo, etc. during their rides
June 5th – Grab announces launch of Grab Ventures and Velocity

But there has been backlash from various communities – rider and drivers alike – who are disappointed with the company’s recent performance, user experience after only now being forced to use the Grab app.

What are customers unhappy about?

Based on an ecommerceIQ Community survey, the top two ride-hailing providers preferred by customers remain Grab and Uber.

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It is also important to keep in mind the top respondents reside in Singapore, Indonesia and Thailand that can skew the results as LINE and Go-Jek aren’t available in Singapore.

When asked about the other value-added services used in addition to ride-hailing, customers chose “Food delivery” and “Package delivery” in second and third place, respectively. Results also revealed the adoption of built-in e-wallets aren’t popular.

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And all hell broke loose when customers were asked to ‘speak their mind’ about Grab services in Southeast Asia. These were a few of the replies:

“Functionality not as good as Uber, but improving. Maps not as accurate, main gripe is timings – the estimated times are totally off so really hard to know when to book. Wallet has been useful at hawkers / festivals a couple of times, would use more if that expands.”

“Cannot change the pickup location (sometimes GPS is not accurate) – tried ordering food at 11AM and it said rider not available – got a lot more expensive and waiting got much worse after Uber’s exit.”

Prices has increased dramatically since the merger with Uber; what’s worse is, driver availability has also gone down since.”

Too expensive now. Confusing fare structure and flat rate charged before the trip are more expensive than taking a taxi. Losing UberEATS for GrabFood is the bigger disappointment though – at least Grab’s transport works, the GrabFood UX/UI is the worst app I’ve opened for four years and completely unfriendly to non Thais.”

And a single positive reply:

“Awesome.”

Most common complaints? Terrible UX, inaccurate Maps, lack of drivers and more expensive than before.

Go-Jek to the rescue?

Not quite.

While on-demand in Indonesia is essentially untouchable due to Go-Jek’s market dominance and customer loyalty, the company will struggle to convince other Southeast Asians to download yet another on-demand app when they expand.

But a window of opportunity may be wide open for them if Grab doesn’t improve its user experience (and quickly given Go-Jek’s long-awaited expansion).

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Source: GrabFood Apple Store reviews

During our intimate interviews with Jakartians who surprisingly use multiple digital payments, we discovered it is all due to convenience. Because they already use Go-Jek to order everything else on one platform – one app. They don’t want to install more applications on their mobile phones.

Let’s say Go-Jek is able to overcome tricky government regulations, assemble driver fleets, and jump through talent pool hoops, customers trying Go-Jek, already well-known in Indonesia for its superior UX/UI, have access to the company’s all-in-one app services – all in one.

This is an already added plus considering users need to download a separate GrabFood app to order food versus the built in function in Go-Jek’s app.

GoJek’s expansion will also mean users can enjoy lower prices as companies will likely revert back to heavy subsidies to win customers and leading to Grab dropping prices once again.

ecommerceIQ, Consumer Pulse

Source: ecommerceIQ Ride Hailing Survey 2018

Competition is a good thing

Competition encourages businesses to improve the quality of goods and services they sell to attract more customers and expand market share.

“Preparations are well under way and within the next few weeks our first new country launch will be announced. This will be followed by three other countries in Southeast Asia by the middle of the year.” – Nadiem Makarim, CEO and founder of Go-Jek.

Citing the financial and strategic backing of its local and global partners, he added: “We are confident that we have more than enough support to take one of the most amazing growth stories in the world from being an Indonesian phenomenon to a global one.”

Grab should be taking advantage of this brief moment of competitor-less time to become even more user friendly, push revenue limits and popularise its e-wallet, but based on survey results, forgotten to optimise its core value proposition – a seamless ride-hailing experience.

Brace yourselves everyone, we’re in for another on-demand showdown.

Over the last few days, major moves have been made by a handful of top ecommerce players in Southeast Asia in efforts to cement a position in payments. Each company is already well aware: if you want people to buy or use your services, it makes sense to have direct influence over their spending.

Owning the payments chain has become so important (thanks to what was witnessed in China), that Amazon announced it would pass discounts to retailers if they used its online payment service.

Earlier this week, ShopBack, a cash back ecommerce aggregator, acquired Singaporean personal finance startup for an undisclosed amount. The stated reason being it wanted to help millennials ‘better handle their money‘, but with a new team of developers, no doubt the company is looking to optimise its existing system.

What was more interesting this past week were the new discoveries made by Go-Jek and Grab users in Southeast Asian markets.

Go-Pay

The on-demand market leader in Indonesia has expanded its reach to the most unexpected locations – street food vendors.

Tweet translation: “Interesting find this afternoon: Some street vendors on the alley beside Bank BNI Kebon Sirih have accepted payment with Go-Pay. When I bought ayam penyet [fried chicken] at my regular place, I just have to scan a QR code, show the payment slip, and that’s it. So cool!”

