Blibli.com is best known for being Indonesia’s first established online retailer where shoppers can find quality vacuums and handphones to local Indonesian fashion labels.

The ecommerce veteran has been around since 2009, raised over $13 million in funding and runs in-house operation of over 1,000 employees to ensure that its 5 million monthly customers receive their packages within two-days. How do they manage it?

eIQ caught up with Lisa Widodo, Blibli’s Head of Operations and Product Management, at Last Mile Fulfillment Asia to discuss one of the most common questions asked in logistics, buy or build?  

To answer this question, there are many factors to consider and understanding where the company stands is a good place to start.

Growing in a crowded B2B2C space

A quick glance at the e-marketplaces available in Indonesia show that there is already a number of strong horizontal ecommerce players.

To succeed in a saturated market like Indonesia, companies either need to differentiate or allocate a large budget to marketing to get their site in front of the eyes of consumers.

Blibli focuses on product differentiation and based on the latest data in 2016, has over 12,000,000 sellers, 12,000 brands and more than one million products on its platform to attract a growing population of wealthier young Indonesians.

By 2030, the highest concentration of top income earners will be 30-34 year olds (Euromonitor: Income and Expenditure Indonesia 2016) and Southeast Asians in general are willing to pay more for better everyday products especially in personal care and food (see chart below).

This is good news for Blibli.com as the company’s shoppers are comprised of equally male and female (55% and 45%, respectively), between the ages of 25 – 35, and digitally savvy.

Galeri Indonesia is the newest vertical by Blibli.com that puts local Indonesian entrepreneurs in the spotlight. These small shops sell items like handmade wooden watches, speakers that run without electricity, grow-at-home mushrooms and jewelry made out of rice.

Blibli internal data shows sales from this category has been growing 1197% MoM since its launch last year.

“Locals like to shop locally,” says Lisa.

The company also recently began offering hotel bookings and soon train tickets under Blibli Travel and electronic tokens for Indonesians to pay their utility bills with under Blibli Digital Product.

The company, Lisa assures, is in it for the long run.

So buy or build?

Blibli currently has five warehouses strategically placed near Jakarta’s airport, near Jakarta’s port, in the middle of the city and in Medan. The company’s facilities, which also includes a fleet operating out of five hubs in the Greater Jakarta Area, and two hubs outside Jakarta, serving all orders coming from Java – 70% of Blibli’s total volume.

Out of the five warehouses, only one was outsourced to a local provider because the company knew it would be set up faster and that the packing process was standard meaning irregular shaped items like guitars or products that needed special handling weren’t going to be stored there.

But even so, the warehouse management system used at the outsourced warehouse belongs to Blibli for complete product transparency tracked by four statuses:

  1. Order comes through and payment has been received → package will be delivered within two days, otherwise the merchant will incur a penalty
  2. Ready for shipment
  3. In shipment
  4. Delivered

Only 10% of Blibli’s orders are paid for with cash-on-delivery, which is quite low for Indonesia.

“What sets Blibli apart is our dedication and empathy towards our customers,” says Lisa. “This means we must have complete control over their happiness, their complaints and the ability to track the problem back to the source.”

Because Blibli holds its customers in such high esteem, it needs to ensure the last mile experience is of quality.

 

“Even down to smallest dent in a box, it all matters,” comments Lisa. “The only touch-point we have with the customer is the package at their door so it needs to be perfect.”

The company sends all new merchants a care package that includes free Blibli branded boxes in various sizes and tips on how to pack a product properly.

“Currently we work with 12 different last mile service providers to serve customers outside of Java and we’re always open to working with others as long as they have a solid business plan.

Buy or build? In short, if the company is a class brand that sells at a higher price point thus needs to prioritize a quality customer experience to keep retention healthy, they should spend the resources to build its own operations.

Other factors to take into account would be local knowledge, the urgency for expansion and financial allowance.

“Blibli.com had over 7.5 million transactions last month, it makes sense for us to do as much as we can in-house to give our customers their money’s worth,” comments Lisa.

