Constraints within Vietnam’s underdeveloped infrastructure are not well documented, but that hasn’t stopped the country from continued economic developments and growth in ecommerce.

Raphael Wilhelm and his co-founder Vanessa Santamaria launched SoNice, a new entry to Vietnam’s newest e-marketplace, took time to share with eIQ the challenges with starting a business in the up and coming ecommerce market.

What is SoNice?

The company launched in October 2016 in Ho Chi Minh City enabling Vietnamese designers and makers to scale their businesses as SoNice is capitalizing on the emerging and fast growing sector of local independent brands.

As many merchants on SoNice have little ecommerce experience, the company began to offer services such as content production, brand management and logistics in addition to hosting them on the platform.

Businesses were selling items such as concrete lamps, sketch notebooks and handmade leather wallets on the platform but they didn’t just want another online channel, they wanted someone who could help them scale.

SoNice features over 800 curated products and with a 80% month over month GMV growth since its launch four months ago, activating Vietnam’s smaller brands is working.

Home decor is one of SoNice’s core categories, which taps into Vietnam’s growing property market, where more young people are buying their first apartments and choosing western inspired, modern interiors.

Vietnam emerging from the shadows

Before 2015, Vietnam’s market was often overlooked by foreign investors and only two main companies were offering opportunities for brave investors, Dragon Capital and Vietnam Asset Management Limited.

During that time, countries such as Indonesia and India were showing investors that Asia was more than China, these two countries in 2014 accounted for 21% of the world’s population and 3.8% of global GDP together, and shadowing Vietnam’s potential.

But the tide slowly turned and Vietnam’s investment potential continues to grow. In 2016, the country overtook Indonesia and Thailand as ASEAN’s most attractive market for US firms – 40% of them cited Vietnam as their priority market in the region.

In that same year, ecommerce revenue also increased to $5 billion, accounting for about 3% of total retail trade and services revenue. The number could surge within the next few years as the government plans to invest $111.6 million from the State budget into the ICT sector by 2020.

With a young population, increasing urbanization and 44% Internet users in 2015, the country is steadily becoming an attractive market for businesses.

However, the ASEAN market comes with its own obstacles SoNice co-founder Raphael experienced firsthand. He details what new companies should look out for:

Overcrowded B2C space

Marketplaces such as Tiki, Sendo and Lotte are some of the most well-known marketplaces among the Vietnamese in addition to the region’s most popular marketplace, Lazada. This means that new businesses trying to capture market share would be entering an already crowded battleground.

Raphael advises,

“Understand the playing field first. It would make more sense as a smaller, new player to offer a more select and strategic product offering on your platform to increase the chance of survival.”

He notes that Vietnam’s vertical ecommerce market is still relatively young. Notable startups such as WeFit and Foody are good examples of successful companies that saw opportunities in their untapped fields by offering something unique to consumers.

“For entrepreneurs poised to enter Vietnam, think about what is lacking, and go from there.”

Challenges specific to foreigners

As a European business owner in Vietnam, the process of opening a bank account took 2X longer than it would for a local.

“The quality of financial services is also quite low in Vietnam. Not only did it take me a few hours to open a bank account, I was also required by the bank to pay a deposit to apply for a credit card,” comments Wilhelm.

For 100% foreign owned businesses, it will be a challenge to overcome the country’s bureaucracy. Wilhelm recommends hiring at least two different lawyers in Vietnam to help navigate the 5-6 month long process of launching your own company, whereas for locals, the process simply takes five days.

Vietnam’s unbanked population

Although it’s becoming less common, some people still pay for their houses using gold and the reason why Raphael says 90% of ecommerce transactions in Vietnam are paid with cash-on-delivery (COD).

According to the World Bank, 70% of Vietnamese are still unbanked. However, with 38% of the population owning a smartphone, payment companies and banks have the potential to access more clients and increase financial sophistication amongst the Vietnamese.