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The popularity of Go-Jek in Indonesia is almost legendary and this example shows how far its reach goes. The difficulty for Go-Jek will be expansion outside of Indonesia to other markets in the region, where similar on-demand companies exist.

GrabPay

With Uber officially out of the picture, Grab is doubling efforts to increase the adoption of its e-wallet, GrabPay. On a trip to Manila May 7th, an ecommerceIQ Community member shared with us app screenshots of Grab promoting a new cash ‘top up’ feature. Riders can add money to their Grab accounts by simply handing their drivers cash.

This is hardly innovative as Go-Jek has offered cash top ups since 2016, a large contributing factor to its success in Indonesia, but it shows Grab’s seriousness in evolving its payments product to the local market.

 

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This new feature follows Grab’s launch of three other services the company introduced to the Singapore market: GrabAssist, GrabCar Plus, and GrabFamily.

“Grab’s vision is to be an everyday app for consumers,” said Tarin Thaniyavarn, country head of Grab Thailand.

Regulations stand in the way of Grab’s vision in Southeast Asia as most countries lack any solid regulations to ride-hailing companies. Currently, the company is unsuccessfully trying to acquire a microfinance licence from the Bank of Thailand.

What drives the adoption of new technology?

Grab is targeting hawker stalls in Singapore, Go-Jek has already successfully penetrated local vendors in Jakarta. Grab is offering cash top ups, Go-Jek has been doing so for the past two years. They both offer on-demand services, taxis, cars, bikes and the technology and mechanics of an e-wallet are not all that different player to player. They are essentially going toe to toe, what is going to push further adoption?

The real winner will be the company’s capability in effectively communicating the benefits of its payments service to users. How aware are users of its existence and its importance? How can it make their lives easier versus using good old fashioned cash or swiping a credit card?

In developed markets like the US, Apple Pay, Samsung Pay, Google Wallet have single digit adoption rates compared to credit card usage. Why? Because the country already fares well with credit cards, there is no reason to change habits.

The same case can be made for relatively cash-less markets like Singapore. The real opportunity to dominate payments is in developing markets like Indonesia and Thailand, where credit card ownership floats around only 4 percent and majority of the population owns a smartphone.

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“To enhance awareness, you really need advertising — one thing that’s not well understood [by consumers] about Samsung Pay is that it has more utility the Apple Pay; you can use it at a non-NFC terminal and that’s a huge advantage I don’t think Samsung is doing a good job of promoting.”

It seems every day is filled with announcements about fresh funding, joint ventures and market expansion in Southeast Asia’s digital economy.

Money, it seems, is not an issue for these internet companies.

There is instead an even bigger problem – a lack of a company’s most valuable resource: talent.

Every tech company I have interviewed operating in Indonesia, Thailand, Malaysia, Singapore, Vietnam, etc. has cited difficulty finding, recruiting and retaining top talent when asked about major challenges.

In a region abundant with people – 650 million – and rich resources, what in the world is going on?

Companies can’t find good talent

Through a short community survey last week, executives from companies such as Colgate, Grab, Facebook, Blibli, DHL and Abbott, shared the top traits they look for in a successful candidate and their thoughts on hiring in the region.

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Over 80% of respondents believe there is a talent challenge for some specified reasons below:

“Yes, there is certainly a talent challenge in Southeast Asia. Reasons being absence of educational institutions of global level that churn out quality graduates. Focus on localization than globalization and limited exposure.” – Reliv Pharma, Vietnam 

“Yes, the young generation lacks persistence and cuts corners.” – Self-employed, Thailand

“Yes, there is a lack of ‘soft’ skills or qualities required to be successful in a technology business. These include problem solving, creativity, self-starters, willingness to take initiative and ownership. Due to the large amount of tech companies headquartered in the region, there is also a job-hopping mentality meaning that younger talent does not stay in one place long enough to learn critical foundation skills.” – Cresco Data, Singapore

“Yes, lack of ability to understand the world of digital is not binary and you need to recognise shoppers are omni-channel more and more so.” – Abbott, Singapore 

“It’s apparent that there is a talent challenge when large companies like Central Group (Thailand), MAP (Indonesia) and SSI Group (Philippines) are often having to “import” expats into management or even senior management positions because they couldn’t source a candidate locally. More to the point, the ecommerce market is in its infancy in Southeast Asia, enforcing the point that talent from maturer markets is a viable option.” – aCommerce, Thailand 

“There should be a proper place to develop these talents.” – AmorePacific, Malaysia 

“Cultural difference and attitude.” – Grab, Thailand 

The other 20% were either on the fence and believed the struggle to hire was due to other reasons:

“No, there’s a pool of strong candidates but it’s quite tough to find someone who shares the same values and goals as the company.” – Clickasia, Malaysia 

“Not really, a lot of great candidates out there. The thing is, sometimes the recruitment process and the interview questions are ridiculous and those are eliminating the great candidates from the recruiter.” – Facebook, Indonesia 

A quick overview of the feedback reveals companies are experiencing the same problems such as inflated salaries, job hopping, and lack of ownership and strategic thinking.

