opportunity for Men's Grooming in Thailand

Products for men’s grooming are now varied as the demand increase. Source: Harper’s Bazaar

Even after reading about the rise of the Nouveau Bro, I didn’t realize the times were really changing until my eye cream went missing from the bathroom. Thinking I had simply misplaced it next to my laptop during a Netflix binge, I was shocked when my hunt ended abruptly in front of my mirror, boyfriend caught wide-eyed, daintily dabbing the brightening cream around his eye lids. He blinked at me and continued shamelessly.

A couple years ago I may have found the idea of male grooming a bit fringe, but turns out that he is part of a global market for male beauty products estimated to reach $19 billion this year alone. In Thailand, the trend is even more pronounced, growing almost two times faster than the overall beauty sector – valued at $360 million in 2015 and projected to reach $443 million by 2020.

In Thailand, the male beauty sector is growing almost 2x faster than the overall beauty sector – valued at $360m in 2015 and projected to reach $443m by 2020.

“Thailand is known for its gender fluid acceptance, the freedom of sexuality has even given rise to a ‘third sex’. This phenomenon in addition to the popularity of K-beauty breaks any traditional gender norms meaning beauty isn’t only for women anymore,” says Chalermkiat Jinah, popular male beauty blogger of Pemikaz, in Thailand.

But how are these market trends translating to ecommerce in Southeast Asia, and specifically Thailand? EcommerceIQ posits that there is a very strategic and largely untapped opportunity for brands to leverage ecommerce as a major channel for male beauty products. This may prove true even more so than their female counterparts because online shopping behavior between the sexes varies greatly and facilitates male behavior.

Male Beauty Case Study in Thailand

Studies show that male shoppers tend to buy more for utility than for the enjoyment of the browsing and shopping experience. So the convenience and speed offered by ecommerce creates the perfect storm to leverage online beauty sales for men.

When online subscription beauty service Birchbox started selling men’s sample boxes three years ago, the company’s founders quickly learned there are certain shopping habits that distinguish men from women. Females would test samples that the company sent them in the mail—sometimes purchasing a full-size version of an item they really liked—men would immediately snatch up six to a dozen versions of the same thing.

Birchbox was so unaccustomed to such buying behavior that its website started to code the orders as fraudulent.

To test global consumer behavior of males in beauty for the Thai market, ecommerceIQ partnered with aCommerce to look at one of the region’s trailblazing beauty brands. This brand has made impressive steps in ecommerce adoption, and whose brand equity is strong for both male and female shoppers, hence providing an interesting case study for male beauty shopping behavior. (Scope: The data covers Jan-Dec 2015 & a half million online sessions. Products ranged from $5-125 targeted to middle and upper class customers)

 What kind of men shop online? Not your grandpa

Male consumers of this beauty brand are younger, urban and from middle-upper classes where internet and smartphone penetration is higher. 

opportunity for Men's Grooming in Thailand

Half of men shopping online for beauty products are between 25 and 34. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

Once connected, they go deep into the experience 

Surprisingly, they consulted more pages per session (9.7 versus 8 for women)

opportunity for Men's Grooming in Thailand

When shopping for beauty products, men consult more pages than women Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

They stayed longer each session (3.56 mins versus 3.17 mins)

  • This may support the Interactions’ study, which found that men are more likely to read all of the product information before purchasing an item.
opportunity for Men's Grooming in Thailand

Men tend to consult more pages on beauty websites than women. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

They had a significantly lower bounce rate (38.6% versus 43.1%)

  • “Most men are destination shoppers,” said Fashion Institute of Technology associate professor Vincent Quan to CNBC. “They are looking for something specific [and] make a beeline.”
opportunity for Men's Grooming in Thailand

Men have a much lower bounce rate than women on beauty website. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

Why? Because men shop to buy, women shop to browse

About 30% of online beauty market revenue came from men’s purchases even when they only represented 20% of the traffic.

  • Male conversion rate was much higher, once a man has landed on an online beauty website, he was 70% more likely to make a purchase than a woman. This supports Birchbox’s findings on male soap, above. “[Men] were buying something that they liked, and they weren’t just buying one of it,” said Katia Beauchamp, one of Birchbox’s co-founders.
opportunity for Men's Grooming in Thailand

Women represent most of the traffic of beauty websites, but compared to women, on average men spend more at each visit. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

What are they buying?

