The five most valuable companies of today account for almost $2.4 trillion in market capitalization combined while only employing around half of the people that normally attend the New Year’s Eve celebration in New York City’s Times Square.

This number may not tell us much per se but when we think that the whole continent of Africa with a population of 1.2 billion people has a combined GDP of $2.2 trillion, (International Monetary Fund) we realize that there was never a time in recent history where so much wealth was generated by such a small number of people.

If we think of these tech giants in simpler terms, we have a company connecting people (Facebook), another one organizing the world’s data (Google), one that’s aspirational (Apple) and another that makes businesses more efficient (Microsoft).

Amazon, on the other hand, is set out to become the world’s marketplace.

And even to this day, they continue to hold true to its original mission statement, which we can consider as their “Box Two”, which is to be “earth’s most customer-centric company, where consumers can find anything they want to buy online and at the lowest price” (

In its annual letter to shareholders, Jeff Bezos characterized Amazon as an “invention machine” which three main pillars or “Box One” are: Prime, their marketplace and AWS. Not only will Amazon Prime members account for 50% of American households this year but they also spend more than twice as much and order much more frequently than non-members.

Members not only get free and fast delivery but other benefits such as video streaming, which in the end results in higher conversion rates and retention. The company is allocating almost $6 billion on original content next year.

With more than 63 million members spending around $1,300 each year and a retention rate of more than 90% (Consumer Intelligence Report, 2016), numbers seem bright for Amazon. We also see that last year, Amazon alone was responsible for 51% of the growth in US ecommerce while expectations are set on the fact that total global sales are predicted to reach $28.3 trillion by 2018 with ecommerce accounting for 8.8% (eMarketer, 2014).

Lastly, when looking into Amazon cloud service, AWS, we find that they lead adoption rate with 57% and around $10 billion in revenue this year. Spending on public cloud Infrastructure as a Service (IaaS) hardware and software are also expected to reach $173 billion within the next ten years – the market growth potential is massive.

Amazon ‘Box Three’

The new global logistics paradigm

Not that long ago, only a handful of retailers offered free shipping. Now, everyone is forced to try and do so, hoping they won’t run out of oxygen before it happens. Amazon has changed the rules of the game for the retail industry with its tremendous access to cheap capital that allows them to make multi-billion dollars investments in their fulfillment infrastructure.

They have opened more than 180 fulfillment centers across the globe surpassing any other retailer and only last year, they opened 28 sorting centers, 59 delivery stations and more than 65 Prime Now and Fresh delivery hubs with the intention of delivering goods to consumers in less than 60 minutes.

Amazon also offers a platform called Fulfillment by Amazon (FBA), which is a way for third-party retailers to take advantage of Amazon shipping infrastructure. FBA saw its active users grow more than 50% last year while nearly 50% of total third-party units delivered was through this platform.

To this day, the Achilles heel for Amazon continues to be its shipping costs, which account for 11% of its overall sales and have increased each year to almost $12 billion in 2015. Shipping fees collected – mostly through Prime users – are only 50% of all shipping transportation costs making this situation unsustainable in the long-run.

Amazon needs to reduce its dependency on external providers and change the role it plays in the delivery of products.

The Seattle-based company has not sat quietly and recently made of series of moves to strengthen its logistics arm:

  • obtained a freight-forwarding license through one of its Chinese contractors that allows them to sell space in cargo ships potentially becoming a sort of travel agent for freights
  • leased 40 US cargo planes that could account for 20 to 30% of its cargo volume independently
  • started testing the usage of parcel-drone delivery under the “Prime Air” platform
  • utilizes more than 30,000 robots at its warehouses
  • started delivering packages under the “Amazon” brand with leased truck trailers.

Amazon has also recently focused on its “last mile” strategy, which is the final and normally most expensive part of a package’s trip to a customer’s front door.

Amazon started to team-up with delivery startups in Europe, mostly the UK, and introduced its own crowd sourcing delivery service called “Flex” that uses contract drivers to deliver its regular packages directly competing with FedEx, UPS and if thinking about future possible business models, with Uber.

Amazon has also filed a patent to use transient warehouses that would allow smaller vehicles to access items from places other than brick-and-mortar locations.