If the company’s selling point is low priced goods, it should focus on scaling before investing in its own operations. Other factors to take into account are cash reconciliation, difficult delivery routes outside of the metropolises and capabilities of its tech solutions.

And of course, a hurdle to overcome is the key resource needed to make ecommerce operations a success – talent.

Changing the mindset of the people

As Lalamove International Managing Director Blake Larson commented at LMFAsia 2017,

“Technology isn’t magic dust you can simply sprinkle on logistics, it still requires a human element to work.”

Lisa believes the company’s strongest asset is its people and as with most digital companies in Southeast Asia, finding the right employees can be a challenge.

“It’s really about changing the way the general population thinks and getting them to take more ownership,” says Lisa.

She personally vets each employee during the onboarding process to ensure that there is a culture fit. Coming from a mechanical engineering background, Lisa identifies strongly with logical thinking as a necessity for anyone joining her operations “super team” of 400.

The Blibli mission

There are two main objectives for the future of this online company:

  1. Expansion in Indonesia
  2. Putting local talent on a global stage

“We plan to keep monitoring the data to determine how quickly we need to expand our reach outside of Java,” comments Lisa. “SLA and cost also need to match up.”

“We hope to make these small businesses internationally known through mentorship programs like The Big Start Indonesia. The strength of Indonesia is its local talent but it needs to be nurtured,” says Lisa.

By: Cynthia Luo

Credit cards. Not a thing in emerging Southeast Asia.

Fintech is quickly becoming the next big thing in Southeast Asia. According to recent data from Tech in Asia, the number of venture capital deals in fintech has outpaced ecommerce for the last two quarters – something that hasn’t gone unnoticed by the big players.

Alibaba is on a mission to bring in Alipay and Ant Financial into Southeast Asia through its $1 billion Lazada acquisition. Indonesia’s Go-Jek recently launched Go-Pay and Grab is said to be raising a massive $1.5 billion round to fuel its nascent payment platform.

Despite an increasing influx of money into the payments ecosystem in Southeast Asia, cash-on-delivery (COD) remains the most popular payment method in emerging Southeast Asian markets. Aggregated data shared by aCommerce indicates that the share of COD orders has increased over the last 12 months.

Of course, the data is limited to the orders processed by the regional ecommerce enabler and skewed by individual client preferences, but given their size and reach, offers a good representation of the market.

What then could explain the increase in COD share in markets like Indonesia, Thailand and the Philippines? One hypothesis could be that as ecommerce continues to gain widespread adoption, new users are the late majority and laggards. These groups are less likely to have access to credit cards and some won’t even have bank accounts. This means COD will still be essential for continued ecommerce growth in emerging Southeast Asia.

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Sitting comfy where I fit.

A few days back, TechCrunch broke news that sources claimed Amazon would be delaying its highly anticipated Q1 entry into the fast-growing Southeast Asian ecommerce market. Unclear who these ‘sources’ may be, the lack of any substantial evidence that the ecommerce giant is entering Singapore points to the case that it probably will never happen.

Plans of entry into Singapore have never made sense if you take a look at Amazon’s past and present market strategy, as I do here.

Conventional versus Guerilla Warfare

Like the giant in David and Goliath, Amazon performs best in wide-open “terrains” where the juggernaut can accumulate and leverage its scale advantages. Look at the markets where Amazon is currently dominating the competition: US, Japan, UK, Germany, France and increasingly India.

Amazon SingaporeAmazon entering Southeast Asia is comparable to the Americans fighting the Vietnam war. They’ll be battling an enemy that’s scattered across countries, often divided by water and much better equipped at playing the local game. Drop a few Amazon executives from Seattle into the jungle called Jakarta to navigate “Prime” logistics in the city’s legendary traffic and they might beg to go home.

Just look at Europe, which, despite the European Union, is still a loose collection of individual countries. Amazon’s tour-de-force in Europe has whittled down to three major markets — UK, Germany and France.

China seems like the exception — an enormous single market similar to the US — yet Amazon’s market share tanked from 15% in 2008 to less than 2% today. Decision-making was centralized in the US, which slowed down its operations in China and couldn’t outcompete the hungrier competition.

