“Sustainability is not a tech problem, it is a human weakness.”

A fireside chat about Thailand’s competitive advantage at Echelon Thailand 2017 revealed a few more interesting tidbits regarding startup up growth, government involvement, and investment best practices shared by industry expert Dr. Alex Lin, Head of Ecosystem Development at SGInnovate, an establishment that connects over 7,000 regional and global corporates.

Let’s dive in.

The government, the corporation & the startup

“Governments love corporations because they bring jobs and money. Startups hate corporations because they are so rigid. It’s all love and hate,” says Alex.

“The moment you build a lot of startups, corporations will move in because very simply, they cannot innovate. Innovation threatens the CEO, he doesn’t want anything to come in and ‘kill’ his job.”

So how should businesses go about innovation?

“What’s the definition of innovation? It’s looking at the status quo and changing it.”

“What is the job of the government? It is to uphold the law – follow the rules that they created. They aren’t able to change the law, only the top dogs, so are they innovative?” explains Alex.

Governments need startups to innovate, they need the corporates to provide the customer base, domain knowledge and infrastructure and they themselves need to push initiatives – all three units need to work together to create a healthy ecosystem for growth. But unfortunately, this doesn’t always end up being the case – why?

“A strong opportunity for Thailand is fintech because there is a large chunk of the population not being served, they are the unbanked,” says Alex. “If they don’t have a lot access to finances, per unit cost is higher and they can’t buy in bulk.”

So why are there still so many unbanked (approximately 72% of Southeast Asia to be precise)? Banks simply aren’t interested in them.

And if fintech startups are being mentored by a bank, they end up becoming products of the bank to serve their agendas.

“Over 600 startups that were mentored by a bank and none of them ended up serving the unbanked.”

What other business opportunities exist in Thailand?

“Digital healthcare is a good market for Thailand because the country is a very homogenous market, i.e. everyone wants to be whiter, while in Singapore you have a mix of tan is good, white is good,” says Alex. “Thais are also willing to experiment with treatments.”

“What about not-for-profits startups?” asks an audience member.

Dr. Alex Lin here pulled a Donald Trump (in his own words).

“Global warming is a great cause and I would gladly donate or attend fundraisers for these charities but I would never invest in them because there is no ROI.”

“If you are a startup, you need to think about who is going to pay you and if you can’t survive, you have to figure that part out first.”

‘Solve people’s problems first. Don’t build technology and try to fit it in somewhere.’

 

#EchelonTH2017

Here are the ecommerce headlines you should know to wrap up the day:

1. Grab welcomes Honda as a shareholder and partner

The funding comes as a number of car manufacturers are developing AI and robotics for autonomous vehicles.

Grab didn’t disclose the funding terms in a statement today, but it said a memorandum of understanding with the auto giant revolves around “[collaboration] on driver education programs to promote motorbike safety, efforts to reduce traffic and environmental congestion in urban areas through rideshare, and other technological advancements.”

Interesting as Uber in May joined forces with Honda competitor Toyota, which is also accelerating its self-driving strategy.

Read the rest of the story here

 

2. Pushing to make all SIMs in use be registered 

Ooredoo Myanmar, an international telecommunications company, has added new channels for its subscribers to use to self-register, in line with a government directive that all SIMs in use in the nation be registered by next year.

Thailand’s National Broadcasting and Telecommunications Commission is also calling for the introduction of a common regional SIM registration platform covering prepaid services in Thailand, Cambodia, Laos and Myanmar as a counter-crime measure.

This will help the governments collect better mobile data and understand the growth of mobile in their relative countries.

Read the rest of the story here

 

3. New platform to promote trade with ASEAN

The China-ASEAN platform, eshopasean.com, is operated by China’s retail giant Suning Commerce Group Co and designed to help Southeast Asian small and medium-sized enterprises better crack the China market, where a growing number of consumers want foreign products.

Jiang Zengwei, chairman of the China Council for the Promotion of International Trade, said ecommerce and big data will play a very important role in boosting multilateral economic ties.

“The agricultural produce and daily products from Southeast Asia are very popular among Chinese consumers. Cross-border ecommerce is becoming a new growth engine,” Jiang added.

According to Suning, the cross-border ecommerce platform will initially focus on importing products from ASEAN countries, focusing on food, cosmetics, healthcare products, fruit and other daily necessities.