This is Amazon’s move into expanding across the supply chain by focusing on logistics components that were previously outsourced — first inbound logistics and then home delivery.

Once they have built a sustainable and efficient transportation network over the next 5 to 10 years, others will be able to use it and Amazon will market it accordingly, just like they did with their cloud computing business.

This way of doing business is explained by Freightos CEO Zvi Schreiber in Techcrunch as being part of the development process at Amazon. First, you identify some inefficiency and start developing a technological solution internally, then as you scale that solution and it becomes a platform, you can offer it as a paid service to third-parties.

Amazon has done this for things like product development and warehousing to payment systems.

Figure 1. Amazon’s vertical integration in the supply chain (Freightos, 2016)

In the following years, we are going to see a disruptive change in the current transportation business as Amazon will not only compete domestically but it will also become a global delivery company capable of moving goods directly from China to consumers in the US or Europe through its transportation network that ranges from cargo ships to drone deliverance.

Nowadays, ocean freight continues to be mostly a “paper-based” industry with room for technological improvement with consumers keen to have faster and cheaper access to a broader range of products from around the world and merchants eager to have a broader market.

This is what Amazon believes is a unique opportunity to enter both the $1 trillion market of cross-border online sales and tap into the $350 billion ocean freight industry.

Disrupting fashion

Although most of Amazon sales comes from either books or consumer electronics, there’s one category that has seen tremendous growth over the past few years: clothing.

Amazon has invested heavily in setting itself as a fashion destination for anyone looking to buy clothing online. Many designer brands have decided to be on the platform to take advantage of its huge consumer base, its excellent supply-chain management and the fact that Amazon has promised them full price on their listings.

Figure 2. US sales of apparel and accessories (Quartz, 2016)

On the other side, we see that all major department stores have witnessed their stocks fall last year as their long-term market outlook seems rather obscure with more people turning to Amazon for apparel.

Macy’s had to close 100 stores last year and it’s said that others like Nordstrom and Sears would have to cut down around 30% their stores in order to have the same level of sales per sq foot as pre-recession (2008) times.

Amazon has shifted its initial strategy about fashion to start offering more high-end designer names in its listings somewhat successfully with “accessible luxury” brands but most higher-end luxury labels still don’t want to be associated with what they consider to be a “simple marketplace” and diminish their brand equity.

Luxury is defined mostly as a customer experience that is difficult to replicate online and by no means in a template-ized format where their listings would be next to fast fashion or lower-end brands. But this could turn out to be a good opportunity for Amazon to acquire brick-and-mortar stores in exclusive locations -Macy’s for example – and build what could become an aspirational brand in the future, much like how Apple went from being a tech company to a luxury one.

Even when they are not officially on the platform, high-end luxury brands like Louis Vuitton also have products listed on Amazon. We can see that even when their products rank higher than other prestige brands, the bulk of their sales happened in the grey market through third-party sellers.

This phenomena involves mostly apparel and fragrances brands who can’t control the flow of counterfeits or legitimate discount listings.

Amazon keeps a close eye on the volume of these listings but only for partner brands, as is the case with Calvin Klein who after signing a partnership with Amazon went from having 7,824 SKU fragrances in 2014 to only 38 one year later.

This is the way that Amazon forces high-end brands to become partners and have an official store inside the marketplace.

Amazon’s move into the fashion industry does not only involve increasing brand equity by bringing higher-end brands into its platform but also positions them as a key player.

To do this, the company has launched its own private fashion label hiring executives from top luxury fashion companies and launching seven in-house brands.

They understand that branding is shifting towards the consumer and with its loyal and affluent Prime user base,they will surpass every department store out there and become the largest clothing retailer in the US by 2017.

Amazon entering our house

In a recent conference, NYU professor Scott Galloway stated that our previous understanding of how market capitalization is made in the tech industry has completely changed in the last few years. In the past, we would argue that value was dependent on the amount of users we had and how engaged they were and we could cite Twitter as a clear example of this with its vast (but declining) user base.

He argues that the algorithm for value is now based on how many “receptors” we have,

How much user data and user behaviour patterns we can collect and what we do with this data for the consumer in terms of intelligence.

Amazon had pioneered this idea long ago when they enabled shoppers to make informed purchases through user reviews while reinforcing search algorithms. This algorithm works by comparing historical and recent sales to determine a sales rank, which it then uses to support search placement.