In the end, Amazon China was no match for Alibaba’s Jack Ma and JD’s Liu Qiangdong, leaving them no choice but to throw in the towel and set up shop on Tmall instead in 2015.

In the Middle East, Amazon is currently entangled in a bidding war with UAE magnate Mohamed Alabbar to acquire Souq.com. Souq operates across the Gulf Cooperation Council (GCC) countries, all connected by land and no custom duties between them. This provides Amazon access to 50 million people sharing the same language and culture and fits with its strategy of going after large single markets.

Singapore is not operation D-Day for Amazon

Amazon’s rumored entrance into Southeast Asia has specifically focused around setting up in Singapore first, arguably the most mature, albeit smallest, ecommerce market in the region.

Prior to Lazada snapping up Redmart for $30-40 million, there were talks of Amazon trying to buy Redmart as a way to jumpstart its Singapore operations.

But Amazon setting up local retail operations in Singapore doesn’t make any sense. Singaporeans, due to their country’s GST relief and efficient global logistics, are already ordering from Amazon en masse.

Amazon and Singpost are driving improvements in global cross-border logistics, to enable delivery of packages from US to Singapore within 3 days with priority shipping. That’s the average time for local domestic deliveries inside Indonesia. Expect even faster deliveries in the future when Amazon successfully expand its own fleet of planes.

Custom dutiesPerhaps Singapore could serve as a distribution hub to expand into the rest of Southeast Asia? Also, probably not the case. There are good reasons why Jack Ma decided to set up his new Southeast Asia hub in Malaysia’s new ‘Digital Free Trade Zone’ and not in Singapore:

  • Malaysia is connected to Thailand via land that gives it access to Cambodia, Myanmar, Vietnam, etc.
  • Malaysia is as close to Indonesia, Alibaba/Lazada’s biggest market in Southeast Asia, as Singapore is.
  • Malaysia itself is a much bigger ecommerce market than Singapore – 30M vs 5.5M population.
  • Malaysia has a much bigger overseas Chinese community than Singapore who are regular users of Tmall, Alibaba and AliExpress.
  • Malaysia is a close political ally of China. (Not everything is purely business; read between the lines).
  • Malaysia has more physical space than Singapore to fit in a massive logistics operation.

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But Amazon is recruiting people…right?

You may know someone who works in the ecommerce space in Southeast Asia who has received a phone call from an Amazon recruiter. Yes, Amazon is recruiting but not for the reasons you think.

Most of the jobs sourced are for its cross-border business based in Singapore long ago to get Southeast Asian merchants to sell on the Amazon global marketplace.

ecommerceIQ, Amazon jobs, Singapore

Amazon is hiring in Thailand for Amazon Global Selling (merchant acquisition) and AWS, not for local retail.

Indonesia would be the place to start

In line with Amazon’s strategy of going into large, singular markets, the most recent being Australia, a Singapore landing would be ruled out. If Amazon is really set on conquering Southeast Asia, a more likely entrance would target Indonesia. With a young population of 250 million and growing, Indonesia is the ‘new China’ — an economic and ecommerce powerhouse in a region of 600 million people.

Having said that, the window of opportunity for Amazon in Indonesia is closing fast. With Alibaba’s backing, Lazada is doubling down on its biggest market in Southeast Asia, and local giants like Lippo Group have pumped over $500 million into its ecommerce venture, MatahariMall. Then there’s JD that sneaked into Indonesia in 2015 and seen steady year-on-year growth and ecommerce veterans such as blibli.

To accelerate a move into Southeast Asia, a plausible option for Amazon is to buy its way into the market even though it didn’t work so well with China.

Even its bid to acquire Souq.com in the Middle East is still up for debate.

Fortunately for Amazon, Indonesia’s ecommerce space is still developing with plenty of players that could want a powerful ally like Amazon. Lets wait and see.

By Sheji Ho, aCommerce Group CMO

What do you think? Will Amazon ever enter Southeast Asia?