Low trust in logistics 

“The postal services in Vietnam are not yet up to an international standard, which can sometimes cause delays in delivery, making it hard to persuade people to shop online,” comments Raphael. “We use motorbike riders in Ho Chi Minh City and 3PLs to deliver to other cities like Hanoi and Danang.”

SoNice’s best-selling products range from Home décor items such as canvas art prints and Edison Desk Lamps to hand-crafted notebooks – the right size for motorbikes making delivery cost is also favorable.

“While logistics are a challenge, the price ranges between $1-2 to take your customer’s parcel from one district to another.”

Winning over VCs

According to Raphael, there’s a lack of funds and VCs that solely focus on Vietnam. Instead, startups often have to pitch elsewhere to raise funding, commonly to outsiders who aren’t quite convinced of the market potential.

However, it seems that overseas VCs are taking notice. In 2016, Vietnam saw two dozen startups receive funding from seed to Series C stages with the help of Hanoi based ed-tech startup Topica’s Founder Institute incubator.

For Raphael, interested investors are advised to spend time with local entrepreneurs and get to know their way around the city before committing to an investment opportunity.

“The culture here is so distinctive that it requires an understanding of the locals, of how things are done and these two require time and effort,” says Raphael. “The market can’t be pitched in 5 or 6 slides, it’s important to come with an open mind.”

Although the fundraising process takes time, the average deal size in Vietnam is relatively small, meaning that investors don’t need to commit to a major investment to make an impact. They could easily inject $500,000 and it would be considered a significant contribution, unlike funding rounds in Singapore or Indonesia where numbers are in the millions.

The Vietnamese mindset

In general, Vietnamese people have more to spend compared to even two-three years ago. When Raphael arrived in Ho Chi Minh City in 2012, the landscape was completely different.

“After Starbucks opened shop in Vietnam, a wave of boutique coffee houses popped up and young people also started to invest more in their first apartments. Vietnam is slowly opening up room for more experiences, shopping and consumer-centric verticals,” remarks Raphael.

The Vietnamese government has recently announced Resolution 35, an initiative to help launch one million enterprises by 2020, double the current number. The State is ensuring equal access to funding sources, land and natural resources among enterprises, regardless of their types and economic sectors and adopt policies to back SMEs, startups and creative businesses.

Vietnam: Is it worth it?

“Despite the hurdles in Vietnam’s growing ecommerce landscape, the challenges in payment, logistics and the law exist because the ecommerce landscape is so new, not because Vietnam is not suitable for ecommerce,” says Raphael.

SoNice’s growth in less than six months speaks for itself and Raphael is a passionate advocate for Vietnam’s potential.

“By coming in now, startups have a higher chance of succeeding but they must differentiate themselves from what’s out there. Deep rooted challenges in Vietnam present companies with lots of opportunities,” said Raphael.

Raphael (center) with the SoNice team in Ho Chi Minh city

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

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

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

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

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

“Businesses first”

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

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

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

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

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

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

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

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

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

New ventures

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

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

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

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

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

Marketing to millennials

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

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

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

She calls this approach “content on steroids”.

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

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

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

Behind the scenes tech

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

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

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

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

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

The challenges faced by everyone

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

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

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

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

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

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

We hear you Ankiti.

The showroom is quiet.

Fanie Fikri, Head of Marketing at Fabelio, one of Indonesia’s up and coming startups, isn’t worried, the usual mall traffic is out to lunch.

“Our experience centers contribute a healthy 15% of our total revenue.”

He’s referring to the number of customers who have “signed in” to any of the company’s two offline experience centers to view Fabelio’s line of Ikea-esque furniture before buying it online.

To promote a product such as furniture, it’s almost mandatory to have an offline presence and it must be working as the company has raised $3.5M in total funding and was a part of SPARK 40 2016 top individuals building the ecommerce ecosystem.

ecommerceIQ invited out Fanie for coffee to discuss how the company markets affordable coffee tables and artisanal items to the masses and the habit of purchasing furniture online.

What was buying furniture like?  

“A complete mess.”

