When successful, established businesses tell their story, it usually sounds all very straightforward. The founders get an idea, work hard to execute it, and miraculously, it all works smoothly from the very beginning to result in millions of dollars earned.

The reality of start-ups in today’s economy is different – the initial idea is only the starting point that almost always evolves at any point of time. The founders of TheLorry, Malaysia’s on-demand logistics start-up, experienced this firsthand and have been on the tips of their toes since deciding they would capture the market’s overlooked opportunities.

TheLorry is a technology-enabled platform that matches lorry owners and drivers with private and corporate customers who need help moving house, office and/or general cargo.

Founded late 2014 by ex-colleagues Nadhir Ashafiq and Chee Hau Goh, TheLorry was initially intended to be the “Expedia for logistics”, but then became the “Uber for lorries” to focus on the business-to-consumer (B2C) market and then later switched focus to the business-to-business (B2B) market.

Ex-colleagues Chee Hau Goh (on the left) and Nadhir Ashafiq (on the right) have reinvented TheLorry three times within two years, showing how startups can adapt to unexpected factors.

It may sound like there was a lack of vision, but this is the reality of businesses in dynamic markets, especially developing ones. The growth of any company involves adapting to unexpected factors such as new competitors, new technologies or customer demands.

ecommerceIQ sits down with TheLorry co-founder and executive director Nadhir Ashafiq to find out how his company carved out a niche in Malaysia’s competitive logistics landscape and why they decided to pivot.

The Business Model Evolution of TheLorry

2014 – early 2015: Expedia for Logistics

At first, TheLorry built a website that allowed customers to access instant lorry rental price quotes online after sharing some common variables: the type and size of the lorry needed, the start and end points of the journey, etc.

The whole business was a two-man team at that time. While Chee Hau was pumping up marketing and sales, Nadhir was running around Kuala Lumpur and Selangor meeting lorry drivers and giving them Excel sheets to fill in their prices, which would afterwards be uploaded on TheLorry website.

TheLorry initially wanted to be “Expedia for Logistics” where users could choose lorry rental on the startup’s platform from selected service providers based on ratings and prices

Right away, there were several downsides to this model, the most pressing being the scalability of the model. It was a time consuming and tedious process to acquire the price quotes from service providers that sometimes involved over 900 price points.

The other reason was that TheLorry could not prevent customers from going directly to the service provider instead of booking through the website. There were several cases when TheLorry got to know that people were searching for their providers online either by customers’ own admissions or comments from the providers.

“Therefore, around the mid-2015 we moved to an Uber-like model where we would be setting the prices ourselves,” explains Nadhir.

Early-2015: Uber for Lorries

The switch meant TheLorry would need to match providers with jobs. At first, it was done manually until the company built an app in-house and the minimum viable product (MVP) within two months. The drivers could accept the job on the app, and thus the process became automated.

TheLorry built an app for drivers in-house within two months. It automated the process of matching lorry drivers with the jobs available.

As TheLorry had attracted funding at the beginning of 2015 from pre-accelerator program WatchTower and Friends and Singapore’s venture capital KK Fund, the company started scaling up by hiring people for their team. Their obsession became to grow bookings through their website and increase their fleet size.

The need for a second major pivot came when the company realised that lorry rental aimed at individuals was mostly a one-off event as people did not often move homes or offices. And apart from customer referrals, the company would find a difficult time sourcing new clients.

Mid-2015 – present: Lorries for B2B  

This is when TheLorry decided to push for B2B sales targeting commercial cargo market – manufacturers, distributors and freight forwarders with urgent trucking needs. Now business customers make around 60% of the company’s sales when it was only expected to make up around 30% of the entire business.

But every business model, no matter how successful, has its own set of challenges.

“There are a few drawbacks for B2B. First, the onboarding process of each client is longer and sales managers have to be hired to pitch our services and build a long-lasting relationship. Then, we also have to give corporate clients a credit meaning at least 30 or 60 days to pay for the services. But chances of repeat business are high and generated revenue is healthy,” says Nadhir.

Servicing Different Customers: B2C versus B2B

Targeting B2C and B2B segments obviously require different approaches. TheLorry adopted online marketing strategy to acquire more individual customers and invested in Google adwords, Facebook ads and content marketing to drive as much traffic to website as possible.

This tactic, however, did not really work for targeting corporations where it is more effective when sales managers knock on client office doors for a face-to-face meeting – especially in the Southeast Asia business world.

“Online marketing gave us visibility, but to seal the deal, we needed a salesperson on the ground and account managers to meet customers to clearly explain our solutions. B2B sales is all about creating and maintaining relationships,” says Nadhir.

Once onboarded, corporate clients can use TheLorry app to hire drivers directly or in the case of any special needs they can turn to an account manager, assigned to each business. Through the TheLorry platform, clients can view all the past and present bookings and invoices as well as track drivers who are on the job.

As TheLorry is a technology-enabled platform, around two thirds of its business is automated. Compared to other start-ups, Nadhir says the company wants to be fully transparent with its clients and does not promise full automation because of the difficulty it entails.