Based on the user recent purchases and what product listings they visited, Amazon shows a customized home page relative to each person and while they provide users with the most information than anyone else about a product, they also ensure consumers that they are selling it at the lowest possible price.

While BestBuy and Walmart change their prices about 50,000 times each month, Amazon does it 2,500,000 times each day reinforcing the idea to Prime users that they don’t have to go anywhere else to buy something online.

Almost 20 years ago, the world of ecommerce was shaken when Amazon filed a patent for a “one-click” payment system that allowed customers to avoid the hassle of entering their personal information each time they make a purchase. This patent covered a business method with such a broad definition that created an initial technological lead by Amazon for many years.

With the recent introduction of the “Dash” button, Amazon now offers these “one-click” purchases within the household as a way for consumers to effortlessly order goods for their everyday lives but have no desire to spend time purchasing it, such as cleaning detergent, for example.

This was a bold move by Amazon to lure consumers away from brick-and-mortar stores and also learn even more about their users purchase history.

At the same time, it came at almost no cost for them because 150 brands were each sponsoring their own version of the “Dash”. But it doesn’t stop there, as Amazon launched a device called the Echo that uses cloud-based AI Alexa to perform tasks that range from answering queries about the weather to controlling smart home devices and making purchases.

Alexa has recently been opened up to external developers and more skills are introduced each week by the community – over 3,000 as of now. With sales reaching 3MM units this year, even other tech giants like Google had to come up with their own version of the Echo (using “conversational actions” instead of skills), to not miss the opportunity of entering ‘our’ house.


Not many companies have a broader “Box Three” than Amazon does at the moment. It has the ambition to disrupt not only the retail and fashion industries but also global logistics and content-on-demand to name a few.

Amazon is already the undisputed leader in ecommerce and cloud infrastructure (“Box One”) and have an affluent and loyal Prime user base.

My prediction is that Amazon will continue to secure this user base by spending more each year on generating original content for its users. The budget for next year ranks 3rd worldwide only after ESPN and Netflix.

It will also add more special perks such as “Prime Day” and finally continue providing an ever faster and cheaper service for consumers.

As Jeff Bezos said in a recent conference, “I don’t think anyone will ever want to spend more in shipping and have longer delivery times”. These users belong mostly to upper-middle class households that have yet to shift most of the purchases they do from offline to online.

Amazon wants to capitalize on that by offering a seamless experience to users through Dash and Echo for everyday item replenishment and through Amazon Fresh and Pantry for grocery delivery.

Amazon will surely open brick-and-mortar stores that will serve as warehouses and offer curated items with a 5-star user rating along with user reviews similarly to what they currently do in its Seattle bookstore or the recently opened cashier-less convenience store they call “Amazon Go”.

Amazon Go serves as proof that vertical integration is key to this kind of disruption as no other company would have ever pulled something like that off through corporate partnership.

As only 3 to 5% of the shopping we do is actually enjoyable and we prefer to do it in brick-and-mortar stores, Amazon understands that to capture the mid-high end market, they need to transform its brand into an aspirational one. For that, they need to provide a disruptive shopping experience inside its stores and make a name for themselves in the fashion industry.

Finally, through all this user generated data, Amazon machine learning algorithms will learn our purchasing behavior over time and eventually be able to “predict” what our purchases will be, only asking for confirmation before ordering the groceries for the week.

That way, most of today’s purchases, both offline and online, will happen through Amazon thus increasing the current Prime user yearly expenditure from $1,300 to $10,000 pushing market capitalization to a trillion dollars.

By Nicolas Metallo, the original article can be found here. Editing by ecommerceIQ

The Philippines often comes second by various factors when compared to its peers in Southeast Asia. It’s the second most populous country in the region after Indonesia with 103 million civilians. It’s also the second poorest country after Vietnam and currently has the second smallest ecommerce market at $0.5 billion.

Google & Temasek predicted a rosy future for the Philippines’ ecommerce market to become bigger than that of Singapore, Vietnam and Malaysia by 2025 at $9.7 billion.

However, there are several signs indicating online retail has a long way to go before it picks up in the country:

  • Low ecommerce spending
  • Lack of local ecommerce players
  • Slow internet

Can the Philippines’ ecommerce actually reach its predicted potential? We take a deeper look at some of the reasons why it will be challenging.

