Ever since Netflix made the pivot from a DVD mail-order business to streaming video-on-demand (SVOD), it’s been besieged by the likes of Hulu, Amazon Prime Video, and free-to-stream sites like Pluto.tv that have tried to play catch up.

They realized the future of video streaming was primarily via on-demand.

Part of the reason is the shift of consumption patterns towards the internet. Millennials have brought the cord-cutting phenomenon to the mainstream and they’re no longer interested in 24/7 cable television but would rather stream sports, movies, and shows on their own devices.

Asia Pacific is viewed as a laggard to this dynamic. The proliferation of cheap, pirated DVDs plugged the problem of access to the latest Western movies and TV shows. But the web changed everything: as more households came online, Asian consumers warmed to the idea of watching content directly on their phones.

The dawn of a new era?

The benefits of SVOD are undeniable. There’s a far richer user interface and experience than linear television. Streaming devices also aren’t clunky and fixed to a certain place like a television is and with Asian consumers flocking to smartphones, the opportunity to sidestep television directly is very real.

According to App Annie, the time APAC consumers spent consuming video on their phones grew by 300% between 2015 and 2017. This ferocious rate of growth was double the global average in the same time period.

Asians are consuming a lot of video. Source: App Annie

While impossible to quantify the effect of this systemic shift on the Asian pirated DVD market, it’s fair to say that purchasing DVD players is going out of vogue, especially with younger consumers.

A rapid surge of wireless high-speed broadband networks and mobile data connections mean users have a wider library of content to choose from, and more channels from which to acquire it i.e. YouTube, torrents, and streaming services like Netflix, iFlix, HOOQ, ViKi, Viu, & others.

The SVOD market was valued at US$51.6 billion in 2016 and projected to grow by an annual rate of 8.93% until 2022, eventually settling at US$86.1 billion.

North America will occupy the largest market share, but the majority of growth will be driven by Asia Pacific.

Goes to show why players like Netflix & iFlix are doubling down on their efforts to win over the Asian consumer.

The race for dominance is on

For its part, iFlix, which has raised $300 million and counts companies like UK’s Sky Television as investors, explains that the very reason for its existence is to switch consumers over from pirated DVDs to licensed content.

Comparisons to Netflix are inevitable, but the Kuala Lumpur-headquartered startup has tried to downplay this impression.

CEO Mark Britt told TechCrunch that the two streaming companies don’t share the same target audience.

iFlix, with its price point of about US$3/month caters to the mass market, while Netflix, which is significantly more expensive at about US$10/month is trying to capture the “global elite”, he affirmed.

The Malay company, which now operates in 25 countries across Asia, the Middle East, and Africa, relies on local teams to lock in licensing deals and enhanced payment options via partnerships with telcos & banks.

That’s radically different than Netflix, which allows anyone around the world to sign up (excluding China, North Korea, & Syria) provided they have a functional credit card. This factor alone precludes the overwhelming majority of consumers in Southeast Asia (excluding Singapore).

Most Indonesians, Filipinos, Thais, and Malaysians don’t possess credit cards and this situation won’t change drastically in the near future.

Netflix understands this bottleneck towards acquiring new users. During a visit to Singapore in 2016, CEO Reed Hastings told journalists that they need to start offering more payment options in markets where there’s low credit card density.

It’s been almost two years since that visit without significant developments.

Netflix did partner with Lazada to offer six months of free streaming with every Live Up membership – opening itself to an affluent population and more points of entry into ASEAN as Live Up is introduced in other markets.

But so far the streaming giant hasn’t adopted any hyperlocal strategies for each specific country.

It certainly doesn’t seem like it’s preventing the company from continuing to scale into unchartered territory. Only last month, it was officially valued at US$100 billion after declaring that it added over 6 million new subscribers in Q4 2017, reaching 117.58 million subscribers globally.

While iFlix doesn’t publicly reveal its total subscriber base, but chairman Patrick Grove told Hollywood Reporter that they expected to breach the 5 million mark in 2017.

So iFlix has a more hyper-localized strategy, is focused on mass-market consumers, and offers a number of flexible payment options. On the other hand, Netflix is relatively expensive, needs a fast and stable internet connection, but offers better content, HD quality video, and popular original programming.

Which streaming provider is winning over consumers in Southeast Asia?

Our survey results

ecommerceIQ initiated an online survey with majority of respondents from the Philippines and Indonesia. For full transparency, overall sample size was small, but the insights generated are fairly discerning.

Let’s repeat the prior assumptions that we outlined. Senior executives at iFlix believe their product is skewed towards the mass market and tailor-made for viewing on mobile devices with slower internet speeds.

This is why iFlix allows users to download content on their phones in order to view it later. It also deliberately keeps prices low to reach an audience that may not be able to afford Netflix.

Netflix is slowly starting to build local teams, and by extension, is incorporating a local strategy, but it’s still isn’t as laser focused on Southeast Asia as some of its peers.