“There needs to be a bit more scrutiny and a bit more manual intervention in order to get the business to run properly,” explains the entrepreneur.

As quality of service is important to any type of customer, TheLorry interviews all drivers and puts them through 2-3 test drives where their skills and professional manners are assessed. If clients give them 1-star rating after these test jobs, they don’t get the opportunity to join TheLorry driver family.

TheLorry team interviews all their drivers face-to-face and gives them test jobs before accepting them to TheLorry driver family to ensure quality of the service.

What’s in The Cards for TheLorry?

TheLorry still has plenty of room to grow. The B2B lorry rental market in Malaysia is estimated at $3.9 billion. There are no solid figures for the B2C market, but the company estimates that this segment is worth around $22.5 to 45 million based on property sales data.

TheLorry wants to become profitable in 2017 and expand to Thailand in addition to its existing services in Malaysia and Singapore.

Jumping on new and unexplored opportunities to raise revenues is one way to grow. Yet, one piece of advice Nadhir hopes other entrepreneurs remain mindful of is that potential top line revenue always carries costs.

Lured by potential revenue growth last year TheLorry took a business opportunity, which Nadhir did not want to disclose, in a field they had no experience and no clear plan to make unit economics profitable.

“In the end, we ended up in a situation where we were selling our service for 1 ringgit and our cost was 2 ringgits. And there was no way for us to increase the price to 3 ringgits,” said Nadhir, adding they decided to quit the business opportunity later that year.

On the bright side, there also have been surprising successes. In 2016, TheLorry introduced a new product – 4 wheel drive car rental, which turned out to be a hit for small and medium mom-and-pop shops who use them on a more regular basis.

As for 2017, the company’s end goal is to grow revenue by a certain multiple, not disclosed, to become profitable. In the second half of the year, TheLorry hopes to expand to Thailand in addition to its existing services in Malaysia and Singapore.

After raising $1.5 million in Series A funding early last year, TheLorry is still in touch with many investors but has no plans for fundraising as yet.

You can read more about TheLorry in SPARK40 here.

Nadhir Ashafiq’s Tips for Aspiring Entrepreneurs

  1. Validate your business idea – test the product, see whether you will have a market before spending money on it. Prior to TheLorry I spent RM 200,000 ($USD 45,000) on a thing which did not work. Don’t spend so much money for nothing!
  2. Read The Lean Startup by Eric Ries, create minimum viable product and get as many people to review your product and launch as fast as possible at the lowest cost possible.
  3. Learn about online marketing, things such as how to drive traffic, conversion rates, upsell and do email marketing, if you will be working in ecommerce space. Good resources for this are kissmetrics.com, backlinko.com, quicksprout.com, neilpatel.com.  

 

By Aija Krutaine based on an interview with Nadhir Ashafiq

Founded in 2015, popular ecommerce startup Glazziq has established itself as one of Thailand’s top eyeglasses brands for the younger generation. The company is sells high quality, affordable glasses online and experiencing a healthy average monthly revenue growth of approximately 20% – with no additional help from external investors.

What makes Glazziq unique? Well, the company offers a ‘Home Try-On’ program to allow customers to order up to three pairs of glasses to try on first and for a small deposit that is returned as store credit once items are shipped back.

Sound familiar? The startup is often compared to Warby Parker, a highly successful US based startup that managed to disrupt traditional eyeglasses retailers by providing customers with a similar at-home trial.

Although initially met with a lot of skepticism, the US company is now estimated to be worth over $1 billion and since its inception in 2010, has added over 20 offline stores to assist its online growth. 90% of in-store shoppers have already visited the Warby Parker website and/or plan to make a second or third purchase online. 

The brand’s low prices and O2O strategy have attributed to its accelerated growth and awareness.

It was really about bypassing retailers, bypassing the middlemen that would mark up lenses 3-5x what they cost so we could just transfer all of that cost directly to consumers and save them money,” says Warby Parker co-founder Neil Blumenthal.

The successful integration between offline and online channels has created a unique browsing experience and propelled Warby Parker to be one of the most popular choices in North America for eyeglasses and Glazziq aims for the same success.

Although similar, Glazziq identified the demand for this kind of business model in Southeast Asia but adapted it for the region – all without the help of any external funding. How? With a smart business model, some traditional retail experience, dedicated founders and a market with high demand for spectacles.

Euromonitor forecasts that glasses in Thailand is expected to maintain a compounded annual growth rate of 5% to push sales to reach $13 billion by 2021. With so much potential, it’s surprising no company in Thailand has found a way to sell better to the digitally adept generation.

Equipped with an MBA from Kellogg Business School, on-the-ground experience from her family’s own 50 year old glasses retailer Better Vision and SET listed global lens manufacturer Thai Optical Group, co-founder & CEO Prinda Pracharktam decided to build Glazziq.

Prinda shared that people often admitted they felt pressured under the watch of a salesperson and unwilling to pay high prices for brand name frames and lenses. Others were overwhelmed by the sheer selection of eyeglasses. Glazziq wanted its frames to be affordable and designed to suit the tastes of its target market of 20-35 year olds.