First, the good things

The Philippines population is projected to increase by 13% to 116 million by 2025, presenting a bigger market for businesses to sell their products.

Beneficial for ecommerce growth is also the 10 million Filipinos living and working overseas.

Around 3.5 million of them work and live in the US, which has advanced their online shopping behaviour and paved the way for innovative cross-border logistics businesses offering deliveries from the US to the Philippines.

Overseas workers have also facilitated the birth of many digital payments businesses in the country as they send remittances home to their family.

Filipino overseas workers sent home $29.7 billion in 2015.

These money transfers have made the Philippines the top third remittance-receiving country in the world after India and China and spurted the growth of fintech startups providing transfer services, such as Ayannah,, BloomSolutions, using blockchain technology to serve the unbanked.

The innovative payments and logistics solutions work in favor for ecommerce development as online companies are dependent on the ease of payments and the efficiency of logistics networks for speedy delivery to attract customers.

As a result, Lazada, the Southeast Asia’s marketplace for everything, ranks as the 7th most visited website in the Philippines.

No money, no honey?

Despite the mentioned factors, ecommerce has not yet picked up as quickly in the Philippines as it has elsewhere in Southeast Asia. Although 30 million people reported shopping online in 2016, the Philippines has the lowest average annual retail ecommerce spending per person.  

A Filipino spent on average $33 shopping online in 2016.

Even the Vietnamese, who are the poorest of Southeast Asian nations spent 67% more per person shopping online and Malaysians with two times less online shoppers spent twice as much as Filipinos in 2016.

According to Statista, people shopping online in the Philippines are expected to increase by 42% to 48.8 million in the next five years and the average annual spend on ecommerce per person will reach only $48 in 2021.

For comparison, the Vietnamese are expected to spend on average $96 and Malaysians – $129 in 2021.

Where are the local players?

Low online spending per person is not inspiring local businesses to invest in ecommerce  as seen by presence of a few local ecommerce players.

The Philippines is a market where Southeast Asia’s darling Lazada is dominating ecommerce with around 40 million monthly visits.

Local ecommerce players, be it marketplaces or vertical webstores, are not even close to Lazada in terms of number of visitors.

And overall, the competition is rather thin in any category but more brands are working to capture the growing ecommerce potential.

There are a few first movers that are choosing a full ecommerce strategy such as local telecommunications service provider Globe Telecom and retail brand Bench, or global brands Payless ShoeSource and Adidas, and performing quite well. It’s also common for traditional brick-and-mortar retailers such as SM Store to open a shop-in-shop on Lazada to test the ecommerce waters first before investing in a strategy.

Slow and slower

Filipinos are connected to and browsing the second slowest internet connection in the Asia Pacific region. While a speedy internet doesn’t guarantee strong ecommerce behavior, it does impact a good user experience. Who would be willing to browse for a new phone or a pair of shoes if it takes ages to load pictures and product descriptions?

On top of this, the country ranks lowest among its Southeast Asian neighbors in terms of ease of doing business because of slow and complex procedures of starting a business, enforcing contracts and protecting minority investors, which doesn’t help to boost online trade either.

So how to reach its golden potential?

While the large population, familiarity with cross-border deliveries and digital payments offers a great foundation for ecommerce growth, projections of its future market growth greatly vary.

Statista projects the Philippines ecommerce will reach only $2.345 billion in 2021 making the country the smallest of markets in Southeast Asia, while Google and Temasek expect the market to be $9.7 billion by 2025.

The difference will depend on the number of first-movers that kick off the snowball effect.

Recently Ayala Group, one of the largest conglomerates in the country, acquired a 49% stake in online fashion retailer Zalora Philippines. The group hopes its footprint in banking, real estate and telecommunications will generate synergies throughout the ecommerce value chain.

If the takeover proves successful, it could inspire others to follow and contribute to ecommerce growth.

To increase ecommerce growth in the country, there are several things needed to be done. Some of the issues are up to the Philippines government, such as increasing the internet speed by breaking the existing telecommunications market duopoly and opening it up to competition or easing the company registration process.