42.4% of survey respondents said Netflix is their go-to video streaming platform of choice. A similar number chose YouTube. iFlix was actually tied with Viu (which is focused on providing Asian content such as Korean TV and anime) – with 6.2% each.

Let’s put these numbers in context. The Philippines actually has some of the slowest internet speeds in Asia Pacific.

Both countries have low rates of credit card penetration. There were 8 million people who had credit cards in Indonesia, which translates into just 3.2% of the population. The Philippines actually follows the same trend when judged in percentage terms; 3 million credit card holders in 2015, representing roughly 3% of the population.

No credit card? No problem. Source: Informedmag

Despite structural bottlenecks, the data seems to show that Southeast Asian consumers will find a way to pay for the service if they truly desire it.

iFlix has partnerships with local telcos and banks; users can opt to pay from prepaid mobile phone balance and bundle data deals from their provider.

But only 3% of survey respondents actually said they would like to see more payment options and no one indicated that the reason for choosing a provider in the first place was because of ease of making a payment.

It gets more interesting.

Only 9.1% of respondents said a cheap price point was the reason to opt for the platform in the first place. That makes iFlix’s value proposition a relatively weak factor in winning over the Asian consumer.

The ability to download content to watch later ranked as the highest priority for them, followed closely by access to a large range of Western entertainment, original productions, and an excellent user experience.

12.1% said they opted for their video streaming platform of choice because of its range of local television shows and movies, putting it at 5th priority overall.

The insights slightly negate messages from senior executives at iFlix. CEO and co-founder of iFlix Mark Britt told Variety last year that “almost every assumption about subscription video-on-demand that is based on Western metaphors has failed in developing markets […] we are learning those lessons quicker than others.”

But is that view correct? Our findings seem to indicate that streaming media consumption in Asia isn’t a whole lot different than Western habits.

Research from eMarketer in 2017 said iFlix trailed Viu in Indonesia. The same report said iFlix was marginally ahead of Netflix, but the results could have been skewed because Netflix was blocked for a long time prior to the publishing of the study.

Source: eMarketer

eMarketer also quoted AIP Corporation and said that 39% of Filipinos with an internet subscription had signed up for iFlix, but the corresponding figure for Netflix was much higher, at 60%.

What’s the takeaway?

Southeast Asian consumers might be price conscious but they’re willing to pay a premium for services that add value to their lives. The Netflix brand is known for a vast library of content. The recommendation engine is intuitive and strives to understand a user’s preferences.

The results are also consistent with our analysis of the ride hailing space in Indonesia where consumers don’t simply opt for the cheapest player – they are willing to pay for a comfortable, safe ride, and an enhanced user experience.

The Netflix marketing and product teams have also invested considerable time and resources to build an aspirational brand through social proof, and storytelling.

Its original series such as ‘House of Cards’, ‘Stranger Things’, ‘Orange is the New Black, & ‘Master of None’ command far higher viewership figures than any other SVOD providers. The term ‘Netflix and Chill’ is almost household parlance now.

When consumers sign up for Netflix they gain social validation: they can share updates on Facebook, tell their friends, and be able to participate in discussions about latest episodes. Sure, iFlix is cheaper but can it engender the same kind of excitement?

Southeast Asia’s inbound tourism industry has grown by an annual average of 7.9% since 2005 and the region now accounts for over 30% of international expenditure in this sector.

But as high-end and mid-market hotel brands strive to attract a greater number of tourists to fill up their rooms, they might be missing out on an emerging demographic: the domestic Asian millennial traveler who is more likely to opt for a budget hotel.

According to E&Y, millennials and millennial-minded travelers are far more cost-conscious and experience-focused than their predecessors.

This view is augmented when you consider travel preferences in Asia. The top three requirements for travelers looking for recommendations within the region are to help them save money, make travel more comfortable, and to save time.

Preferences of APAC travelers. Chart: Amadeus

Millennials are increasingly likely to ditch glitz and glam for minimalism and function. And with travel within APAC democratized by the likes of no-frills carriers such as Air Asia, it’s only a matter of time before complementary industries start riding this wave too.

The budget hotel industry has certainly witnessed greater investor interest in the past couple of years looking to solve a key problem – standardization. It’s often that travellers booking online even after combing through ratings & reviews are commonly surprised upon arriving at the hotel.

The idea to club together existing hotels, upgrade their facilities to ensure safety & comfort, and bring them under a unified brand was popularized by India’s OYO Rooms. The startup has raked in US$450 million in funding primarily by Softbank.

Since 2000 the Chinese tourism industry has also witnessed a surge in budget hotel franchises, aiming to address the historical issue of lack of standards, safety, trust, and reliability. Franchises like the China Lodging group and 7 Days Inn are now worth billions.