The online glasses store was born to be the solution to these particular pain points so now how could they keep its fickle millennial demographic engaged?

The Glazziq Experience: Laid back, Trendy & Fresh  

When Glazziq was founded two years ago, Prinda and three other co-founders did everything in-house from snapping street style images of casual models to running online marketing campaigns and optimizing the design of the website.

By focusing on quality web content to mirror the appeal of flipping through a glossy magazine, Glazziq elevated the browsing experience for its customer. The company borrowed the same concept Instagram and Facebook fan pages used to keep their audiences engaged –  relatable content that inspired.

And this concept is evident in each collection from Glazziq. There is a clear focus on “everyday” imagery and the company keeps its product line trendy through a new model release every quarter and offers over 170 styles.

By creating a fresh and visually appealing shopping experience for browsers, Glazziq removes the pressure to buy and instead provides the customer with everything they need to make an informed and satisfying purchase: multi-angle views, information on glasses material, styling examples, etc.

“Glazziq focus on personalization to improve brand loyalty,” says Prinda. “We cater to our customer’s unique tastes by providing them with styles that are either popular in magazines or edgy frames that can’t be found elsewhere.”

glazziq thailand

The Glazziq Model: DTC

Glazziq operates on a direct-to-consumer model. The startup manufactures the glasses themselves from custom designs and leverages resources from its partner, Thai Optical Group. This allows Glazziq to keep prices affordable while maintaining high quality, models start at $56.26.

The company operates like a fast fashion brand in charge of its operations and brand identity, bearing similarities to the business model of another highly successful Thai fashion brand Pomelo.

Glazziq’s extensive offline network gives it an advantage over other online platforms. Prinda shares that Glazziq’s UV400 color lens provided by Thai Optical Group is unique only to them and they collaborate to keep up with consumer trends. The company also works with Better Vision to offer a free eye prescription test and after sales care including frame repair, frame adjustment and lens replacement, all the crucial components that are often missing from purchasing eyewear online.

To ensure efficient supply chain operations, order information from a customer is sent directly to the lens manufacturer where Glazziq stores its frames. The product is then assembled and delivered directly to customers nationwide through a mix of third party logistics couriers. The return process is also simplified through Glazziq’s partnership with 7-Eleven that makes its “Home Try-On” program even more appealing.

Customers can return sample glasses from the program to any 7-Eleven branch – something that happens 10-20% of the time. The program has proven to be successful as home try-ons welcome a healthy 60% conversion rate. Although the company’s primary focus is on Thailand, the team plans to expand to Singapore and Malaysia where Better Vision is also present.

The Glazziq Future: Integrating Offline Touchpoints

The Glazziq team knew when they launched that they wouldn’t remain a pure online brand and began to tread the offline waters in 2016. Glazziq’s decision came from a cautious outlook on Thailand’s landscape – the country’s ecommerce industry is predicted to make up 15% of total retail sales by 2024, although a sizable jump from the current 3.8%, it would still leave a staggering 85% offline presence.

“Thailand still remains a thriving offline retail landscape, people are never going to stop shopping in department stores or malls,” Prinda comments.

So came the decision to launch an offline showroom in one of Thailand’s bustling office districts in a coffee shop called Printa Cafe.

“We didn’t want a typical brick and mortar store. Using a high-traffic location such as a cafe gives our products a lot of exposure and the relaxed environment encourages people to try on different designs between cups of coffee. We wanted something entirely different from going to an eyewear store with a sales attendant breathing down your neck. We hope customers purchase because they’ve found a suitable model they like,” Prinda comments.

And it seems to be working as Glazziq recently added a second offline location to its portfolio at Casa Lapin – a coffee shop and co-working space highly frequented by young professionals.

Glazziq’s second offline showroom at Casa Lapin, a popular coffee shop and co-working space in a busy area in Bangkok.

Glazziq’s first showroom at Printa Cafe, located below the startup’s HQ.

To buy at the showroom, shoppers can simply scan the QR code on the product or buy online through the site’s search function. The customer can then make an online transaction via credit/debit card payment or bank transfer and the product is delivered within 5-10 business days.

Prinda believes Glazziq’s offline presence will double the number of sales and bring more awareness to the company’s “Home Try-On” program. It also hopes the added exposure will give the brand a new audience who will enjoy the entire Glazziq experience.

“Every channel has its own forte. For our brand, it’s better to close sales online and tend to customers offline,” Prinda says. “You have to synchronize and blend both online and offline experiences in order to succeed.”

THIS ARTICLE WAS BASED ON eIQ’s INTERVIEW WITH GLAZZIQ FOUNDER, PRINDA PRACHARKTAM

Let me preface this by saying that I truly believe that at least half of success in business can be attributed to luck, with the other half being execution. Although it is fruitless to try and document something as idiosyncratic as luck, I will discuss what I believe were the key principles that allowed us to scale our business to where it is today.