There are few things businesses themselves can also do to add to the growth:

  1. Invest in market education to explain how ecommerce works and provides convenience
  2. Training workshops for small and medium sized sellers, as well as larger traditional players can nudge more businesses to explore different channels for sales
  3. Improving security of their sites and adding secure payment methods to build trust   between businesses and consumers concerned about fraud
  4. Attract more customers online by selling ‘lifestyle’ services, insurance, etc.

The collaborative effort in the entire ecosystem between brands, retailers, service providers, logistics players, marketing agencies, consumers, etc. will help take the Philippines ecommerce market to the billions.

By: Aija Krutaine

Amazon was initially poised to make its much anticipated foray into Southeast Asia in Q1 this year. Now, it seems like the ecommerce giant hat delayed its entry to ‘later this year’, according to reports.

The long awaited launch has been relatively under the radar, although sources revealed that Amazon was planning to introduce its Prime and Fresh services to Southeast Asians. The region’s current most popular marketplace Lazada has in turn doubled down in the region to prepare for Amazon’s arrival, having acquired online grocery service Redmart in November last year.

But it seems that the US ecommerce giant is prioritizing other projects for now. Here are some of its most recent activity, including an acquisition and other market entry:

Source: Amazon Australia Twitter Account (Not yet verified)

Amazon poised to enter Australia

ABC Australia reported on 22nd March that Amazon is planning a launch down under and promising cheaper prices, faster delivery times and its online groceries delivery service. The company has reportedly hired more than a hundred people to cover roles in IT and logistics.

“They are the animal that went right across America devouring all before it, sending everyone broke,” said Gerry Harvey, founder of Australian online retailer, Harvey Norman.

There isn’t a confirmed launch date yet for Amazon AU.

Amazon acquires to tackle the Middle East

Amazon has confirmed its acquisition of Dubai online retailer, The online retailer has similar offerings as Amazon, selling electronics, fashion and household items to six Middle Eastern countries. It was launched in 2005 as an online auction site, and pivoted to become an online marketplace in 2011.

Saudi Arabia and the UAE are attractive to Amazon being among the top countries worldwide for mobile penetration.

Souq has gained a large following, with an average 27 million visits spanning over six months based on SimilarWeb traffic.

Source: SimilarWeb

India’s ongoing battle

With Alibaba’s injection of $200 million into Paytm and biggest rival Flipkart’s recent $1 billion fundraising to solidify claims on India, Amazon will need to focus on the country to capture India’s projected $220 billion online GMV opportunity.

Bank of America Merrill Lynch report stated that India could become Amazon’s second largest market (after the US) after its investment of $5 billion into operations there.

“While revenues are relatively small to Amazon’s global scale, Amazon India could generate $81 billion in GMV and $2.2 billion in operating profit by 2025,” – Economic Times India  

There’s a lot of buzz brewing in India – Flipkart restructuring, Walmart investment, etc. – it’s no wonder Amazon is focusing on the activity.

But let’s not forget about Southeast Asia

Delayed or not, Amazon’s postponed launch date should be encouraging for local online and offline players alike, as it gives them more time to gear up to fight the giant.

Amazon is quietly laying down the groundwork for its Southeast Asian launch to meet the clear demand for its services here.

Google Trends over 12 months show that people are searching for Amazon, in relations to Singapore.

Google Trends search for, Inc. in Singapore

And it isn’t only retail businesses that are sweating because of Amazon’s global stretch. Advertising giants such as Google, especially as over 55% of Indonesians start their product search on a popular marketplace such as Lazada ID or Tokopedia.  

“The long-tail capacity, common for marketplaces, makes it feasible for Amazon to not just be an online retailer and a marketplace but also the search engine where it all starts.” Early Moves

Players, are you ready?

As ecommerce is growing in Southeast Asia and the latest Digital in 2017 report shows more respondents in each country have made a product or service purchase online compared to a year ago, the window is opening also for cross-border online shopping.

According to the Consumer Barometer by Google, 19% of people on average in 2014/15 have made a purchase online in Southeast Asia. But how many of them have bought something online from a foreign country? Let’s find out.

Singaporeans are the most active users purchasing products online from overseas – two out of three people do it more than once a year. The absence of Goods and Services Tax on imported goods of S$400 or less is highly attractive to Singaporeans.