Read the rest of the story here

This is the first of a four-piece series breaking down Alibaba’s plan to shake up China’s logistics: Cainiao Network. Part 2, Part 3, Part 4

The Beginning

In May 2013, Alibaba, along with Yintai Group, FOSUN Group, FORCHN Logistics, SF Express and a group of leading Chinese last-mile logistics companies conveniently labeled “Three TOs and One DA” (YTO Express, STO Express, ZTO Express and Yun Da Express) established Cainiao Network Technology Co. Ltd.

This consortium led by Alibaba is committed to building a “China Smart Logistics Network (CSN)” to realize 24-hour delivery of any product to anywhere in China and a total of 300 billion RMB ($43 billion USD) was invested to kickstart the project.

Alibaba’s announcement of Cainiao and Jack Ma entering the logistics industry was like an atomic bomb dropping, with rippling effects across the entire value chain including the Internet, ecommerce and real estate industries. People soon started speculating that similar to how Taobao transformed an entire generation’s shopping behavior, Cainiao would disrupt and change the traditional logistics ecosystem.

But during the noise, Cainiao retreated into silence. There has been very little public information about the company except for leaked news that it had been gradually acquiring more land as part of a much bigger and soon to be revealed strategy.

All this changed two years later on May 28, 2015, when Alibaba held the “Cainiao Jianghu Assembly” to officially launch Cainiao, along with answers to a series of personnel changes and the strategic positioning of Cainiao Network’s future.

This four-part series intends to shed more light on the series of actions and arrangements made during the period of time between the establishment of Cainiao Network in 2013 and the May 2015 assembly.

We will learn more about Cainiao Network’s underlying business model, why Alibaba initiated it and what the implications are for industries inside China and beyond. With Alibaba’s march into Southeast Asia through the Lazada acquisition, there may be signs that Jack Ma’s Cainiao Network strategy may not only be limited to China.

Analysis of Cainiao’s Ownership Structure

To fully understand Alibaba’s Cainiao strategy, we need to dive deeper into the consortium’s ownership structure. Who are the key players and their intentions? Their backgrounds and roles within the consortium and their percentage share holdings reveal Jack Ma’s master plan.

As mentioned at the beginning of this article, Cainiao’s investors include Alibaba, Yintai Group, FOSUN Group, FORCHN Logistics, SF Express and “Three TOs and One Da”. The proportion of each investor’s investment is shown in the table below:
cainiao southeast asia

Brief introduction and analysis of each investor’s background:

First, FOSUN Group founded in 1992, is mainly engaged in real estate investment, pharmaceutical and steel industries, and its far-reaching professional experience ranges from land acquisition, construction, and warehouse real estate property management.

Second, Yintai Group has long been involved in department store chains, particularly in supply chain management. When Cainiao Network was first established, Shen Guojun from Yintai Group was appointed as its CEO. It was because of Yintai Group’s strengths in this area that Shen Guojun was appointed to take charge of Cainiao’s warehouse and logistics operations.

Third, Alibaba’s stake in Cainiao Network accounts for the largest chunk — a 43% of total investment. This is mainly based on the following:

  • Alibaba has a lot of capital
  • Alibaba is acting to unite different parties in order to address its own weaknesses with regards to warehousing and logistics
  • Alibaba has always favored an asset-light, platform approach (i.e. Taobao and Tmall) and doesn’t plan to become an asset-heavy organization. Let other players do the heavy lifting while Alibaba invests into and builds a platform for intelligent logistics it is able to unify and control the flow of information and finance.

Given that Cainiao could be considered a logistics play, then why have the “Three TOs and One Da” companies and SF Express each invested only 50 million RMB ($7.2 million USD) to account for 1% of total investment?

SF Express and the “Three TOs and One Da” are courier companies. Their participation reflects the resolution of Cainiao Network to become China’s logistics backbone, while also ensuring that risk can be properly dispersed. But why do they account for such a tiny stake?

This may be due to Alibaba’s business arrangement considerations. Through analysis of the relevant investors, we can see that in the future business operations of Cainiao Network, FORCHN Logistics will be mainly responsible for line-haul logistics, and the “Three TOs and One Da” companies and SF Express are left to compete for last-mile delivery.

Through this shareholder structure: FOSUN builds warehouses, Yintai manages warehouse operations, FORCHN is responsible for line-haul logistics, the “Three TOs and One Da” companies take care of last-mile delivery, and Alibaba provides the platform and controls flow of information and financial reconciliation.