As a quick primer, Althea.kr is a Korean Beauty ecommerce business. We were founded in Malaysia in July 2015 and in the past year have expanded our operations to Singapore, Philippines, Indonesia, and Thailand. Within one year, we were recognized by Forbes as the largest Korean Beauty website in Southeast Asia with an annualized revenue run rate of $10 million.

Luck aside, I think we can attribute our ability to grow so quickly to three principles – focus, localization, and financial discipline.

1. FOCUS

What differentiates Althea from many ecommerce businesses is that we exclusively focus on one niche – Korean Beauty (K-Beauty). In the past 10 years, the K-Beauty industry has experienced CAGR of 33.8% and a significant amount of that demand comes from Southeast Asia.

We estimate that the addressable market for K-Beauty in the region alone will be $8 billion by 2020.

althea southeast asia

Google Search Interest – ‘Korean skin care’

Side note on why K-Beauty is popular

To understand why K-Beauty is so popular, it helps to understand the unique dynamics of the Korean market. It comes down to the fact that Korea is a small country with a condensed, demanding and fickle population.

Companies are constantly under pressure to innovate and create new products in order to meet the differing demands of consumers and to stay relevant. In traditional beauty companies, it takes approximately two years to create a new product, whereas Korean companies do so within months. One of the best examples of this hyper innovation is highlighted in the unique ingredients used in K-Beauty products ranging from snail mucus, horse oil to egg whites.

Despite the high demand for K-Beauty, it is extremely difficult for consumers to purchase K-Beauty products in most parts of Southeast Asia. The first challenge is the limited selection – there are over 10,000 K-Beauty brands in Korea but less than 100 of them are available in Southeast Asia.

This is because the demand in Southeast Asia, although growing, is still small relative to Korea’s domestic market and their main export market, China. On top of this, the available brands usually only offers a limited selection of their top sellers, not the whole product line.

The second challenge is pricing. In other parts of the world, K-Beauty is known as a value for money product, but because of distribution agreements and import duties in Southeast Asia, customers often pay up to 100% more for the same product.

For example, Laneige sells its Water Sleeping Mask for 28,000 KRW in Korea but it costs approximately 35,000 KRW if a consumer purchases the same product in Singapore.

Althea-southeast-asia

althea-southeast-asia

At Althea, we saw that the vast price discrepancy represented an untapped opportunity. By hiring a specialized team of K-Beauty experts in Seoul to work with brand owners and distributors to build our assortment and negotiate pricing, we have scaled our assortment from 300 SKUs to 3,000+ SKUs. For brands that we have direct relationships with, they see Althea as an easy way to enter five different markets that have diverse languages, culture and regulations.

Our pricing is comparable to what customers would pay in Korea, and we can generally deliver across the region to most areas within five working days. This has established us as an authority on K-Beauty, which has two main benefits:

1. The majority of Althea traffic and transactions come from unpaid channels (Direct and Organic Search results)

2. It significantly improves cost per order (CPO) –  in our more mature markets, we are getting marketing spend ROIs in excess of 25x

althea-southeast-asia

*Blended CPO over the last 12 months in one of Althea’s more mature markets. Source: Althea cost per order, internal data

2. LOCALIZATION

Even though K-Beauty is considered a universal product, it is still important for us to localize our service and offerings. We localize every consumer facing aspect of our business and operate a different website for each of our specific markets. From changing web addresses to suit local domains such as my.althea.kr for Malaysia and th.althea.kr for Thailand to having website content in the local language.

For our marketing campaigns, we engage 150-200 top beauty influencers in each country to act as local brand ambassadors. We benchmark our pricing by market to ensure we have the cheapest prices in each country we operate in.

Payments has always been a hurdle in ecommerce, we cover most major options ranging from credit card, local bank transfer, over the counter, and cash on delivery, which is crucial to success in Southeast Asia, due to low credit card penetration.

Our logistics operations work with 15 local last mile couriers and five local return centers to facilitate ease of deliveries and returns and we’ve adopted our customer service operations to offer social network support in each market.

Althea’s localization efforts: 

  • 5 websites
  • 4 languages
  • 750+ beauty influencers
  • 70+ payment options
  • 15 local last mile couriers
  • 5 local return centers

3. FINANCIAL DISCIPLINE

We are fortunate enough to be a part of the beauty industry, one of the only industries that has maintained its margins for 100+ years. Our product margins are multiples higher than a typical ecommerce business. Combined with the inherent stickiness of the products and a highly engaged customer base (18-34 year old females), our customer LTV is attractive.

These factors mean that we can afford to be aggressive with our customer acquisition cost (CAC) and other customer centric costs. While we invest aggressively in marketing and customer service, we practice strict financial discipline in all other aspects of our business. This means that while we do business in six countries, we only operate two offices and one central fulfillment center. We have one office in Seoul, which has 10 full time equivalents (FTE), and is responsible for sourcing, logistics, HR, and legal.

Our second office in Kuala Lumpur has 20 FTEs that handle development, marketing, finance, and customer support. This asset light model has allowed us to enter a new market once every three months since launching.