They are followed by Thais and Malaysians of which nearly every second person buys something online from foreign countries. It is not a coincidence as Singapore, Malaysia and Thailand are the richest of the six Southeast Asian nations.

Source: The Consumer Barometer Survey 2014/15. Base: internet users who have purchased online, n=14174.

In all countries, the product categories that reap the most cross-border orders are clothing & accessories or footwear. People are also buying cosmetics, beauty or health products and books, CDs, DVDs or Video games from other countries.

Source: The Consumer Barometer Survey 2014/15. Countries included: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Base: internet users who have ever purchased a product or service online from abroad, n=8750.

Better availability and quality of products are among the top reasons why people are looking to buy things online from abroad, followed by better conditions and broader range of products.

Source: The Consumer Barometer Survey 2014/15. Base: internet users who have ever purchased a product or service online from abroad, n=8750.

Despite the perks of cross-border online shopping, there are also several hassles. Shoppers in Southeast Asia have experienced deliveries that take too long and lack of international shipping options. Their trust has also been diminished as they see online shopping websites as “insecure”.

Source: The Consumer Barometer Survey 2014/15. Countries included Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Base: internet users who have ever purchased a product or service online from abroad, n=8750.

On the other hand, for those who have never bought products online from abroad, Indonesians (90%) and Vietnamese (51%) stand out. In comparison – only 13% of Singapore has not ever ordered online something across the border.

People do not order products online from abroad as they believe it is more expensive, delivery takes longer and returns will be difficult or costly.

Source: The Consumer Barometer Survey 2014/15. Countries included: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Base: internet users who have never purchase a product from abroad, n=4827.

There are several takeaways for ecommerce businesses, both targeting consumers locally and also those willing to sell their produce outside their country’s borders.

Local online stores and marketplaces would benefit from studying the motivation of those who dabble in cross-border ecommerce to offer what consumers are lacking. For example, consumers in Indonesia and Vietnam are stocking up on quality clothing, accessories and footwear. In Singapore, consumers are ordering from abroad because of appealing offers so providing attractive deals on the website might be a good way to catch their attention.

For those looking to expand their customer reach and tap into the Southeast Asia’s population, offering more attractive delivery options might be key. While the level of infrastructure development (or lack of it) varies across Southeast Asian countries, there are number of established players such as DHL Ecommerce and Lazada Express as well as startups like LalaMove and NinjaVan that are looking to address the logistics challenges. Improving the security of the website and offering convenient payment methods would also help transition more people to try ecommerce.

By enhancing the shopping experience and tackling the above mentioned issues, hopefully the myths that surround the online shopping in the region will be dissolved but there is still much to do.

By: Aija Krutaine

Product research is an essential part of the consumer decision making journey. After the initial conception of the idea to buy something, consumers enter the phase of active evaluation gathering information and researching.

Consumer decision journey

Source: The consumer decision journey, McKinsey Quarterly, June 2009

While the ‘research phase’ is driven by consumers as they control where they look for the information, marketers can find ways to influence the process. To do that, however, it is important to know where consumers first find information about products.

Where do Southeast Asians come across new products or offers before making a purchase?

The Consumer Barometer from Google has some answers for that. It’s not a surprise that product discovery in Southeast Asia, similar as elsewhere around the globe, is driven by previous experience and word-of-mouth.

At the same time, pre-purchase research and advertising have influence over consumer decisions.

Source: The Consumer Barometer Survey 2014/15. Countries included: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Base: internet users, n=38384

On average, stores and showrooms are still the most common place where 51% of consumers in Southeast Asia discover new products during product research. Online comes second with 39% of consumers while 4% are contacted through the phone via text or phone call.

The behaviors change when we look at each country within Southeast Asia:

Source: The Consumer Barometer Survey 2014/15. Base: internet users, n=6527

Singapore leads the digital product discovery journey as 60% of consumers use the internet to find out about new products or offers. Only 34% of the country’s consumers first source of information comes from a store.

In Malaysia, more consumers are first aware of products during the research phase online than in store.

In the Philippines, Vietnam and Thailand, stores are the first place where consumers begin product discovery but the number of customers that start online is close to the region’s average at 35 to 38%.