Fanie explains that his father used to find a carpenter on the streets of Jakarta, attempt to describe his coffee table vision and haggle for an agreeable price. He would also need to return a few times in a week to check on its progress because very rarely would it be without blemishes or completed on time.

One could understand the frustrations with buying artisanal furniture in Indonesia and why it was such a big deal when Swedish furniture giant IKEA opened its first store in the archipelago three years back.

It also showed the shift in taste of Indonesians from traditional teak furniture to a more minimalistic and functional design.

Furniture is not dominated by one brand and Ikea only captures 18% market share in Indonesia so why not offer another option online?”  

Startups, do your research.

If a company expects potential visitors to spend at least $250 per order on its website, it would be wise to conduct extensive market research first. Furniture is one of those items that people prefer to have home delivered, but who is the audience?

Unlike IKEA, that focuses on younger people with higher education, medium income, and are not very status conscientious, Fabelio targets new Indonesian families who have the growing luxury of decorating as the average top income earners are 30-34 year olds (Euromonitor: Income and Expenditure Indonesia).

Consumer expenditure in Indonesia on household goods and services is also forecasted to rise in the next 13 years.

The company has held many focus groups comprised of young couples, with and without children, to understand what its consumers are looking for. Fanie, a local Indonesian himself, knows that many young professionals are living in “Koskosan” – temporary rooms that are already fully furnished – so they wouldn’t be Fabelio’s main customers.

The company deduced the following from marketing efforts:

    • Focus groups revealed that Indonesians prefer wooden furniture but the look cannot be too raw, it needs to be extremely well polished. Women typically decide on the household’s smaller purchases but males have the final say on larger purchases.
    • Paid search keywords in Bahasa – “furniture”, “buy furniture online”, “dining room table”, “chairs” – hold the highest marketing return
    • Showrooms “experience centers” are the company’s build trust and inspire, are able to capture names and emails in a visitor log book to track efficacy
    • Event sponsorships are important to reach the right audience, in Fabelio’s case, Indonesia housewives, who still have 78% influence over their spouse’s income. The company partnered with Femina Group, a popular magazine for women, to provide the furniture for its offline pop shop

 

Fabelio partnership with Femina Group’s fashionlink pop shop at Fabelio’s experience center in Senayan City, Jakarta.

What about the Swedish competition?

Although both companies offer minimalistic designs, Fabelio ensures competitive pricing and more room for customization.

Like IKEA, the company also offers “Fabelio Design & Build” that is a B2B interior decorating service. The offices of Go-Jek, Qraved and Singapore Airlines all contain a splash of Fabelio.

Home by Fabeliois the company’s newest venture that caters to customers with basket sizes of 20M IDR and up. If clients are purchasing multiple pieces of furniture, why not send in a professional interior designer for free to transform the entire space?

Although it’s been only 4 months since its launch, over 100 customers have currently signed up for the service.

Furniture may seem as a one-off type of buy but Fabelio sees 20-25% repeat purchases within six months. Fanie also shares other factors that attribute to the company’s success:

    • Extremely vigorous QC process that includes testing weights on the tables, balance of chair legs, polishing uneven colors and surfaces to reduce number of returns (only 10% of returns are due to quality issues)
    • More logistics control with its own dedicated fleet and free delivery and installments in West Java whereas IKEA charges for both. Fun fact: the Fabelio trucks have travelled 120,000km, equivalent to 3X around the globe’s circumference.
    • Having “Ready Stock” items delivered within 4-7 business days and “Made to Order” items delivered within 3 weeks

“We don’t see IKEA as an enemy, they are more of a mentor we can learn from. What we want to know is why our customers who’ve been at IKEA come to Fabelio,” comments Fanie.

Fabelio’s design for its own future

The company hopes to offer delivery to other parts of Indonesia beyond West Java, the country’s largest consumer market, and open more experience centers. The challenge is finding a sweet spot between high foot traffic and rental price.

Fanie shares that although Fabelio plans to expand to new markets, namely Singapore and Malaysia being the most mature and ready for furniture ecommerce, the company wants to cater to Indonesians properly first.