We generate significant savings by not duplicating functions across local offices, and in turn we re-invest those savings into growing our business.

By adhering to these three core principles – focusing on a niche category that we can execute well, localizing all customer facing aspects of our business, being efficient with our capital and a little bit of luck, of course, we were able to enter five markets and build a $10 million a year business within one year. Looking forward, we hope to expand our business to the rest of Southeast Asia as well as the greater APAC region.

althea-southeast-asia

The Althea team at their one year anniversary party

BY DAVE CHANG, HEAD OF MARKETING & EXPANSION AT ALTHEA

Over the last few weeks, we have looked at the ecommerce landscapes in Indonesia, Thailand, Malaysia, Singapore and the Philippines to see how the five largest markets in the region are faring. The region itself is a diverse and fragmented landscape having disparate infrastructure and fickle government regulations, making it hard for global brands to find a one-size-fits-all solution to conquer $238 billion in market potential.

However, despite the diversity of each country, there is a common theme apparent for ecommerce in the region. Here’s what we have discovered from the Southeast Asian ecommerce landscape in 2016.

1. The domination of Lazada – or soon, Alibaba

One player that has succeeded in making a name for itself in every country across the region is Lazada Group. The company, introduced by Samwer Brother’s Rocket Internet in 2012, has dominated monthly web traffic by millions in almost every country. Their recent acquisition by Alibaba has only cemented their position of power and plays a key role in Jack Ma’s big plan for Southeast Asia.

The only market with local players that puts up a decent fight with the giant is Indonesia. The country has several big players in the B2B2C sector – MatahariMall and Blibli to name a few – backed by big enterprises or conglomerates. But deep pockets is not the only thing that gives these players an upper hand, local knowledge of the market is also a big advantage.

southeast asia ecommerce landscape

With the looming news of Amazon’s expansion into Southeast Asia with Singapore next year, Lazada doesn’t seem to be worried as they have the advantage of years of consumer data and its latest acquisition of Redmart is seen as the latest effort to thwart Amazon at its own game.

2. M&A as a strategy to survive

Ecommerce is a long term game. Even with a good business model, companies need to be able to sustain themselves for the marathon before they even have a chance to make profit, let alone reap the other additional benefits of going online.

This year, the region has seen a lot of acquisitions as players attempt to expand market share or make an entrance. This includes the old news of ‘Alizada’, a $1 billion acquisition that left players in the industry trembling with excitement or the acquisition of Caarly by Carousell to accommodate the growing interest of people looking for cars on the mobile platform.

Some of the acquisitions were done by non-ecommerce players hoping to expand their reach. There is the latest move by K-Fit, a subscription fitness startup, acquiring Groupon in Indonesia and Malaysia; and the exit of Zalora in Thailand and Vietnam to Thailand’s conglomerate, Central Group, earlier this year.

With hundreds of players clamoring for a chunk of market share, it’s only time before natural selection leaves only the strongest and most committed players in the arena.

3. Payments sector is saturated, but no true problem-solver

Payments is still one of the largest hurdles for ecommerce in the region despite the financing boom for Southeast Asian fintech startups in 2016. Numerous startups are attempting to create a payments product for the sake of ‘doing fintech’ but aren’t addressing fundamental payment issues like a high unbanked population.

All across the region we see players in every market trying to address local financial challenges with little success. In Thailand, the government’s effort to create a cashless society with PromptPay has been halted indefinitely when Government Saving Banks (GSB) ATMs fell victim to the cyber criminal.  

Coins.ph in the Philippines is using bitcoin to increase financial inclusion in the country but is still at a nascent stage. In Indonesia, Telcos and even ride-sharing apps are fueling the high-profile race of mobile wallets – no doubt inspired by Alipay’s and WeChat early days strategy in China – but not a single e-payment option has become widespread.

southeast asia ecommerce landscape

Bank transfers and cash-on-delivery (COD) still remain the top two most preferred payment methods and continues to cripple ecommerce.

4. The key to C2C is through mobile

Consumer-to-consumer is estimated to make up at least 30% of ecommerce market share in the region but is tricky to measure because it happens on social channels like Facebook and Instagram and payment typically happens offline.

In Thailand, around 50% of online shoppers make purchases through a social network – making it the biggest social commerce market in the world. Consequently, it has attracted Facebook to make the country its first test base for social commerce payments and Facebook Shop.

This habit of preferring social commerce pushes players to focus on mobile to be able to capture the customer in an already familiar environment. In Singapore, 38% of online shoppers are making purchases through mobile, higher than the global average of 28%, and inspires home-grown companies like Imsold, Shopee and Duriana to focus on mobile platforms to appeal to more customers.

singapore ecommerce landscape

C2C players are also seen dominating Google Play Store in the Shopping category for every market, with Shopee being the most favored in almost all the countries. In the Philippines, the platform has become the answer to the high demand for popular international brands that only recently available in the country through official offline channels

5. Delivering ecommerce packages gets easier

The rise of ecommerce in the region has also boosted logistics infrastructure. The sector has reached an all time high of funding at $28.16 million in 2015 – led by aCommerce, the tech-logistics ecommerce solutions provider, with $20.2 million before its bridge series of $10 million earlier this July.