ZEN Rooms is another startup that operates on a similar model and was brought to Asia by German startup incubator Rocket Internet in mid-2015. It’s now present in seven countries across Asia, namely Indonesia, Singapore, Hong Kong, the Philippines, Malaysia, Sri Lanka, and Thailand.

At the time of launch, the company pointed to the expanding nature of regional travel as a critical factor in its decision.

“…in terms of accommodation and travel, Southeast Asia behaves like one big country. There is a lot of inner-country travel. Indonesians travel from Jakarta to Bali, Malaysians from one city to another. There is a lot of inter-region travel, from Jakarta to Singapore to Bangkok to Kuala Lumpur, for example,” said co-founder Kiren Tanna while speaking to TechCrunch.

Most travelers in Asia like to journey closeby. Source: Euromonitor

In 2017, ZEN Rooms received a fresh capital injection of US$4.1 million adding further credence to its business model. New investors joined the party, namely Redbage Pacific and SBI Investment Korea.

And the Rocket Internet-backed startup isn’t the only contender in this space. Companies like Reddoorz, Nida Rooms, and Tingall have all propped up aiming to cater to an ostensible gap in the market. Cumulatively they’ve managed to attract US$10 million in funding so far.

Another competitor is Goldman Sachs-backed Red Planet. Its model is slightly different; rather than partnering with existing budget hotel operators, it chooses to own and operate its own properties. The company has over US$200 million in funding purportedly because it’s not an asset-light model, but is trying to solve the same pain points of uniformity of service.

“The [budget] hotels in Southeast Asia lack efficiency in many aspects and that eventually translates into substandard customer satisfaction,” explains ZEN Rooms co-founder and global MD Nathan Boublil to ecommerceIQ. “That’s the difference between Southeast Asia and the West. We want to improve the budget hospitality market with better sales and distribution, technology, and lowering the cost of procurement.”

“The Southeast Asian market is largely made up of small “mom-and-pop” hotels with no structural efficiency, which penalizes both guests and the hoteliers themselves. In the end, prices have to go down and the service level has to go up so that domestic and regional travelers can fully access travel,” he adds.

The Philippines in focus

The Philippines has rapidly emerged as one of ZEN Rooms’ largest growth areas.

Nathan says the dominant budget hotel chain before them only had 11 hotels on board which his company has surpassed since, although he declines to disclose the total number of partners they have.

11 certified budget hotels compared to the 6 million international tourist arrivals in the country in 2016 presented a large gap in the market and existing infrastructure – a fact alluded to by Domingo Ramon Enerio, Chief Operating Officer of the Philippines Tourism Promotions Board.

“We ended 2014 with 4.8 million tourists; this year we’re hoping to reach 5.2 to 5.5 million. We estimate that the demand for Philippine tourism is in excess of 10 million – meaning these are people who want to visit the Philippines but couldn’t for several reasons, whether it’s flights or not enough rooms or information,” he explained to Philstar in 2015.

The government has also aggressively promoted tourism in the island-drenched nation under the “It’s more fun in the Philippines” banner.

Hence according to official estimates, there’s still a gap of about 4 million inbound tourists who would like to visit the country but aren’t able to do so. This doesn’t factor in domestic tourists who might be put off by similar challenges of finding suitable rooms. So the total number is likely to be higher.

In the Philippines, ZEN Rooms first piloted a project to bring serviced apartments under its banner in addition to regular hotels. This has grown to be immensely popular with the category running at 95% occupancy and an average customer rating in excess of 9, according to Nathan. There’s 200 such budget serviced apartments in Manila alone with plans now to introduce the category in Kuala Lumpur.

Domestic travelers account for 50% of ZEN Rooms’ customers, with regional travelers making up an additional 30%.

In the Philippines itself, domestic travel is being fueled by an emergent middle-class, strong GDP growth, and a larger number of households with young children.

A larger number of households with young children are fueling tourism in the Philippines. Source: Euromonitor

The push towards branded serviced apartments does bring ZEN Rooms in competition with property owners on Airbnb but Nathan says they’re succeeding due to economies of scale and lower prices.

Typically Airbnb owners can’t offer things like late night check-ins or daily housekeeping unless they partner with a management agency like GuestReady. This also drives up costs as the agency will typically charge a commission.

Nathan points out that ZEN Rooms’ existing operations drive synergies between the two business units. As they’re already helping improve the level of service in budget hotels, the team can leverage its expertise and manpower towards serviced apartments. This helps facilitate things like late check-ins and quality controlled daily housekeeping.

The French entrepreneur is taking a long-term view of the market.

Really, we’re just starting our expansion in Southeast Asia, the region is huge and inter-country travel is growing very fast,” he notes.

Southeast Asia is, in fact, the world’s fastest-growing travel region according to the World Travel & Tourism Council.

And there’s little doubt about a palpable sense of optimism engulfing the region: 80 million new consumers came online via their phones last year, representing a 31% increase as compared to 2016. Asian millennials are also addicted to social media, internet shopping, and increasingly rely on the web for travel & tourism research.