There is already one piece of Fabelio furniture in all 267 neighbourhoods of Jakarta, minus Thousand Islands Regency. Maybe the next coffee table for your new home won’t have to be from Ikea but Fabelio.

The Fabelio team

AUTHOR: CYNTHIA LUO

More brands in Southeast Asia are looking to adopt “dot com” strategies for a direct-to-consumer approach. Why? It allows them to establish a stronger brand identity, customize a more personable online experience and obtain customer data to keep optimizing their ecommerce cycle.

But it’s not cheap to build a website and with so many software options on the market, how can a brand that is only beginning to go online make an informed decision? The right technology allows scalability whereas the wrong one will require more maintenance sucking both time and money.

eIQ sits down with Mandy Arbilo, Senior Project Manager at aCommerce, Southeast Asia’s leading ecommerce service provider, to discuss what brands should take into account when choosing between the two most popular platforms currently on the market, Magento and Commerce Cloud (previously Demandware).

Both enable medium to large brands and retailers to sell products online, but which one is the right fit for your company?

Magento

Suitable For: Small-Medium sized business (with GMV of $0-20 million) to global brands, used by Nike and Thai fashion brand CPS Chaps

  • Magento Community is the free basic version and open-source, pay only for “extensions” (more on this later)
  • Magento Enterprise starts at $20,000 annual fee (includes abandon cart feature and support)
  • Compare the two more in-depth here

Estimated Budget: $20,000 – $250,000 depending on added features

Time to Build a Fully Functional Site: 2 to 4 months

Why should you consider Magento?

Magento’s software, both Community and Enterprise, is a cost effective solution for brands that want to test their traction online before spending more dollars on a website with all the bells and whistles.

For smaller scale brands, they will most likely use Magento Community as it requires little maintenance and is the most basic and budget friendly software currently on the market. Theoretically, Magento can accommodate millions of SKUs ,but the software is not optimized enough to handle that much. The more complex your site becomes, the more resources it will require for Magento to maintain an appropriate level of site performance. 

The two programs are fundamentally similar with the key difference being the $20,000 annual fee. Another key difference is security – Community does not have highly secure payment bridges whereas the Enterprise version does.

But extensions make a huge difference to what your site will be able to do, regardless of the version.

This is what Magento’s core architecture looks like:

By altering parts of Magento’s core technology, the basic functions of the website can be changed to provide a better browsing experience for customers

For example:

If a brand wants to collect a database of customers through a signup on its website, the default criteria would be: name, email address and home address. Adding an extension to the core architecture will allow brands to target a specific audience and create personalized marketing campaigns such as birthday discounts or Facebook re-targeting.

The ‘Shop By’ column on the left is the product of core modification on Magento where brands can add sub-filters so that customers can narrow the product search.

Key functions & features

    • Magento Marketplace: 7,500+ extensions that allow brands to enhance the site with i.e. blog section, flash sales tool, product zoom feature, etc. The price of an extension can range from $0 to $20, and over $200
    • API integration: Magento allows brands to use API to perform a number of tasks such as integration with the content management system (CMS), customer relationship management system (CRM) or mobile apps
    • Themes: Magento allows brands to install design layouts to the website without altering the core code files section that could cause errors
    • Centralized management: Magento allows brands to run multiple stores with one back-end system. This means that a company can have three brand sites and manage all customers, products and categories from one platform
    • Pricing system: Magento allows for flexible pricing options that can be used as marketing schemes i.e. buy item #1 and get 50% discount with free shipping, etc.

An example of some available extensions to be purchased or download for free on Magento Marketplace

What are extensions?

Extensions can be likened to apps on Apple’s iTunes store. When you have an iPhone, the basic core such as “notes, contacts, camera” are pre-installed. A user usually wants to install extra features to supplement the core offerings to turn their iPhone into for example, a sleep tracker. Extensions have been used by the following companies:

Nike’s multi-image view function and social sharing button are powered by Magento. The website is easy to navigate for users, hence benefitting the brand’s conversion rate.