Meanwhile, JNE, the largest logistics company in Indonesia, stated that 70-80% of its revenue came from the retail sector dominated by ecommerce and hopes to maintain its annual growth of 30-40%. German-based DHL is also reportedly raising the stakes to grab market share, including the opening of a hub in Singapore.

The on-demand delivery service, led by ride-hailing apps like Gojek and Grab, is also thriving in markets where traffic congestion is distressing like in Indonesia and Thailand. Their motorbike fleets allow them to achieve same day delivery.

Where in the Philippines, cross-border package forwarding services like ShippingCart and POBox.ph are targeting the unique high volume of cross-border transactions in the country to fuel their businesses.

The many facets of Southeast Asia’s ecommerce landscape

Despite the warnings about the region’s diversity, the core ecommerce bottlenecks in Southeast Asia boil down to one – poor infrastructure. Lazada’s strong footprint in the region did not happen overnight, its early-adopter status enabled collection of customer data and the ability to build its own infrastructure – logistics (LEX) and payments solution (Hellopay) – in almost every market. But it almost cost them its business before getting swept off its feet by Alibaba.

southeast asia ecommerce landscape

It comes to show that regional players need to be able to adapt their strategies by keeping tabs on the dynamic trends and consumer behaviors. They need to prepare for a long-term investment before hoping to make their mark in the region and if not – better stick to just one market.

Find the ECOMScape series here: Indonesia, Thailand, Malaysia, Singapore, and the Philippines.

It is hardly a secret anymore – ecommerce in Southeast Asia is an enormous $238 billion opportunity that has been under the global radar in the recent years. It’s no longer about whether businesses should have an online presence, but instead how they can stay relevant to their audience in a quickly crowding space.

Indonesia Ecommerce Landscape

ECOMScape: Indonesia details the growing ecommerce ecosystem as of 2016. Source: eIQ

One market that has time and time again stood out is Indonesia thanks to more accessibility to mobile devices, affordable data plans and a youthful demographic propelling social channels and social commerce to the leading activity on the internet. It is a clear goldmine for brands, retailers and investors alike to unlock over 250 million unrealized online shoppers.

So how are they going to do this? Well, Indonesia is a mobile-first country and its citizens update their social networking apps twice more frequently than games and fives times more than music/video apps according to a study by Baidu.

In the next three years, Indonesia is expected to have over 92 million smartphone users, up 67% from 2015. This will push many startups to skip desktop entirely and focus on smartphone friendly ecommerce products. New apps have been the popular way to reach customers, but large spending for development, maintenance, and marketing have restricted companies from finding long-term success. And what happens when app downloads start to slow down as currently happening in the US?

wearesocial-indonesia-eiq

The rising global resistance to new apps

Almost 50% of smartphone users in the US did not install a new app last month while less than 25% of the ones who did returned to it after the first use. What’s even more shocking is a full 94% of revenue in the App Store comes from only 1% of all publishers, think Google and Facebook.  

Mobile isn’t dead but the opportunity is shrinking. So what does this mean for businesses scrambling to capture the attention of the world’s fourth largest population who prefers to use on average only 6.7 apps?

You don’t chase customers, you find them where they already are.

For the first time, messaging apps have surpassed social networks and that’s where chat commerce comes into the story.

Chatbot, chat commerce

Chat commerce isn’t the future, it is the present.

Chat commerce or conversational commerce is the intersection of messaging apps and shopping and is already a very familiar concept in the West. Businesses understand the importance of being readily available to their customers, especially as a poor customer service experience will drive 89% of them to a competitor.

According to Facebook, more than 50 million companies operate on its platform and send more than 1 billion business messages every month.

But having properly trained customer service reps to support hundreds to millions of personal conversations in parallel is difficult to scale for any business. Solution? Chatbot.

A chatbot is an AI (artificial intelligence) feature of a chat or messaging platform that simulates a human conversation with the user in order to provide them with the information or service they’re looking for.

Brands overseas like Taco Bell have partnered with Slack to allow customers to order and pay through the team communications platform.

Think about Siri who has been helping Apple users carry out tasks since 2011 or Amazon Echo, an at-home device by Amazon, which encompasses a chatbot named Alexa to read aloud weather reports, set alarms and more importantly, help customers order new products from Amazon.

chat-bot-amazon

Screenshot from Amazon Echo commercial.

These are only a few of many examples. Facebook Messenger also opened its platform earlier this year for businesses to build chatbots through its Messenger Send/Receive API.

The API will support sending and receiving text and also images and interactive rich bubbles containing multiple calls-to-action.

chat-bot-benefits, southeast asia chatbot

A chatbot can clearly offer a business great benefits to get closer to customers in a medium they are already familiar with, so why has there been little activity in Southeast Asia?