Not many companies can say they are growing faster than the country’s expansion but Jing Dong Mall or JD.com, one of China’s most well known online retailers, is growing at almost 40% year on year. The B2C company can also add the following achievements under its belt: Fortune Global 500 member, biggest competitor to Alibaba’s Tmall and last year, acquired Wal-Mart’s Chinese division, Yihaodian.

Louis Li, the Deputy General Manager of JD Worldwide, wants to let the world know that China’s market is still maturing and open for business.

It’s hard for industry businesses to forget about China when the superpower has overtaken the US in total online spend at $752 billion in 2016, see fig below, and expected to grow 20% annually by 2020.

What are some important factors brands and retailers need to consider before selling to consumers in China’s red ocean? eIQ speaks to Louis about his views at Last Mile Fulfillment Asia.

Be the little guy

“Even if you’re big overseas, don’t assume the Chinese will know who you are and what you offer,” comments Louis.

“Be prepared to do what the smaller brands have to do to become familiar.”

This means dedicating resources to consumer education about what your business can offer and rigorous content marketing on the right platforms. This also means legwork to build a trustable name from scratch no matter how big you are elsewhere.

The channels are different

“Unlike the West, the Chinese don’t use Google, Youtube or Facebook,” comments Louis. “Companies will need to find the right tools to do marketing.”

Some of China’s most popular platforms are Mobile QQ and Tencent’s WeChat, the country’s largest chatting app that also facilitates payments, taxi-hailing, news services, food delivery and much more.

The platform boasts over 800 million users and has welcomed notable brands such as Coach, Chanel, Burberry and Apple onboard who share promotions, support followers and run sales campaigns.

JD and Tencent formed a strategic partnership in May 2016 to share big data with brands to reach more niche customers versus general sweeping TV or newspaper ads.

Source: eMarketer

Through a WeChat campaign during Chinese New Year last year, JD was able to increase Japanese skincare SK-II brand followers by 20,000.

Knowledgeable customer service reps

It’s understood that strong customer support is vital to any successful business. Louis suggests automating as much of the general inquiries as possible, for example a chatbot answering common questions such as “where can I track my package? How can I get a refund?“

A few other pointers to keep in mind when serving the Chinese consumer:

  • 73% of consumers would expand their purchases with a merchant by 10% if the merchant delivered superior customer experience
  • If they already provided their telephone number and credit card information online, they do not expect to have to provide the same information again
  • Chinese consumers like to share online and expect to be heard, the reply of the company can determine their repurchase rate
  • 86% of consumers are willing to pay more for a better customer experience

*Source: Deloitte’s “Delivering Superior Customer Experience in China”

Invest heavily or drown in the red ocean

Ecommerce in China is extremely competitive, much more than other markets, so companies should be ready to allocate resources to a team and to logistics to ensure products are delivered quickly to the end customer – especially the Chinese consumer who already has expectations.

“If you promise people to deliver same day, people will more likely buy,” says Louis. “Our people will literally cross rivers and climb mountains to get the package to the end customer.”

In 2016, JD fulfilled a total of 1.6 billion orders through its own extensive logistics network: 256 warehouses covering 5.6 million m2 and 6,906 delivery and pickup stations in China.

China’s cross-border future

By 2020, a quarter of the country’s population will be shopping either directly on foreign-based sites or through third parties. Online consumption already accounted for 13.5% of all retail spending in the country in 2016 and consumers in low-tier cities are outspending those in high-tier cities online.

The demand for goods exists. The demand for goods in Southeast Asia also exists and is strong. Not only do Chinese consumers want Thai consumer goods such as fresh fruits, the amount of trade between China and Cambodia has taken off since 2012.

Source: Bloomberg

The more online retailers, the better growth for China’s economy and its citizens is how Louis sees it.

“Ecommerce helps consumers,” says Louis. “The farmer in China’s outer provinces would never have been able to get their hands on an iPhone 7 until now.”

Forget about China? I doubt anyone will any time soon.

By: Cynthia Luo

Newly out of DTAC’s accelerate program, B2B marketplace Freshket raised 6 digit funding from an anonymous agriculture company in Thailand, including VC fund 500 tuk tuks to continue connecting food suppliers with restaurants through its online platform in Bangkok.