In Indonesia, however, the situation is quite different. 76% of consumers discover new products in stores and showrooms, while only 18% come across new finds online.

While in most Southeast Asian countries, the number of consumers being introduced to new products over phone via text messages or phone calls is small, marketers in Thailand have found the mobile phone a good channel to reach customers.

11% of consumers report phone as their first point source for finding new products.

To influence the product discovery journey for Southeast Asians, advertising online and on TV are two of the most effective channels to reach consumers but as expected, the situation differs across countries and verticals.

Source: The Consumer Barometer Survey 2014/15. Average of Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Base: internet users, n=5338

In Indonesia, advertising on TV is three times more effective than advertising online as 44% of consumers report learning about a product they purchased on TV compared to 15% learning through online advertising.

But for clothing and footwear, advertising online in Indonesia can reach more consumers than advertising on TV.

In Vietnam, online advertising has helped 43% consumers discover new products they purchased, almost two times more than 24% of consumers who became aware of new products through advertising on TV.

Source: The Consumer Barometer Survey 2014/15. Base: internet users, n=5338

Marketers in Southeast Asia have multiple channels to reach consumers and should keep an open mind when promoting for their respective brands.

A mix of online and TV advertising, running a content rich blog and betting on relevant keywords are as important as training sales staff in store to learn what customers want to recommend new products.

Happy basket building.

Fashion is one of the first things that comes to mind when thinking about online shopping and nowadays, there are plenty of brands and retailers to choose from.

Yet, did you know around 60% of all Southeast Asia’s fashion and lifestyle retail is attributed to small vendors who sell at places like Bangkok’s Jatujak market, Platinum outlet mall, or Singapore’s Haji Lane?

In Indonesia, it’s even more – 85% of retail is thanks to small shops and resellers and what’s even more surprising is that most of these sellers are not taking advantage of the internet revolution.

This is exactly what Ankiti Bose realized on a trip to Bangkok a few years back and together with Dhruv Kapoor, the duo built Zilingo in 2015. The company is a fashion and lifestyle marketplace focused on helping small sellers in Thailand, Singapore, Malaysia and most recently, Indonesia, expand their customer reach.

Bose shares with ecommerceIQ how her marketplace competes in an already saturated online fashion market in Southeast Asia and what her newest B2B venture is all about. 

“Businesses first”

While most companies create a product for the end user, Zilingo was specifically built with the sellers in mind in order to help them create virtual storefronts and overcome the difficulty of managing large order volumes and fulfillment.

“I realized all these sellers had smartphones and probably a few had Instagram, Facebook shops or Shopee accounts. While it is a great way to be discovered, there’s a lot of noise and complexities to running a business on these platforms. We knew that writing some Magento code wouldn’t solve this problem; we needed to educate them,” says Ankiti.

Part of the reason why current ecommerce platforms such as Shopify don’t tempt small sellers to open online shops is simply because they’re in English.

Understanding that English proficiency levels vary widely across Southeast Asia, Bose aimed to build a localized backend system that allowed sellers to easily track analytics, manage inventory and schedule order pick-ups. The mobile-first site was good to go within five months.

When a buyer purchases a product on the site, the seller is notified on his app to confirm the order and provide a slot for a product pick up. Zilingo’s logistics partners, integrated in the system, then go to the seller’s shop to pick up the item and deliver it to the buyer. The company doesn’t hold any inventory itself.

Zilingo marketplace was built with the sellers in mind to make it easier for them to create an online store and help them track analytics, manage inventory and schedule order pick-ups.

For these services, the e-marketplace charges sellers 15-20% commission on their products plus a per-order fulfillment fee. According to Bose, businesses don’t mind paying the commission if they get more orders as Zilingo helps them to be discovered by buyers.

“Our seller churn is less than 7% annually meaning sellers don’t drop off once they see the value of the platform,” says Bose.

The less than two year old marketplace has managed to secure 2,700 sellers all trying to capture the attention of 1.1 million users, of which 2% are active buyers. All of this could be the reason why Zilingo managed to secure a $8 million Series A in September 2016.

New ventures

Thailand is Zilingo’s biggest market in terms of sellers and buyers; Singapore follows very closely. While around 80% of the company’s gross merchandise value comes from these two countries, Zilingo is also present in Malaysia and launched in Indonesia in the first week of February. The company also ships to other markets such as Hong Kong, Australia and United States.