  • Skincare and Deluxe categories dominated the online sales of the brand (3/4 of total sales).
  • Men tend to buy much more products focused on the body than women.

“Anti-aging and skin whitening products in both higher and lower ends of the quality spectrum continue to have a strong presence in the Thai market,” said the President of L’Oréal Asia, “The company saw a boom in men’s skin care in China and realized the potential for the segment globally. The use of anti-aging products has become common among both male and female consumers.”

opportunity for Men's Grooming in Thailand

Body beauty products are much more popular within male customers. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

What type of devices are males & females shopping with?

As a recent report from Google precises: women, both as breadwinners and primary domestic caretakers have a much more active and mobile behavior. In the eIQ beauty case study, 2 of 3 women prefer browsing on mobile. Ecommerce needs to be mobile friendly to target them. But for men, browsing beauty website on desktop is still their first choice (47%) before mobile (46%).

opportunity for Men's Grooming in Thailand

Women customer are much likely to use their mobile to browse compared to men for which desktop is first choice. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

Tips to Winning the Male Beauty Market Online in Thailand

1. Provide the right content to your audience

Improving online content is the key to higher conversions. In a nascent market such as men’s grooming, customers need to be educated through tailored suggestions, tutorials or services about men beauty products. In Korea, men beauty tutorials are already garnering a huge amount of attention and this trend is starting to get imported into Southeast Asia. Take for example, Thai blogger Pupe So Sweet, who is an expert of men beauty and has millions of views and 20K subscribers on Youtube. 

2. Win the online battle of peer endorsement 

In Thailand, beauty shoppers rely heavily on peer affirmation and highly trust reviews and content from others to make decisions. A recent release from AT Kearney shows that 59% of the online shoppers for beauty and personal care find peer reviews very important or somewhat important. 

opportunity for Men's Grooming in Thailand

3. Get more products specifically ‘for men’ online

Currently, men still use unisex or women’s products because of the low offering of specific products specifically for men. On average, they use seven grooming products but only three are “for men” products. Also keep in mind, a recent study shows that men are selective with their purchases and prefer to use “for men” products that are fast-acting, easy to use, less processed, and with visible results. “These products are used on daily basis and have been previously tested by customers. A large majority of this kind of customer is more loyal compared to their counterpart,” says Tiffany Schmitt-Chretien, Senior Brand Commerce Manager at aCommerce.

4. Make the wives convert their husbands

Women have a significant influence on male behavior. If encouraged by the people around them, men will take much more care of themselves. eIQ internal data suggests many conversions are triggered by women in Thailand: 40% of ‘for men’ products are purchased by women.

opportunity for Men's Grooming in Thailand

Even if men represent the majority of the customer for “for men” product, women are important customers of this category. Source: eIQ Case Study – Ecommerce & Men Grooming in Thailand

5. Retarget existing offline customers

Men, in general, have higher brand loyalty compared to women. When they decided to branch out from their usual basic grooming regimen, they will go to the most familiar brands. By giving a better deal that they couldn’t get when shopping offline, for example, free samples or discounts on product set, you can convert them to this channel. Selling these products online can also offer males the anonymity that some men may still crave despite the changing image of men’s grooming.

 

Contributed by ecommerceIQ Team (Rara Kinasih, Alex Henry, Anutra Chatikavanij, Felicia Moursalien)

Tweet your feedback to @ecomIQ

direct to consumer strategy

Ecommerce has completely disrupted not only how people shop, anywhere anyhow, but also the supply chain and distribution of goods. Brands and businesses are empowered in a way never before possible, most noticeably by cutting the middle men and selling directly to consumers. By adopting a direct to consumer strategy, businesses gain a stronger presence in both online and offline markets.

The Apple example

Dive into Apple’s branding strategies in the past and you’ll recognize the importance of a direct to consumer approach for success. Long before its growth streak, Apple’s sales were driven by big box electronic retailers. After launching an online store in 1997, the company turned around and aggressively expanding its own retail stores internationally. Since then, Apple has grown to become the number one tech company in the world.

But Apple isn’t the only success story. Nike, Puma, L’Oréal, Kiehl’s, and Dell have expanded their distribution channels and sold directly sell to customers by increasing their ecommerce distribution channels, specifically brand.com websites and mobile apps, and by establishing brick-and-mortar stores worldwide.