Call all chatbots

Southeast Asia has largely mirrored the West and particularly China in development of its ecommerce maturity. Yet, current chatbot growth has been stuck at the ‘idea phase’ – a lot of chatter and buzz about its revolutionary importance but no product.

“The reason why companies in Southeast Asia haven’t created chatbots isn’t because they don’t think the opportunity is there, but they lack the resources and most fundamentally – AI talent to build it,” comments Lingga Madu, Sale Stock co-founder.

No company has released a true commercial-scale, transaction-enabled MVP, that is, until now.

Sale Stock case study: Facebook Messenger’s first chatbot in Southeast Asia

One lesser talked about company has already begun testing its chatbot with Facebook, Indonesia’s most popular social channel. Sale Stock, the mobile first shopping platform widely popular among Indonesia’s young females, has become SEA’s first company to launch a chatbot that can handle end-to-end transaction on Facebook’s Messenger Platform.

Meet Soraya AI, a relatable, cheery chatbot who handles 100% of queries coming to Sale Stock’s Facebook Page and the brainchild of Facebook, Google, Palantir, and NASA engineers recruited by Sale Stock around the world.
sale-stock-chat-2, southeast asia chatbot

Soraya uses machine learning to shuffle through queries and decide whether to answer it autonomously or give recommendations to an agent instead.

Frequently asked questions such as “do you offer cash on delivery?” or “do you sell high heels?” are replied to almost instantly. In development since 2015, she can already handle 22% of all queries autonomously.

The beauty of machine learning is that the more information she receives, the smarter she becomes and the more accurate her answers will be.

Soraya has already improved response time by 20 – 40 times and currently replies within 60 s. That has granted Sale Stock a response time badge on their official Facebook page.

sale-stock-fb, southeast asia chatbot

Soraya has also been fed large amounts of past Sale Stock customer queries to enhance her intelligence. This combined with recent purchasing behavior and browsing history allow her to recommend consumers personalized products.

Buying the product is even more simple. Soraya asks for confirmation of the item, correct size and color, all within Messenger, and requests address and payment method. If it is a returning shopper, all previous payment information is saved so purchase is simply a click of yes.

sale-stock-chatbot, southeast asia chatbot

“Soraya was created to meet the needs of our customers, many of whom are living outside major cities on limited social media data plans where chat is free but browsing is not. Some have never even been exposed to digital shopping carts but chatting is second nature,” – Jeffrey Yuwono, Sale Stock President.

Trust is also a major concern that holds many Indonesians back from trying ecommerce. By creating a personable chatbot on a familiar channel, brands hope customers will feel comfortable sharing their personal details.

sale-stock-chat, southeast asia chatbot

Chatting with Soraya on Facebook Messenger

Sale Stock chat bot, Indonesia

What’s next for Sale Stock?

The company is already working to create viable chatbots for WhatsApp, LINE, BBM and SMS as they are the most popular messaging platforms their shoppers use. Sale Stock strongly believes in the Lean Startup methodology, “getting it out there as soon as possible to collect real, user feedback”.

“We’re still in the very early stage of our product and ironing out the bugs and adding features iteratively,” comments Madu.

All inquiries going to Sale Stock are monitored, independent of the channel source, on one platform created in house to control flow and fix any arising bugs.

The team hopes to fine-tune its technology to quite possibly launch SaaS in the future.

“The success of chat commerce depends on how well the machine can distinguish the details: context, intention, the slang, mix of dialects, and even the use of emojis so the customer never feels like they are chatting with a bot. The platform has to be robust enough to handle these typos and fringe use cases,” says Madu.

The future of chatbots

There has always been a fear of AI replacing tasks typically performed by humans, but customer support is a tricky area since personalization is at the core.

“As brand loyalty and exceptional customer service become the main priority for brands, companies simply cannot afford for bots to completely handle customer service and risk creating a negative experience. With that said, the live customer service representative will always have a place with the overall customer experience,” says Mayur Anadkat, Vice President of Product Marketing at call center software provider Five9.

The moment has not yet been reached when machine learning enables 100% accurate and instant replies to customers no matter the language, mix of dialect, slang or emojis – but it is in the foreseeable future. AI is here to enhance, not replace.

Not only will the rise of chatbots improve the reputations of brands but it will be expected of businesses by the next generation of shoppers. As Uber product manager Chris Messina put it, bots present a new, unpolluted opportunity to build lasting relationships with people.

Ultimately, the lack of friction is what makes the shopping experience a pleasant one and what will drive the A players to the head of the game.

By: Cynthia Luo

Malaysia Ecommerce Landscape

Malaysia may be the second smallest Southeast Asian nation but it doesn’t lack ambition to develop itself into a powerhouse. Prime Minister Najib Razak recently out-hustled neighbour Indonesia to appoint China’s ecommerce tycoon Jack Ma to advise the country’s government on its route to develop a strong digital economy.