 

The ‘pick-up in store’ extension for Magento will allow customers to collect their item at a store instead of having it delivered home.

 

An example of how the ‘pick up in store’ extension would be applied on a web page

Some free recommended extensions for brands on Magento are Shipworks, a function that tracks order status and currently is being used by carriers such as DHL and FedEx and Yotpo for a reviews feature.

Commerce Cloud

Suitable For: Bigger brands that want to expand their online presence to other countries. Ex. Adidas GMV of 10-500 million

Estimated Budget: $250,000 – 600,000 annual fee

Time to Build a Fully Functional Site: 6 to 8 months

Why should you consider Commerce Cloud?

Commerce Cloud is known for its security and reliability, which is partly why the software is not as flexible when it comes to customization. A brand that is using the Commerce Cloud is investing in a long term ecommerce strategy and should have a 10 year plan for the brand’s online visibility, partly because of the software’s price but also because a cloud system allows you to scale without much storage restriction.

For example, global brands such as Clarins launched an online website in China and Japan with Commerce Cloud.

 

This is what Cloud Commerce’s core architecture looks like:

Commerce Cloud is fully hosted, which means that the task of hosting its services and maintenance is handled by the company and not the brands using it. But then users cannot modify the core structure to the extent that they can with Magento.

Adidas’s website is powered by Commerce Cloud. The customized email pop-up aims to encourage customer sign-up.

Key functions & features

    • Commerce Cloud Marketplace: A one-stop shop like the Magento Marketplace where users can go to purchase website extensions
    • API integration: Tightly integrated system that allows brands to sell across multiple websites with one backend
    • Centralized management: Can link channels from mobile to website together to simplify operations, sales and fulfilment. This function is also available with Magento Enterprise but Commerce Cloud handles the development and integration
    • Flexible shopping options for customer: The software lets brands offer in-store pickup, ship from store, etc. All included in the price as opposed to purchasing additional extensions for Magento.
    • Cloud integration: Commerce Cloud can integrate with the company’s offline stores. Store associates can show shoppers the inventory across all the brand’s stores. An advanced predictive intelligence feature provides insights on ‘total’ customers and ‘little data’ for an individual customer so brands can hyper-personalize campaigns.

 

The choice between Magento and Commerce Cloud comes down to three key factors: budget, scalability and brand positioning. For brands testing the market at a small scale and require more customization and control, Magento is better suited as a kickstarter ecommerce software.

If a brand is growing rapidly with clear expansion goals in mind and high SKUs, they should consider using Commerce Cloud as there will be very little maintenance required so the company can focus on growing in multiple markets.

Unsurprisingly, the right software is essential to a successful online strategy. Find out more about aCommerce web development here.

The success of on-demand ride hailing app Uber in the recent years has facilitated the birth of the gig economy, where temporary, flexible jobs are common and businesses hire contractors to perform ad hoc tasks.

While companies used to hire more workers to get through peak periods, the gig economy model allows them to bring in additional temps when there is demand and cut costs.

That is what Helpster, a Thailand-based on-demand staffing platform, is doing – connecting companies with blue collar workers when they need extra hands. ecommerceIQ sat down with the startup’s CEO and co-founder Mathew Ward to talk about the ins and outs of his business.

Building a LinkedIn for blue collar workers

“There are still plenty of people looking for jobs and businesses who always need employees, but connectivity is the problem. If we talk with small business owners, finding and keeping staff is what keeps them up at night. People are always willing to pay for solutions to their pain points,” Mathew explains the business rationale behind Helpster.

Helpster was founded in October 2015 by Mathew and John Srivorakul, the CTO of the startup, as a platform that would connect customers with repair and cleaning service providers through its app.

It has now turned into a curated marketplace that matches blue collar workers seeking a job with businesses in industries with high demand for temporary staff such as restaurants, retail, and event management.

Helpster founders

Helpster started as a B2C platform for hiring handymen services, but soon realized this business model had low frequency. The company shifted focus to B2B market three months into operations.