It’s time for no-name, obscure hotels to partner up with players like ZEN Rooms in order to gain more exposure, efficiency and latch on to emerging millennial travel needs.

Mens sana in corpore sano.

The latin phrase means “a healthy mind in a healthy body”, and is a widely spread antidote in wellness communities, but how much of the population actually devotes time to exercise on a regular basis? And is it even a priority in developing countries?

To understand the attitude towards fitness in Indonesia, ecommerceIQ surveyed 30 young Jakartans, ages 20 to 35 years old, about their habits. 73 percent of respondents said they didn’t participate in sports and/or fitness regularly due to busy work schedules (22) and 23 percent claimed to be too shy to do fitness or sports alone (7). A single respondent didn’t know how to exercise.

An Indonesian booking platform named DOOgether aims to change the attitude of urban Indonesians and help them overcome common obstacles like the mentioned above for not exercising. The startup connects sports enthusiasts in Greater Jakarta with a database of over 80-100 fitness studios, gyms and sport centers offering zumba and basketball.

The company will be capturing a piece of the Indonesia fitness services market estimated to reach revenues of approximately USD$298 million by 2020.  

“Essentially DOOgether is a community that enables people to book sports activities that suit their schedules and also encourage beginners to try new activities,” says Fauzan Gani, CEO and co-founder of DOOgether.

“Based on last year’s performance, we believe we can convince more studios to list on our platform as we see a rise in fitness awareness among Indonesians.”

The startup was founded in 2016 by Fauzan and his friend Helmy Ikhsan, now COO of DOOgether, after their own difficulty finding suitable sports classes in Jakarta. It was a stark contrast to their university days in Australia.

“Helmy and I were discussing the headache of booking the right sport venue near,” shares Fauzan. “We decided to solve our own problem.”

Introducing Itself to Jakartans

In December 2016, the startup closed an undisclosed amount of seed funding from Indonesian businessman and chairman of Inter Milan, Erick Thohir, after bootstrapping from day one.

Having money meant aggressively launching on mobile through both an iOS and Android app less than one year later to reach more users. By working with fitness influencers in Indonesia, the company was also able to build a strong social media following and invite the masses to its trademark offline event like DOOday.

The full day event, held 2-3 times a month, invites all users to participate in a unique themed activity such as yoga on top of a helipad or combining mini-soccer and zumba.

One of DOOgether’s trademark offline event DOOday.

An average of 50 participants attend for smaller scale events offer zumba and yoga and 240 participants for larger scale events like mini soccer cups or basketball competitions.

Speaking with ecommerceIQ, Fauzan says the company’s focus is more on offline to acquire and educate Indonesians about the benefits of fitness. For the founder, these offline touchpoints are crucial for an early stage startup to promote its platform and build a community.

Are Indonesians ready to get active?

The startup appears to compete with popular subscription based fitness apps like Singapore-based GuavaPass, but Fauzan doesn’t consider the company as a competitor.

“What GuavaPass offers is membership with a monthly fee of roughly IDR 1 million (USD$75.20). We offer flexible classes on a pay as you go model. Our biggest competitor is how users spend their time doing anything but going to the gym like being stuck in traffic or hanging out at the movies,” laughs Fauzan.

BMI Research predicts that spending on sports, camping and open-air recreational activities in Indonesia will grow by an average of 11.6 percent year on year with the market forecast at IDR 3.8 trillion in 2021, up from 2.5 trillion IDR (USD$186 million) in 2017.

Strong growth in spending on sports and outdoor activities in Indonesia (IDR billion) and IDR % y-o-y growth). Graphic credit: BMI Research/ National Bureau of Statistics

The increased spending on outdoor activities seems to correlate with the growing population of young adults (20-35 years old) in the country – 1.45 million in 2017 to roughly 86 million by 2021. The hyper marketed Asian Games 2018 set to start in August will also increase the interest in fitness.

Growing young adults segment to drive sports spending of young adults in Indonesia (20 – 39 years old), ‘000 Graphic credit: BMI Research/ UN

By the end of December 2017, DOOgether claimed to offer more than 100 fitness studio and gym partners, with available to be booked more than 3,000 classes per month. Fauzan believes that in 2018, DOOgether can double its numbers.

But before the company can serve more users in Indonesia, it will need to solve a few bugs with its technology. During the interview, Fauzan noted that his team is currently working to improve the interface to help users find information more easily on its mobile application.

Fauzan strongly believes that for DOOgether to become a one-stop sport platform, it needs to value feedback from its users and always be hungry for more.

“We will continue to focus on being the biggest sports platform and ecosystem in Indonesia. The country is filled with over 250 million people and anyone can love sports, whether it is an individual or a team activity,” said Fauzan.

We hope to bring the entire industry together and help Indonesians be healthier in just one click.”