The startup is currently in pilot testing and working with 20 restaurants in Thonglor, one of Bangkok’s most trendy districts, to figure out what suppliers and restaurant owners need.

Freshket Founder Ponglada Paniangwet tells eIQ that the platform will soon be open to 30 restaurants in different areas in the city and eventually expand to Singapore and Indonesia.

Freshket’s website homepage

Saving costly time for small businesses

Freshket is the first of its kind to solve a deep-rooted challenge in the restaurant industry in Thailand that Ponglada experienced herself having started her career as a fresh food supplier.

“I spent four to five hours after midnight every night to fill paperwork for different restaurants, to sort orders and review bills. Every restaurant had different requirements for ingredients, and everything had to be sorted manually,” notes Ponglada.

She saw the opportunity to build a solution that would simplify the workflow between a restaurant and its food suppliers and replace the time consuming pen and paper process.

“By spending less time on ordering stock, it leaves time for business development, organizing staff and other more important things,” says Ponglada.

Restaurants can simply log onto Freshket and order the ingredients they need one day to one week in advance and choose the time for supplier trucks to deliver the goods. The pilot period has helped determine that demand occurs before lunch and before dinner, between 8-10am or 2-3pm.

Freshket’s platform instantly creates an online purchase order (PO) under the user’s profile consolidating the type, quantity and total price all in one document.

Ponglada recalls that restaurants in Bangkok order their supplies through fax, email or LINE chat app and can easily create errors because suppliers consolidate each order by hand which  can often lead to incorrect deliveries. The automated PO fixes this as well.

Transactions on the site are currently made only through bank transfers but the startup is working to integrate credit cards or bank accounts for a one click payment. Freshket is also planning to allow companies to choose the logistics provider to deliver their goods, whereas currently all deliveries are handled by suppliers.

Challenges with traditional food supply

“We’re currently working with our partners to find out common trends in both delivery times and product selection,” says Ponglada. “For example, no restaurant wants deliveries at noon so we don’t prioritize this time slot. These details help standardize our offerings and maximize resources.”

It’s difficult for smaller restaurants to bargain with high quality food suppliers because they typically target larger chains or big scale businesses.

Suppliers are also known to hoard special produces despite demand in the market.

Both scenarios limit the produce selection available to the little guys.

Freshket tackles this challenge by connecting restaurants with food suppliers of all sizes and ‘smart farmers’ on one platform. It widens the assortment of produce SKUs so any restaurant can more likely find for example, a specific cut of meat or five different types of white shrimp.

Thailand’s army of smart farmers

Smart farmers are a new generation of business minded farmers that are producing crops based on demand forecasting to increase their sales. This can include selling only organic vegetables or a particular type of fruit that not many other farms are producing. There are approximately 100,000 smart farmers registered with Thailand’s national agriculture database, making up 10% of all registered farmers in the country.

Because smart farmers are located outside of Bangkok, business with them can be a challenge. Freshket must provide the right logistics and storage for farmers to scale operations.

Some smart farmers are also unable to process the packaging or customize produce according to each restaurant’s specifications.

Through this work, Freshket is collecting information regarding optimal temperatures, warehouse technology and freezer room specifications, to scale distribution for smart farmers on the platform.

What will Freshket ‘grow’ next?

“There’s a lot of potential for expansion in the region,” notes Ponglada.

The startup is eyeing expansion in 3-4 cities across Southeast Asia

“We would like to consolidate all the data we have access to and share with farmers what to grow this particular season because it will be in demand by restaurants,” says Ponglada. “Restaurants can also map their menu offering based on the seasonal crop during specific periods of time.”

Through data, Freshket will be able to evolve from a middleman platform into an agritech specialist that is able to project outcomes from industry demand.

“Everything we do is in steps. Freshket’s biggest goal is to tackle and modernize agriculture in Thailand, but we have a few areas in Bangkok to expand into first,” Ponglada comments. “One step at a time.”