“The problem we found with the on-demand home services market is that there is limited frequency. When was the last time you called a plumber? The acquisition costs for consumers are high, and it takes too long to get that investment back,” says Mathew.

Realizing this, Helpster started pitching their platform to businesses instead. In the new business-to-business (B2B) model the team saw that companies needed not just handymen, but also waiters and warehouse workers. The real challenge was access to labor – how could they quickly hire blue collar workers?

Filling in temp jobs typically have two options – job boards or agencies. Job boards comprise of applicants of which 95% are not relevant for the business and majority of blue collar workers don’t have a resume or an email. “They don’t use traditional job boards – they generally find jobs through word-of-mouth, making it difficult for businesses to find them quickly,” explains Mathew.

Agencies are good at providing quality staff, but at a high cost, slow pace and workers usually come with constrictive contracts. If a business wanted to hire the worker after his/her temporary stint, the company would be subject to an agency fee.

So where does Helpster fit? The platform enables workers to create a simple profile listing their skills and previous experience, what they would like to do and how much they would like to earn. In a way, blue collar workers create their resume on the Helpster platform.

In the meantime, companies looking for hires send Helpster jobs requests and a description of their needs. The platform then matches job opportunities to available workers with the right skill set, and assigns them to the job in minutes.

Same, same, but different

At first, Helpster’s business seems similar to startups such as ServisHero or Kaodim that connect consumers with different home service providers – electricians, plumbers, movers and others – but how often are their services really needed in a year?

Helpster differentiates itself by focusing on businesses that frequently need temp staff, for example, the food and hospitality industry. Caterers, waiters and kitchen staff are always in demand for year-round engagements such as weddings, birthday parties, pop-up markets, etc.

Besides job requests from food & beverage and hospitality companies, promotional consultants who help staff pop-up booths in shopping malls or hand out flyers are another popular category of vacancies. Helpster also staffs telephone sales and warehouse operations.

“When we need extra waiters for catering events, I use Helpster to find them. It’s the only company I know that offers such a service and we use them quite regularly,” says Una Plaude, partner at Luka café in Bangkok.

Helpster started its operations in Thailand where the unemployment rate in 2016 was around 1%, making it no surprise that hiring and retaining staff were impacting business growth. The company also recently expanded into Jakarta, Indonesia because both countries contained businesses with 20-30% staff turnover.

Blue collar workers, on the other hand, usually earn around $10 a day and live hand to mouth. This makes having quick access to suitable jobs important because majority of them don’t have savings. Helpster works to turn their problems into one another’s solution.

But the company won’t be alone in its quest for long. Rocket Internet’s Ushift, recently launched a similar service in the on-demand staffing market in Singapore with ambitions to expand to other countries.

“If you have a good idea, there will always be competitors. I actually would be worried if there were none because that would mean nobody else thinks it’s a decent business. It shows opportunity if a company like Rocket is willing to enter this space,” says Mathew.

The company at present is offering its service for free, but will soon be introducing a subscription model by charging a flat monthly fee for businesses to access its worker network. While the fee has not yet been set, Mathew said it will be below other traditional recruitment channels such as job boards to remain competitive.

Dealing with uncontrollable factors

A good business idea doesn’t mean challenges aren’t involved.

The company is not simply selling apples and oranges, they are selling a service – the promise that an employee will show up and do their job diligently.

And this reveals a cold, hard reality.

“Businesses can do all the screening possible but if a worker can’t be bothered to get out of the bed because of the rain or traffic, there’s nothing they can do,” says Mathew.

Helpster tries to solve this by giving temporary workers a rating that increases with the number of jobs they take and complete satisfactorily through the app.

To ensure that businesses are sent qualified staff, Helpster curates the workers by doing background checks on those who register on the platform. “When we first started, we made everyone come in for face-to-face interviews and criminal background checks. But that doesn’t always give insights into someone’s reliability. Performance ratings and engagement data is a much better indicator,” explains Mathew.

Helpster also learned that the location of the job is very important for blue collar workers. They’ll be happy to work down the street if they can earn 350 – 400 baht ($10 – $11) a day but less likely to travel, buy lunch to work a job across the city for the same amount.