After Facebook Messenger opened its platform to chatbots in 2016, it became the era of chatbots — more than 12,000 of them were deployed on Messenger by the end of that year. One year later, the number has risen to 100,000.

Despite rising popularity of chatbots around the world, they didn’t take off as expected in Southeast Asia given the region’s affinity for texting through messaging apps. This was especially true in the region’s biggest market, Indonesia.

Talent remains one of the biggest hurdles for AI or any other type of tech development in Indonesia, however, it is the inconsistency of the Indonesian language that presents an even greater challenge in developing the Natural Language Processing (NLP), that powers the chatbot.

According to Irzan Raditya, co-founder and CEO of Kata.ai, an Indonesian B2B chatbot service provider that raised $3.5 million last year, more industry partnerships could be a solution to these challenges.

“We need more collaboration between the service providers, API providers, and more local developers studying AI,” says Raditya. “Without the human resource, it will be impossible to make this technology a reality.”

Launched in October 2016, Kata.ai actually evolved from a free text-based personal concierge service called YesBoss that recorded over 100,000 users at peak.

Before the startup’s pivot, the company struggled to keep up with customer demand and chose to move to a more sustainable business model by targeting a new segment – B2B.

ecommerceIQ speaks with Raditya to understand chatbots, his thoughts on its most promising applications and how his turbulent experience with YesBoss helped build Kata.ai to its present state.

Learning the ropes

Right from the start, the four founders of YesBoss were realistic about their venture.

“We understood that it wouldn’t be scalable (to provide a concierge service) without AI,” admits Raditya.

“And in order to build the algorithms, you need data and we collected tons of data from YesBoss.”

“We learned how to make people’s lives easier through conversations gleaned from our concierge service answering different kinds of customer requests, be it booking a plane ticket or shopping online. Along the way, we learned we wanted a business that was more impactful and scalable.”

With the man-power heavy B2C service provided by YesBoss no longer active, Raditya saw an emerging opportunity in the chatbot space in Indonesia.

Sitting on a bank of data, Kata.ai became the first chatbot provider in the local Indonesian language.

“By studying all the texts in Indonesian from YesBoss — the uniqueness of abbreviations, the slang, and complexity of certain phrases — we did the dirty work and spent over a year researching machine learning to build a comprehensive algorithm compatible with the needs of the Indonesian language NLP,” says Raditya.

Now equipped with a chatbot able to understand the local language, what was the team going to do with it?

Serving the enterprises

As a conversational AI platform targeted at enterprises, Kata.ai develops a chatbot for companies to easily handle incoming customer requests and facilitate ecommerce in Indonesia.

One of the brands that has developed a chatbot with the company is Unilever.

Using a female persona named Jemma, the chatbot on LINE acts as a virtual assistant that liaises with customers on behalf of Unilever where customers can chat about everyday things including entertainment news and/or ask for beauty recommendations.

Raditya says the chatbot is popular among female customers who like to ask for relationship and fashion tips.

“As of now, Jemma has befriended over 2 million users on LINE and recorded over 200 million conversations to date within a span of one year since its launch,” says Raditya. “The longest chat session actually lasted for four hours.”

Veronika is chatbot created by Kata.ai for Indonesia’s biggest telco company Telkomsel.

Another chatbot that Kata.ai helped build is Veronica, the legendary brand persona of Indonesia’s biggest telecommunications provider, Telkomsel.

By texting with Veronica on LINE, Facebook Messenger, and Telegram, customers can access product information, Telkomsel’s latest promotions, a live customer agent, as well as facilitate transactions such as phone credit top ups, buy data packages, make bill payments and reserve appointments with the company’s nearest offline customer service center.

Envisioning a platform for all

If the company’s enterprise solution provides brands with tailored chatbots, Kata’s newest venture released last month, Kata Bot Platform, hopes to provide developers with a enterprise-grade framework to help them create chatbots and reduce costs on tech development and research.

“By releasing our platform to the public, we want to solve the ecosystem problem. A lot of Indonesian developers aspire to incorporate chatbots into their businesses but face the daunting task of building it from the scratch because there’s almost no platform that caters to the Indonesian language,” says Raditya. “Kata.ai provides the infrastructure so they can focus on building a good customer experience for the business.”

NLS, one of the features available on Kata Bot Platform

He also encourages all businesses to use the platform as it can accommodate up to one billion messages and isn’t restricted to only startups.

Do chatbots live up to the hype?

“We believe improving the technology of chatbots is important to capture an opportunity that exists in Indonesia’s strong chat culture and major shift in the interaction between people and technology.”

This shift, according to Raditya, will see people utilizing less apps as it impedes the customer experience; from installing the app, registering for the service, learning how to use it, constantly having to update to new versions, etc.

Chatbots, on the other hand, provide a more efficient way for users to interact with the service provider without having to familiarize themselves with a new interface as most Indonesians already know how to use popular messaging apps.

“Chat is the new standard of user interface.”