“Customers from Korea, Hong Kong, Australia or the US have become an unexpectedly fast-growing part of our business,” says Ankiti. “Probably because the only supplies that were available to these buyers were typically from China and while prices were cheap, the product would arrive completely different from what was expected.”

According to Bose, Thailand is an exceptional market to find a great price versus quality and relevance balance. “If there is something on a catwalk in Milan, it will take three seasons to become available in Indonesia, but it would probably be on hangers in Bangkok the next week,” says Ankiti.

Not only are individuals exploring the Thai fashion scene, Zilingo is also seeing increased interest from businesses – wholesalers and resellers from far-flung areas who are trying to buy in bulk.

“We have many requests to buy 10, 20 or maybe 100 items so we decided to create a separate platform called Zilingo for Business where they can get a better rate from the seller,” says Ankiti. “This also keeps our cohort analysis clean.”

Marketing to millennials

Zilingo is a mobile-first platform. Bose shares that while the marketplace is available on desktop, 98% of its users are on mobile and 83% of users are millennials. Being a millennial herself, Ankiti figured early on she needed new ways to get the attention of buyers.

Zilingo is a mobile-first platform and 83% of users are millennials.

“Other marketplaces are trying to sell to me in a way that I don’t naturally consume media anymore. Majority of my phone time is spent on Instagram Stories or Snapchat and sometimes Facebook. We decided to go big on video and build a Snapchat presence and give sellers an opportunity to position themselves on these channels,” explains Ankiti.

She calls this approach “content on steroids”.

The way it works is that users see products in a video that they can click on to go to the product discovery page. From there, it’s only a few clicks to purchase.

The marketplace does allocate a large budget for digital marketing, but Ankiti ensures it’s spent efficiently thanks to her past experience at Sequoia and Mckinsey.

“Facebook is our most optimized marketing channel and although we’re spending, we recover it back within nine months. For international orders from US or Australia, the cost is covered on the second transaction,” reveals Ankiti. “VC money is quite valuable to us.”

Behind the scenes tech

Besides marketing, technology is the other big expense on Zilingo’s budget. Of around 70 employees across four countries, 25 are engineers based in Bangalore and Singapore. Their efforts are focused on applying machine learning to product discovery and image recognition technology to improve the company’s online shopping experience.

While running operations in several countries, Zilingo is keeping it light. The company has around 70 employees across four countries, 25 of them are engineers.

The Zilingo app lets a customer snap a picture of a blouse or dress and browse through similar items available on the platform. The company recently featured an article on the top 15 looks from the Golden Globes Awards and the video resulted in an 80% higher click-through-rate than any other content on the site.

The development of product discovery technology is even more important for markets such as Indonesia.

“I think people often underestimate the importance of technology required to do very relevant targeting when you have a market that wants both Western and Muslim wear. Either you have to separate the products or you have to have great machine learning that tailors content to somebody who wants to buy only hijabs and not bikinis,” says Ankiti.

The challenges faced by everyone

Zilingo is not an exception to the pain points logistics and payments poise to ecommerce in Southeast Asia. In Zilingo’s case, they might be even more profound as the company does not have its own warehouse and items must be picked up from 2,700 sellers.

“There was a time when one of our sellers from Taiwan would ship to Thailand and deliver the product sooner than an upcountry seller shipping to Bangkok. At that point we understood we had to do something,” says Ankiti.

The marketplace is open to working with logistics companies both large and small and is constantly on the lookout for new partners. It has managed to reduce delivery time in Thailand from 5 days to 2-2.5 days, yet its priority is to get it down to 1-2 days.

Payments are the second problem as cash-on-delivery and money transfers through bank branches, ATMs and payment kiosks are the preferred payment methods.

“The problem with these payment methods is converting orders to real transactions. Cancellations are common when people have to go to ATM or a branch to pay for the items,” says Ankiti.

“Marketplaces run on fintech and logistics companies. At the end of the day it doesn’t matter how great the product discovery is if the delivery experience sucks. You will hate the marketplace. It’s no wonder why so many of the successful internet companies in this region are C2C marketplaces – the problem is between the buyer and the seller,” says Ankiti.

We hear you Ankiti.