So, how does Helpster acquire its network of workers?

“We try everything. We obviously have a digital strategy, but it’s critical for us to have a good ground game. Get out to the market and meet the people. A lot of our acquisition strategy revolves actively targeting workers around their places of work,” Mathew reveals.

Helpster recruits workers

Helpster goes on roadshows to universities, schools to attract young, tech savvy job seekers to their platform.

This strategy seems to be working. Over 80,000 workers and more than 3,000 companies have registered on the app so far and the company expects that number to grow considerably now they have launched in Jakarta.

Using data to make small changes for big impact

Helpster believes in using data to understand “what tweaks move the needle”. The company tracks which worker acquisition channels drive registration on the platform and if they lead to successful job applicants.

It was data that revealed that there can be such a thing as too many jobs on the platform.

Early on, Helpster was actively onboarding businesses to post their jobs on the platform, yet they noticed that a blue collar worker might take only 10 jobs a month even if he sees 100 job applications. They realized they needed to balance the supply of jobs with the actual demand from the workers to ensure a positive experience for businesses who needed temp staff quickly.

“Like any marketplace, balancing the levels of supply and demand are critical. Too much of one, and you will see high rates of churn. It can be a fine balance,” says Mathew.

Helpster can also forecast what parts of Bangkok on certain days will have high demand for a particular type of workers. For example, restaurants and bars in Sukhumvit road area look for extra hands during busy weekends.

Mathew says that 85% of the jobs are filled within 4 hours.

What’s next?

In November 2016, Helpster raised $2.1 million in Series A funding to expand across Southeast Asia. Now for three months, the startup has been present in Jakarta where 15,000 workers have signed up the platform. But the company is not planning to expand any more at the moment.

“Too many companies make the mistake of expanding too quickly. Blue collar worker wages in Southeast Asia make up around $200 billion per year, half of that is in sectors we’re focused on and 40% of workers are on informal employment contracts. Thailand and Indonesia are 60% of Southeast Asia so if we nail these two markets, we’re in a good position,” says Mathew.

Helpster team

He is not worried about the current downfall of certain on-demand startups seen globally since last year.

“I don’t think there is anything wrong with the idea to access things on demand. We’re focused on solving problems for businesses and for which they are willing to pay a premium,” says Mathew.

 

By Aija Krutaine

With pure play online brands around the world adopting offline channels, which retail strategy is really the way to go? Is an online-to-offline (O2O) approach feasible for your brand? David Jou, founder & CEO of Pomelo, one of Southeast Asia’s best performing ecommerce fashion brands, shares his views on today’s definition of a “retail experience” and what it means for his company.


A few months back, I had a very memorable meeting with a prominent Indian investor. He was the number one ranked student among all Institutes of Technology in India back in his days as a student, sold his first company for a hefty sum to Amazon and now heads up one the leading venture capital firms in India. His perspective is particularly interesting because India over the last decade has experienced one of the steepest adoption curves for ecommerce globally.

I was given a bit of time to pick his brain at his office.

“Ask him your hardest questions, because he’s an absolute genius.”

I sat down, launched into a quick introduction of myself and Pomelo and got him up to speed about my margins, growth, the brand, our competitive advantage, the team, our factory etc. etc. I looked over and asked,

“Does that all sound good?”

“Yes, that all makes sense.”

“So, you think this all makes sense?”

“Yes I think you’re absolutely spot on and you’ve figured something out.”

So there it was, we were on the same page and the discussion could continue.

With the groundwork in place, I decided to ask him a question Pomelo had been considering over the past few months.

“Should Pomelo spend its capital on creating an offline retail footprint or on marketing its mobile app?”

I had asked this particular question to many before and heard variations of “forget offline, you’re online! Why would you want to deal with a non-scalable, hassle-filled business model that’s crowded and competitive. You’re exactly where you want to be. Double down!”

Without hesitation and much gusto he answered,

“Go offline.”