The Freshket team at Google HQ in Mountain View

After speaking with a variety of industry professionals operating ecommerce businesses in China, Thailand, the Philippines and Vietnam, trust makes its way into each conversation. Customers don’t trust merchants, business owners are weary of government power, citizens don’t trust banks, so on and so forth.  

eIQ spoke with Joseph Yuen, the Board Chairman of The Hong Kong Federation of Ecommerce (HKFEC), at Last Mile Fulfillment Asia to understand his ambitions to standardize ecommerce regulations.

The federation composes of members from Lazada, UnionPay, PwC, Shopline, etc. and exists to bridge the ecommerce associations between Europe, Russia, Dubai, and Thailand to create a stable foundation for future ecommerce businesses to land on.

“Governments didn’t have any laws in place that could govern new technology such as Uber,” says Joseph. “This shows that governments need to work with organizations like ours to fill in  gaps between booming industries and out of date regulations.”

Creating trust in a trustless Asia

It’s not surprising to learn that Southeast Asians have doubts about product reliability and safety of payment methods when news about counterfeits and financial fraud hang in daily headlines.

Reasons why consumers in Hong Kong do not shop online. Source: Consumer Council 2015

One of the initiatives HKFEC is moving towards is the creation of a “Hong Kong Trust Mark”. Much like food labels in the US – USDA Organic, Non-GMO Project Verified, etc. – ecommerce sites would have to be vetted before being granted a badge that certifies them as trustable for customers to shop.

Companies that meet all criteria agree to work with HKFEC to provide customers with a safe and reliable shopping experience.

If a sold product doesn’t meet guidelines, the idea is that the customer has the right to an investigation and refund – even if that means going to court.

“There’s been a lot of talk but no action,” comments Joseph. “We want to assume that every one is a good player so HKFEC will act as the middleman to clear this black hole and make ecommerce transparent.”

Ecommerce requires standardization

Joseph believes that there are four major areas that need to be addressed in order for ecommerce to grow healthily in Hong Kong and China.

  1. Trust – Chinese citizens fear that all online goods are counterfeit items
  2. Payments – simplified, cashless payments open up opportunities for hackers
  3. Privacy – smart data versus big data, how can businesses use their data to grow?
  4. Cross border – tax policies differ across markets, how can we align the cross-border policies?

Hong Kong, a country of over 7 million people, is an important transit point between vendors and Chinese consumers as a free port. The French Chamber in Hong Kong quotes it as “suitable for low-volume B2C ecommerce, goods for personal consumption with low cargo value and low tax rate items”.

The Trust Mark sounds good in theory, an online business gains the badge after a thorough investigation by HKFEC, customers identify badge on site and are more willing to shop knowing they will be protected. The main question then becomes, how long will this take?

Ecommerce companies in all parts of the world, especially Asia, are already moving quickly to grab market share. Consumers aren’t familiar with any badges or certifications that aim to protect them so education would also add time to the process.

“Our committee has legislative influence to give us a line to the government,” says Joseph. “The one thing that will get them acting is social pressure from our friendly alliances. We will act as the judge.”

“Guandong Electronic Commerce Association, Russia, India, Europe and the UAE are all invested in making the Trust Mark a reality.”

The effects of the Trust Mark

Joseph believes luxury brands are weary of selling online in Asian markets because customers, especially the Chinese, prefer to fly abroad to purchase goods they know are real. The goal is to keep the business within the country.

“The government should facilitate access to financing sources and terms in order to enhance competitiveness of local ecommerce operators,” said Pawoot Pongvitayapanu, president of the Thai Ecommerce Association and ASEAN Market Advisor of HKFEC.

If the badge were to come into effect, HKFEC hopes to see an increase in cross-border trade and growth in the brand.com trend. For example, companies would be less concerned about damaging their brands and sell on platforms like Tmall to reach Chinese customers if it was certified. Or they would open their own webstores to sell directly to customers.

“In every single fast moving industry, regulations and government cannot catch up,” says Joseph. “Someone has to stand in front of the court as an alliance and agree on a set of rules before standardization can happen.”

By: Cynthia Luo