The CEO himself has a favorite AI-powered personal assistant service he uses to save time from shuffling through email chains based in Singapore called Evie.ai.

“Engaging and intelligent chatbots allow businesses to turn these channels from information centers to profit centers, as shown with the case of Telkomsel. They can now monetize an audience of over 10 million connected to their social channels by selling data packages — something that they were unable to offer before,” shares Raditya.

“If you take a look at consumer technology, changes are usually predicted in ten year cycles. The dotcom boom in 1997 changed the way people conducted business with websites. In 2007, Apple changed the landscape with the launch of the iPhone and app store,” explains Raditya. “During these periods, we saw companies coming out as winners carrying high valuation and delivering high impact to the economy.”

“Indonesia is always left behind.”

“With analysts predicting AI to become the one the driving consumer technology on 2017 onwards, Kata.ai can spearhead the wave of incoming local entrepreneurs by being the breeding ground for a new generation of botpreneurs,” says Raditya.

His “big picture” approach was sparked during the Microsoft Accelerator program in Bangalore last year, in which all founders participated. The program provided 14 B2B startups with Microsoft’s resources and network to help accelerate their growth and Kata.ai was a finalist out of 1,500 applicants.

Kata’s founding team. (L-R) Wahyu Wrehasnaya (CFO), Reynir Fauzan (CMO), Irzan Raditya (CEO), Ahmad Rizqi Meydiarso (CTO).

“We learned to see things from right to left, which meant focusing on the goal first and working backwards to the process in order to achieve it,” says Raditya. “Another thing we learned is how to sustain innovation by being the Category Creator, Category Sustainer, and eventually the Category Destroyer.”

“The program also gave us experience with the technical side of things, such as how to scale our infrastructure effectively to serve millions of customers.”

Although the company’s focus is currently on Indonesia, Raditya isn’t counting out expansion to other countries.

“Right now, we’re focusing on building chatbot technology that can offer customers a next level of service that is personalized using historical data,” closes Raditya. “But who knows, in one or two years, I think voice could be an interesting medium as well.”

Deliveree logistics marketplace

Deliveree’s Group CEO Tom Kim and Group Head of New Product Nat Atichartakarn at Deliveree’s Jakarta HQ

The current state of logistics in Southeast Asia is often bemoaned as one of the main challenges holding the region back from its full economic development.

Alibaba founder and chairman Jack Ma remarked that with Indonesia’s geographical state, a comprehensive logistics network is needed to stimulate growth.

His assessment is also applicable to other emerging markets across the region.

But these types of infrastructural projects in the Philippines, Thailand or Vietnam is not an easy, and certainly not, cheap feat. Here are a few examples of current plans in the works:

  • World Bank estimates $500 billion is needed in Indonesia over the next five years to bridge the infrastructure gap
  • President of the Philippines, Rodrigo Duterte, proposed a $161 billion six year plan to improve railways and ports to connect the archipelago’s islands
  • Thailand’s government has also started 20 infrastructure projects worth $50.2 billion to improve the country’s current rail lines

This regional bottleneck has opened opportunities for startups to figure out the cheapest and quickest way to get a package from point A to point B.

Companies solving last-mile headaches for ecommerce companies have attracted a lot of investor money like Lalamove and NinjaVan with $100 million and $30 million funding rounds, respectively.

But a logistics technology company that recently raised $14.5 million is looking to tackle another problem.

“We’re interested in solving bigger, bulkier problems that sit further upstream from your last mile delivery challenges,” explained Tom Kim, Group CEO of Deliveree. “With marketplace technology, we want to fundamentally challenge the way companies approach first and mid-mile bulk logistics.”

Deliveree logistics marketplace

ecommerceIQ speaks with Tom and the Group Head of New Product, Nattapak Atichartakarn, to discover how the logistics company found success in Southeast Asia by helping businesses reduce costs for first and “mid-mile” goods transport and what they plan to do with the recent Series A injection from Gobi Partners.

Logistics but focus is on technology

Through the Deliveree mobile app and web marketplace, customers have access to screened qualified drivers of commercial vehicles to move their merchandise and/or cargo.

The company’s new marketplace model houses 15,000 commercial vehicles consisting of cargo vans, pickups trucks, small-large box trucks, as well as economy vehicles such as MPVs and hatchbacks on its platform — covering three metro cities in Southeast Asia; Bangkok, Jakarta, and Manila (the company operates under “Transportify” due to a trademark issue in the Philippines).

Having started with serving end-customers, the company realized in order to grow its business, it had to focus on serving corporate clients.

“The bread and butter of our business is goods, merchandise, and cargo — bulk movement from outer provinces to warehouses in the cities, factories to distribution centers, and distribution centers to retail stores, or what we call modern trade,” explains Nat.

Now, nearing the end of its third year of operations, the company says it is close to financial break-even in its core markets. Nat credits this success to the quality of technology and drivers that Deliveree provides.