The stage is set for Cainiao Network to become the single biggest backbone for logistics in China.

Analysis of Cainiao’s Executive Team

Within the short two years after the founding of Cainiao Network, the company has been through several executive changes. All of which were strategic and diving deeper provides additional insight into Cainiao’s strategy.

When Cainiao Network was first established in 2013, Jack Ma himself served as chairman of the board and Shen Guojun served as CEO. One year later, Shen Guojun became executive Chairman of the Board of Cainiao Network while Zhang Yong, COO of Alibaba Group at the time, took over as CEO instead.

Finally, in 2015, it was disclosed at the “Cainiao Jianghu Assembly” that Tong Wenhong would serve as president of Cainiao Network, specifically responsible for Cainiao Network’s business operations. Who are these big shots?

Shen Guojun (Cainiao Network Founding CEO; former Chairman)

cainiao southeast asia

Shen Guojun founded China Yintai Investment Co., Ltd. in 1997 and served as Chairman of the Board. As the founder of Yintai Group, Shen Guojun led the company’s expansion into commercial retailing, real estate development and natural resources, eventually becoming the 97th richest person in China with an estimated net worth of $2.3 billion.

Shen has also established many well-known landmark projects such as Beijing Yintai Center, Hangzhou Lake Coast Yintai, Hangzhou Wulin Yintai Department Store, Hangzhou West Yintai City, Chengdu Yintai Center and Ningbo Yintai Universal City just to mention a few. As of 2015, Shen Guojun retired as chairman of Yintai Group Board of Directors and Zhang Yong from Alibaba took over.

Zhang Yong (former Cainiao Network CEO, current CEO Alibaba Group)

cainiao southeast asia

Zhang Yong is the current CEO of Alibaba Group, a member of the Alibaba Group Board of Directors as well as a founding partner of Alibaba. A Shanghai native, Zhang Yong started out his career in auditing and advisory at Arthur Anderson and PricewaterhouseCoopers in Shanghai.

In 2005, he joined Shanda Interactive Entertainment Limited, a leading online game developer in China, as CFO. During his two-year stint at Shanda, he led the company through a rapid growth period culminating in a public listing on NASDAQ.

In August 2007, Zhang Yong left Shanda to join Alibaba Group to serve as Taobao’s CFO and later COO of Taobao and General Manager of Taobao Mall. In 2011, as Taobao Mall spun off from Taobao to become Tmall, Zhang Yong served as its president. During his time heading up Tmall, Zhang Yong grew the platform into one of the world’s largest ecommerce marketplaces and is also credited for inventing the Singles’ Day 11.11 mega shopping event.

Since September 2013, Zhang Yong has served as the COO of Alibaba Group, responsible for both Alibaba Group’s domestic and international operations. He has led Alibaba Group in its continuing transition towards mobile, established an integrated global logistics network – Cainiao Network, and launched the Alibaba international platform where China’s consumers can buy global brands – Tmall International. Zhang Yong has also led a number of important strategic investments for Alibaba Group, including Ali Health, Haier Electric, Yintai Business Group, and Singapore Post.

On May 7, 2015, Alibaba Group announced that Zhang Yong would become the CEO of Alibaba Group and, at the same time, serve as Chairman of Yintai Group’s Board of Directors.

Tong Wenhong (current President and COO of Cainiao Network)

cainiao southeast asia

In a classic rags-to-riches story, Tong Wenhong joined Alibaba in 2000 and slowly worked her way up from front desk receptionist to Alibaba Group Senior Vice President. Today, she’s a partner at Alibaba and serves as COO of Cainiao Network as well as Alibaba Group SVP.

With a strong team spearheading this ambitious project by Alibaba, how will they structure a business model to be a strong contender against competitors like JD? The next article in this series will focus on the formation of Cainiao Network’s strategy and further glimpse into Jack Ma’s plans.

The original first appeared in Chinese on Yunbao88. Editing by ecommerceIQ team. Sign up for eIQ newsletter for updates. 

New funding, new Jack Ma comment on Indonesia and a few concerns surrounding Single’s Day. Here are the morning ecommerce headlines that you should know:

1. Helpster, startup connecting blue-collar workers with temp jobs, raises $2.1 million in seed funding 

Indonesia’s Convergence Ventures led the round with Wavemaker Partners and other investors participating. Helpster sorts through applicants who fill in data through the app. It then matches them to companies looking for help. Businesses can range from food and beverage to hospitality, events, and logistics.