There are a few explanations for this:

First, ecommerce in Southeast Asia is young. The concept of digital only arose six or seven years ago around the time Lazada was born. There was no demand for online jobs, why should students study computer science and digital marketing over finance and science?

Given the novelty of digital, not enough time has passed for any individual to become an expert in the local market and therefore, narrowing the pool of talent with on-the-ground experience. This also means companies tend to hire foreigners to fill senior roles but are usually on short contracts and don’t intend to stay for 5+ years in a developing country.

Second, education in Southeast Asia lags behind the developed world as observed by the World Bank,

“Much of what South Asian students are taught is “procedural” or rote based. Students are poorly prepared in practical competencies such as measurement, problem-solving, and writing of meaningful and grammatically-correct sentences. One quarter to one third of those who graduate from primary school lack basic numeracy and literacy skills that would enable them to further their education.”

Whereas youth in North America are expected to hold part-time jobs, complete internships and have work experience before they even start university, young people in Southeast Asia are deterred from work to focus on studying until graduation.

This means fresh graduates tend to lack basic skills entering their first job – ownership, professional communications, stress management, etc. – and are often overwhelmed at fast-paced companies with heavy KPIs i.e. digital startups.

The top three skills companies believe are crucial for successful candidates are problem solving, strategic thinking and willingness to learn. The first two are also the hardest to find in the region.

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Third, companies are still applying traditional recruitment practices that won’t work here unlike in the West. Simple supply and demand.

Unless you are a Google or Amazon, recruiters cannot expect candidates here to undergo lengthy interview processes because quality talent will get snatched up. As a senior manager once told me, “the interview works both ways, I’m also checking to see whether I like the culture fit”.

Recruiters also cannot solely rely on education as a benchmark for future success or neglect candidates without Ivy League Masters.

For many individuals fortunate and wealthy enough to be sent abroad for higher education, minimum ‘white collar’ wage in Southeast Asia is seen as pocket money. These young professionals aren’t incentivised to push themselves at work when they have family businesses to fall back on. This is not to generalise an entire generation as lacking ambition but to highlight how important it is to understand their backgrounds and aspirations.

It is often individuals with operational experience in APAC and industry knowledge that tend to perform better than MBA graduates. An employee at Alibaba Group sums up her experience with hopeful graduates looking for new jobs:

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We have established there exists a talent challenge in one of the world’s fastest developing regions, but so what? Can’t companies slowly develop and build their teams when education and experience catch up? What’s the big hurry?

Three small numbers: 996.

The Chinese are coming (here)

996 = 9AM to 9PM, six days a week.

This is the working mentality of employees in Chinese companies. As detailed during an episode of Economist Radio, a venture capitalist from China shared his surprise seeing empty parking lots at 5PM during a visit to Silicon Valley.

“Even in large corporations like Tencent in China, you will see taxis lined up at 2AM taking hard working engineers home when they totally run out of steam working 12 hour days.” – Kai-Fu Lee, CEO of Sinovation Ventures

The digital landscape in Southeast Asia is already saturated thanks to the influx of Chinese players and large sums of investment, but in order to win, it’s not about capital when everyone has millions in the bank, it’s about human capital.

Alibaba’s crackdown on Lazada has already started; Maximilian Bittner out, Lucy Peng in. And after three years in Indonesia, JD.com also plans to expand to Thailand sometime this year through a joint venture with Central Group.

Given the speed of the market’s competitive playing field, there is a huge opportunity cost when critical roles are left unfilled. The fear that someone else is building something better, smarter and faster.

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How can companies navigate the talent challenge?

In Southeast Asia, soft skills should trump hard skills every. single. time.

Companies can teach someone to navigate SQL, manage time and set up Adwords, but they will struggle to teach conflict resolution, self-motivation and problem solving.

Like all business strategies, recruitment efforts need to be adapted to the local market in order to be successful, whether through an in-house team or third party platform. These were hiring best practices shared with me:

  • A resume is not a 360° review of an individual, experiences and results count more
  • Fancy education doesn’t guarantee strategic thinking or grit, less experienced but hungrier candidates will go further
  • Update old application systems that require 10 steps to upload a CV
  • Tap into your C-levels to scout for talent as they are your biggest network of eager candidates
  • Rethink unrealistic qualifications (ex. 10+ years in digital, 7 years in ecommerce, etc.) or you will never find someone
  • Continue training your people and have an internal culture accommodating to the locals

Companies in developing markets like Southeast Asia often focus on high growth and cash burn to grab market share, but forget to build a strong, positive company culture so the top talent actually want to stay.

Understand the three crucial skills required to be successful in the role and how the individual demonstrated this through his/her past experience and forget about all the other bells and whistles.

At the end of the day, how defensible is your team?