The company’s tech team of 30 developers in Vietnam is responsible for building, managing, expanding, and innovating the company’s marketplace tech capabilities and solutions that focuses on businesses needs:

  • Batch booking toolsets for high volume customers
  • Flexible booking scheduling from immediate to two weeks in advance
  • Drop off package at multiple destinations up 10 locations
  • Real-time tracking of driver and package location
  • In-app chat between customers, drivers, and customer support
  • Cash on Delivery and original document return services
  • Contract logistics option for businesses that need dedicated resources
  • Full commercial insurance

In addition to targeting SMEs, Deliveree also partners with transportation and logistics companies without their own technologies to connect them to new customers on its platform.

“People think these big logistics companies own their whole logistics network, when in fact, many don’t. A lot of them outsource ground transportation elements of the business and they use us as a provider of ground transportation for bulk goods and cargo so we address the gap and needs of the industry,” says Tom.

Capitalizing on quality

Deliveree logistics marketplace

The company takes pride in the high quality of its drivers, achieved by imposing a high standardized screening process, something Tom doesn’t skimp on.

It’s easier to get into most colleges than to get into our driver pool.

“We only invite a third of the driver applicants to training — it’s less than the acceptance rate at the most universities,” says Tom.

Calling it the “best trained fleet on the market”, every single driver must endure six hours of in-class training, which includes customer etiquette, and pass a 50 question final exam with 80% score or higher.

The company also enforces additional training for drivers with low satisfaction scores and regularly do real-time quality checks with a mystery shopper.

While not the most scalable process, Nat says it’s a price the company’s willing to pay.

Growth without quality is more of a step backward for us.

With such high investment in human resources, is the company worried about “leakage” – the shift of user-driver relations moving off the platform?

“There will always be a case or two of customers trying to work with our partners directly, but most of them end up coming back to our platform. Why? Because one of the reasons they come to us in the first place is they don’t want to, or can’t, manage this specific part of the business,” said Tom.

“And with the added value we provide for them, I don’t see why businesses would want to even bother.”

Ride-hailing apps aren’t built for cargo

With the heated war between ride-hailing companies in the region, parcel delivery is one of the added value services that is being offered by Uber and Grab to capture a wider clientele.

But Deliveree isn’t worried.

“These ride-hailing companies have always been doing logistics but they haven’t been doing it right,” said Tom.

According to Deliveree, the services provided are not comparable as the requirements for logistics is radically different than the passenger business.

“If you’re looking at the value of delivery bookings in Uber and Grab, it’s probably not more than a few dollars. Our average booking value is more than 10 times the amount and at the same time, our resources and costs to support each booking are higher than what a passenger app would expend per booking,” said Tom.

Tom also pointed out the security risks highlighted by a recent ruling in the Philippines by the country’s Land Transportation Franchising and Regulatory Board (LTFRB) that banned any package delivery through ride-hailing apps accompanied without a passenger. The reason? Drug-trafficking concerns.

“Trust me, it won’t only be the Philippines that will apply this rule,” commented Tom.

Small ecommerce pie for Deliveree

With the current state of ecommerce in Southeast Asia where fashion still tops all categories in popularity and ordering large items like bicycles or washing machines is still uncommon, the pie for Deliveree’s business is not that big.

“Ecommerce is primarily a business comprised of small things, and we don’t move small things — we move big things,” says Tom.

But Tom believes the company will eventually grab their share of Southeast Asia’s ecommerce pie.

“Our company is not closely aligned with the ecommerce industry today because the items that people buy are still small parcels and it isn’t our specialty because of the challenging economic units,” said Tom. “Ordering anything and everything online is an evolution that will probably happen in the next over ten years or so.”

“This is when we (Deliveree) will likely play a much bigger role in the ecommerce value chain.”

Growing its current markets

With new funding from its Series A round, Deliveree is exploring some interesting growth plans.

The company hasn’t ruled out M&A to grow the business in key markets and although expansion to new cities and countries are in the cards, Nat said that Deliveree is more interested in growing the cities where it is currently operating at the moment.

Deliveree logistics marketplace

“Imagine if Asus, Lenovo, and Acer compete with each other in the tablet market in Jakarta,” said Tom. “When the sales start, there’s a limit to how far the competitors can go because they have inflated costs the further the consumers. If we can bring down the cost base and give them more margin latitude, the competitive playing field will force some of those savings into discounts, sales, promos, even lower everyday pricing and ultimately the consumer wins.”

Deliveree logistics marketplace

“These are the kind of big problems we love to be involved in solving,” concludes Nat.

The first thing that comes to a consumer’s mind when asked about virtual reality (VR) often involves gaming.

Why? Because virtual reality is used to describe a three-dimensional, computer-generated environment that can be explored by a person. That person is immersed in a space where they are able to manipulate objects or perform a series of actions.