Read the rest of the story here.

2. Jack Ma not giving up on Indonesia 

“I never say no,” Ma told The Jakarta Post on the sidelines of Alibaba’s Singles Day or the 11.11 Global Shopping Festival, dubbed the world’s biggest ecommerce event, in Shenzhen, China, on Friday evening. Indonesian Information and Communications Minister Rudiantara recently said Indonesia had “lost” to Malaysia in securing Ma as adviser for the country’s ecommerce development plans, adding he had seen pictures of Ma and Malaysian Prime Minister Najib Razak in agreement to become the neighboring country’s digital economy adviser.

“We acquired Lazada so that we can be in Indonesia as well as five other Southeast Asian countries […] obviously Indonesia being the largest market.” – Alibaba Group co-founder and vice chairman Joseph Tsai.

Read the rest of the story here

3. A word of caution for ecommerce brands looking to market around Single’s Day

Alexis Lanternier, CEO, Lazada Singapore, said last year, the brand saw an uplift of six times in revenue on key sale dates through Online Revolution – 11 November and 12 December.

Such occasions serve as an opportunity for ecommerce platforms to not only expand their consumer base by spreading awareness about their presence. This helps us gain trust in the highly cluttered market.

Read the rest of the story here

4. Pos Indonesia eyes role as logistical backbone for ecommerce

With ecommerce booming in the country, the government is pushing state-owned postal service PT Pos Indonesia to benefit from this growing industry by providing logistical support for online businesses. Communications and Information Minister Rudiantara says:

“Ecommerce players don’t need to establish their own logistical unit, as they can share a single logistical platform provided by Pos Indonesia.”

Read the rest of the story here

If you’re interested in ecommerce, you might also find these recent reports about online retail helpful.

Southeast Asia’s most prominent and active venture capital firms like Gobi Partners, East Ventures, and Convergence Ventures have formed a lobby group called ASEAN Venture Council to develop the venture capital industry in the region, reports Tech in Asia.

The new group was started by Indonesian venture capital association Amvesindo and its pendant in Singapore, SVCA.

VC associations in Malaysia and Thailand are expected to join at a later date.

Southeast Asia’s startup industry is enjoying a high, $799 million has been pumped into growing tech firms across the region.

ASEAN Venture Council goals

One aim of the group, which was announced today at a fintech conference in Jakarta, is to learn from each other’s experience and to lobby respective governments for favorable conditions. An important aspect to fintech services and products is taxation.

For example, Singapore can teach a lot about creating regulations that differentiate accredited and retail investors. This distinction has not been made clear in Indonesia.

Ku Kay Mok of Gobi Partners has also raised a point about crowdfunding, another area that the council aims to address as it has the potential to disrupt venture capital.

The council will assist each country’s associations with regulatory issues, which will be updated regularly. The council will also organize events and share best practices, as well as assist firms with deal flow.

A version of this appeared in Tech in Asia on August 30. Read the rest of the version here

State Owned China Post Group is investing in China’s ride hailing giant, Didi Chuxing, for an undisclosed amount, reports e27.

The two companies did not release the exact amount of investment, but focused on describing their strategic cooperation in relying on their respective advantages in the industry. This news comes two weeks after Didi Chuxing’s high profile merge with Uber China.

China Post’s well established presence across China will provide Didi with a more reliable mobility experience for its users. Meanwhile, China Post wishes to leverage emerging digital platforms and business models in order to ‘modernize’ the company.

Bringing state-owned companies on board has been a way to seek stability and utilize resources for startups.

Didi has previously obtained investment from state-owned companies such as China Life, China Merchants Bank and Baic Motor Corporation Ltd.

Didi is still growing, at the end of last year, the car-hailing app attracted 300 million users and 15 million registered drivers in over 400 cities. Over 16 million trips are completed every day on the platform.

Didi’s platform is looking very attractive to investors following Didi’s merge with rival Uber in China. New regulations is also re-shaping the ride hailing industry. In China, car hailing companies are now legal, prior to this, companies such as Didi were operating within the legal gray zone.

China Post and Didi have not elaborated on the details of their collaboration, apart from emphasizing on the ‘strategic partnership’ that will be formed as a result.

A version of this appeared in e27 on August 18. Read the full version here.