Astonished, I asked, “why?”

“Even 5–10 years from now, best case scenario, only 10–15% of retail spending in your markets will be online. 85% of spending will still be offline.”

So there it is. For the coming years, offline will remain an important part of the 360 retail experience. Think of Warby Parker, Amazon, Bonobos in the US who have all opened offline stores. Now how can online players really take advantage of clicks to bricks?

1. Provide concrete incentives to visit your offline location

Spend time with your team to figure out the ‘why’ behind your offline project. Why would your target customer come to this particular location and what benefits do they get from coming to it? Opening a flagship store for the sake of it isn’t a good enough reason, answer these questions first:

  • Is it to showcase your physical product because it shows better in the real world?
  • Is it to alleviate a particular barrier to purchase that exists in your category?
  • Is it to provide a space where you can build a community?

If your “why” is to drive more sales or a generic “to increase awareness”, it will be hard to determine if you’re set up for success or failure. Imagine the location you’re contemplating is really a physical billboard to drive customer acquisition and that the metrics you track should be on that basis.

Amazon recently picked up a lot of attention following the launch of Amazon Go, an offline grocery store that boasts zero queues and no check-out. The major realization was that Amazon could reinvent the grocery store experience by getting rid of lines and cash and draw in more users online through a highly attractive offline experience.

“Grab & Go” at the Amazon Go store.

2. Scrap traditional retail conventions

The key to success is to provide a differentiated experience and scrap traditional retail conventions. Remember that you’re not in the business of building more efficient candles, you’re after the next light bulb. Figure out how to disrupt the traditional store format that reigns in your category.

One great example is New York based workwear website MM.LaFleur that has become famous through a product it calls the “Bento Box”, a mail-ordered shipment that comes with four to six ready-to-try wardrobe staples.

The company focuses on professional women’s wear for the office and have been extremely successful, with revenue growing 600% in 2015 and a projected $30 million in 2016.

David-Jou-Pomelo

The “Bento Box”

The brand’s approach to its offline experience directly mirrors the Bento Box philosophy. Stylists curate a selection of products based on a survey customers fill-out when they book their appointment online. A lot of players in traditional retail would say the cost of having a personal stylist on hand for an unpredictable amount of customers is highly inefficient and consequently won’t scale.

MM.LaFleur’s success would suggest otherwise; they’re launching a showroom in Washington DC this March, in addition to a showroom in New York and pop-ups scattered the country.

David-Jou-Pomelo

MM.LaFleur New York City location

3. Have a built-in digital marketing plan

One thing I would say is if you build it, they will not so simply flock. If your brand is considering an offline location, you have most likely built up a loyal following on social media, your email database and an efficient conversion funnel online. The trick here is to take the same approach with offline as you did online, and fully utilize it for your brick & mortar venture.

One of the best examples I’ve come across was by fashion label Marc Jacobs at the Marc Jacobs Daisy Pop-up Tweet Shop in 2014.  The three day pop-up store in lower Manhattan used tweets and Facebook posts as viable payment methods, where customers walked out with products after tweeting or posting a picture about the pop-up event.

The pop-up was a huge success and the brand received a ton of PR via social engagement to reinforce the fun playful character of the brand all at the same time. This concept was later replicated at a few additional Marc Jacobs locations, including London.

Marc Jacobs Pop-Up Tweet Shop window

David-Jou-Pomelo

Signage showing how the tweet shop works

From eIQ:

What’s next for Pomelo?

Multiple mall staples in the US, such as BCBG and JC Penny are struggling to keep stores open. Long-standing department stores Macy’s had to shut down multiple stores, while scrambling to launch ecommerce strategies to stay afloat. Ironically, purely digital brands are beginning to adopt offline strategies, most notably eyewear startup Warby Parker and Rent The Runway. If the death of pure play retail is indeed true, then what is stopping Pomelo from pursuing an offline store strategy to become a global fast fashion powerhouse?

BY DAVID JOU, FOUNDER & CEO OF POMELO

Read more about David Jou in eIQ’s SPARK 40