The virtual reality technology buzz, whether in content or hardware, is projected to be worth $80 billion by 2025 globally, while gaming unsurprisingly will make up the largest share of an estimated value of $11.6 billion.

But the application of virtual reality is not limited to only video games. According to Jirayod Theppipit, CEO and Founder of Infofed, a VR content development startup, virtual reality can be used as a marketing strategy in almost every area.

“Dare we say that virtual reality is the future of content? The experience VR offers can solve the pain points of businesses in almost every industry.”

“People often associate virtual reality with gaming and we can’t blame them. Consumers in the gaming segment have the ability to afford new technology and gadgets,” continues Jirayod. “This is why they’ve adopted virtual reality before others.”

Instead of scrambling to compete in an already crowded gaming market overtaken by virtual reality gaming content creators like VRX, Infofed sees a blue ocean in real estate for virtual reality content in Thailand.

“I know this technology is going to take off because big players like Facebook and Google have already jumped into it.”

Two years ago, Facebook invested $2 billion into VR technology to promote its own VR headset Oculus and only earlier this year, Apple launched ‘ARKit’ to turn its iPhones and iPads into AR/VR (Augmented Reality/Virtual Reality) devices.

IKEA has already jumped on board with its new app, IKEA Place.

IKEA ecommerce

The highly affluential Chinese shoppers have also taken a liking to VR based on a survey by Worldpay, which has been a strong indicator of how content will be consumed in the future.

Phil Pomford, General Manager for Asia Pacific at Worldpay, says,

“China is blazing a trail for VR/AR adoption and showing other Asia Pacific markets what the future could look like…with China leading the way, Asian businesses should start investigating the future of VR/AR technology now, so that they’re ready to meet consumer demands as and when they arise.”

84% of 16,000 consumers surveyed across Asia Pacific believe that AR/VR is the future of shopping, 92% say they’d like to see more retail apps make use of AR/VR – Worldpay.

But for a nascent market like Thailand, can virtual reality successfully take off?

Infofed believes it already has.

ecommerceIQ speaks with Jirayod to understand how the two-year old startup has utilized VR in industries like tourism and education and what it has learned from its latest project, real estate.

Giving a slow-moving industry an upgrade

The current real estate industry in Thailand is experiencing slowing growth but the number of new condominium units are set to rise 15% from 2016.

To sell units, typical marketing tools often include flashy brochures with heavily photoshopped photos and miniature models in an attempt to give homebuyers a glimpse of the expensive home they should buy.

Higher-end real-estate developers will also set up a physical showroom for visitors to experience the ambience of the unit, but this requires travel and more effort than today’s digitalized world is used to.

Virtual Reality Infofed

The Deck, project by Sansiri. Source: Sansiri

“Because my background is in architecture, I can understand the blueprints and engineering language that the marketing material contains but there are many people who are confused by it. The current content in brochures and on websites aren’t extremely helpful for consumers who want to properly ‘experience’ the product.”

Through VR content, Infofed believes that its content can help developers market its products to consumers. What better way for someone to experience their new home than to actually walk through it?

The company has already worked together with Nirvana Property, one of the leading developers in Thailand, to showcase its showroom through virtual reality content.

 

Virtual Reality Infofed

Virtual reality Showroom for Nirvana Rama 2 by Infofed

Consumers are able to view the showroom in 360 degrees, simply through their electronic devices without the need of a virtual reality headset.

According to Jirayod, consumers on average spend up to five minutes viewing a VR showroom whereas they spend no more than two minutes flipping through a brochure.

“The longer consumers spend on our content, the more interest they develop in the product and reflects on a higher rate of purchase.”

The appeal of VR can also save real estate companies money to build and dismantle their showrooms – especially in trade shows and exhibitions. From Jirayod’s past architectural experience, building a showroom has an average cost of $60K for condominiums and $200K for houses.

Creating VR content, on the other hand, can start as low as $1,500 at Infofed according to Jirayod.

New age but in demand

Despite North America being the current leader in VR content market with a share of 73.4% in 2016, Asia Pacific is forecasted to exhibit higher growth.

Transparency Market Research has forecasted that this region will see an exponential CAGR of 116.1% between 2016 and 2024.

Virtual Reality Infofed

But in order to capture the opportunity VR presents, Infofed is committed to educating Thai consumers about new technology and training the people necessary to create VR content. One way it has done so is by creating content for influential industry players like the Tourism Authority of Thailand and leading real estate companies.

“It’s important that we help create build an ecosystem for virtual reality content. I have never viewed other virtual reality players as competitors but instead as partners to together push this technology out.”

Infofed has also brought in experts from the US through partnerships to equip its local staff with sufficient virtual reality knowledge to produce content. It’s also sharing its own experiences at top universities to educate the incoming digital-savvy workforce.

Virtual Reality Infofed

Infofed Team

All of the company’s efforts come down to one goal – to make Thailand a virtual reality society, even if it’s not fully ready now.