These ambitions don’t come out of thin air. In 2015, Malaysia’s ecommerce market was estimated at $1 billion, which constitutes 1.1% of country’s total retail sales (though these numbers may be skewed). Malaysia’s ecommerce market is on a par with Singapore not only in market size, but also in terms of the well-developed infrastructure within the country compared to the rest of Southeast Asia. This might explain why Malaysia is the origin for some of the biggest tech companies in the region such as the taxi hailing app Grab and Catcha’s iProperty Group.

In the next ten years, Malaysia is predicted to increase the online shopping market size eight-fold to $8 billion, but where does the country’s ecommerce stand now? ecommerceIQ shares ECOMScape: Malaysia to provide a quick overview.

1. Surprise, surprise, Lazada emerges as the leading mainstream platform

Lazada, Southeast Asia’s clone of Amazon, has emerged as the leading business-to-consumer (B2C) marketplace in Malaysia with around 20 million visitors per month while closest rival 11street.my, a South Korean marketplace, grew to become the second biggest online marketplace with more than 7 million visitors per month only a year and a half after launching.

Malaysia Ecommerce Landscape

Locally-run Lelong.my, which started as an electronics auction site but now turning itself into a B2C marketplace, gets around 6 million visitors per month.
While these companies are still competitors to Lazada, none of them pose a real threat to Lazada’s leading position, especially after its acquisition by Alibaba earlier this year (deep pockets)

2. Service providers are early online adopters

Malaysia’s online space is filled with service providers who choose to sell services through ecommerce to happy users. A smart move considering 50% of Malaysians in a recent PwC Survey said they shopped online because of convenience.

These early adopters include:

  • KFIT: started its fitness business in Malaysia offering a subscription model for unlimited access to various gyms, and has now expanded to other categories such as selling online spa and beauty procedures.
  • GoCar: car rental by the hour or day through mobile app that offers an alternative to car rental and car ownership in Malaysia’s capital Kuala Lumpur.
  • ServisHero: a mobile marketplace that allows search and booking of home service providers such as a plumber or repairman.

Malaysia Ecommerce Landscape

3. Mobile shopping platforms on the rise

66% of consumers surveyed in the PwC report have used their phones to make purchases. It implies that the majority of 50% of respondents who have started shopping online in Malaysia within the last three years are heading straight to mobile marketplaces.

Among Malaysia’s most popular shopping apps are companies such as local imSOLD, Singapore-based Shopee and Carousell, Japan’s Qoo10 and global players like Taobao and eBay.

Malaysia Ecommerce Landscape

As Malaysians on average spend 3 hours per day on social media, social commerce becomes quite popular – 31% of online shoppers in Malaysia have purchased directly via a social media channel. The most common being Facebook and Instagram, which is preferred by 41% and 22% of Malaysians, respectively.

4. Good banking system means one less problem for ecommerce

Malaysia has well-developed banking infrastructure and as a result, its residents are more accustomed to digital payments than most Southeast Asian nations. 37% of Malaysia’s population uses mobile banking, while nearly 20% made digital payments and used banking cards in 2014.

According to the global payments solution provider Adyen, the preferred payment method of 42% online shoppers is online banking where shoppers are redirected to their online banking environment to complete purchases.

Malaysia Ecommerce Landscape

Source: The Global Ecommerce Payments Guide by Adyen

As a result, there are plenty of payment gateway solution providers in Malaysia, yet few companies offer mobile wallet solutions as they would struggle to change Malaysian habits regarding using online banking.

Malaysia Ecommerce Landscape

5. Newcomers fight to grab a share of logistics

Successful ecommerce in Malaysia has contributed to increased competition among logistics service providers. The country does not have major infrastructure issues such as islands or bad roads like in the Philippines and Indonesia, posing less obstacles for startups to offer straightforward parcel delivery.

Malaysia Ecommerce Landscape

Traditional last mile delivery companies such as POSMalaysia, Nationwide Express and SkyNet have been somewhat lagging behind adopting new technology and are now being challenged by newcomers like Ninja Van, who proudly states it’s “powered by proprietary cloud-based technology”.

And it’s not only rookies in logistics fighting for their share. In Malaysia, the competition is quite tough among fulfillment service providers who focus on serving the needs of online merchants.

Companies such as DHL, SP Ecommerce, aCommerce, theLorry.com and others are battling for clients not only among themselves, but also with the biggest client – Lazada.

Malaysia Ecommerce Landscape

Lazada already pushed its own logistics service, Fulfillment by Lazada (FBL) in Malaysia, Singapore and the Philippines. The online marketplace offers end-to-end fulfillment solution at a fixed cost per item delivered. As the biggest player in the market and scaled operations, Lazada’s price may be hard to beat.

“Increasingly, having an online shopping functionality is becoming the norm, rather than the exception and it is only going to be more widespread,” said Jon-Paul Best, Head of Financial Services for Nielsen Malaysia.

Click here to download the full, high resolution version of ECOMScape: Malaysia and join the ecommerceIQ network to not miss out on ecommerce market trends and insights.

For more information on other ecommerce landscapes, take a look at:

ECOMScape: Indonesia

ECOMScape: Thailand

ECOMScape: Singapore

ECOMScape: Philippines