So why should other brands shift from a traditional distribution process through retailers to a direct to consumer model? How has this shift triggered such a phenomenal growth for these brands? Let’s dive in.

1. Direct to consumer is the best way for brands to build a strong relationship with customers

Directly selling to consumers gives brands a chance to gain complete control over their brand presentation. Whether through a brand.com website and/or a brick-and-mortar store, they’re able to portray a story that conveys the purpose and meaning behind their products and add a distinct personality to their brand so their products can shine.

Southeast Asian consumers are predicted to drive the ecommerce boom in the future as they are among the world’s fastest and strongest adopters of mobile and social media in online and in-store purchasing activities. According to Bain80% of digital consumers use social media or messaging apps to research products and connect with sellers. With online stores, the style of the images, the way the site looks, and even how the items are packaged when shipped, all add to a brand’s customer’s experience.

Take for example Kiehl’s, the global luxury skincare brand is currently expanding a full scale ecommerce strategy in Thailand by adopting an unconventional O2O campaign in order to create an omnichannel experience and in turn drive customer conversions as well as brand awareness. Figure 1 and 2 show the comparison between how products are presented to customers with its own branded website and brand presence on an e-marketplace. 

brands direct to consumer strategy in Southeast Asia

Figure 1: Kiehl’s beauty products displayed on its own website

brands direct to consumer strategy in Southeast Asia

Figure 2: Kiehl’s beauty products displayed on the website of its retailer partner

“The advantage of having a brand.com is control. You can create your in store experience and highlight the products you choose. It’s not the same as selling through other retailers because you can’t create your own story.” – Tiffany Schmitt-Chretien, Senior Brand Commerce Manager at aCommerce.

Southeast Asian consumers tend to use physical stores as a platform to gain more knowledge of a wide range of products, touch and feel are very important. As opposed to selling through retail intermediaries, brands with a physical presence have the advantage of enhancing the whole shopping experience by providing in-person interactions. This can be something as simple as in-store music and lighting to set the mood, to themed decor pieces that reinforce brand identity. Sales assistants can also dress the part to create an immersive experience. Stores like Dior and Chanel often spray their signature scents in the air to play into all the senses – a unique element that intermediaries would overlook. Warby Parker, also moved from ‘click to brick’ back in 2013 to provide a special experience that could contribute towards building relationships with its customers. 

brands direct to consumer strategy in Southeast Asia

Example: A Kiehl’s Store with their trademark industrial lab style visual merchandising

Physical brick-and-mortar stores also allow brands to offer special events and in-store promotions exclusive for members only, which provides the opportunity to strengthen a customer’s return. This becomes a significant advantage for brands wanting to target the Southeast Asian market as consumers in this region hold unique views on special events. According to PWC’s report, consumers in Singapore, Malaysia, and particularly in Thailand place a significantly higher level of value on member-only events than global consumers – they value exclusivity. 

From marketing to customer experience, brands are also able to better connect with their customers through direct channels, and in turn gain their trust. In 2013, L’Oréal, boosted its ecommerce efforts with new business models to support their digital marketing strategy, one of which involved launching the “L’Oréal Paris Make-Up” application. This platform allowed users to test products virtually and create a “brick-and-mortar” type of experience. L’Oréal was able to drive traffic through their application, which effectively strengthened its brand loyalty and contributed towards its significant growth of 29% of online sales in 2013.

2. A key opportunity to collect relevant customer data to drive sales

There’s a clear difference in quality of the data collected directly from a brand’s own channels and the data accessed by third parties. The customer analytics generated from direct channels are more specific to a company’s customers, whereas buying customer data from retailers may be too generic or irrelevant for customer segmentation purposes.

In owning a brand.com site, data is easily collected through techniques such as spotting trends with user’s clicks, identifying the most lucrative search terms and analyzing customer behavior on social media sites. In doing so, brands are able to assess a consumer’s decision-making process and analyze their purchasing behaviors to personalize future campaigns for its existing customers. This is done in the following ways:

  • Customise promotions and special offers to different audiences
  • Improve and/or create new products from product feedback
  • Find the most useful visuals and messaging approaches to boost the effectiveness of marketing campaigns
  • Provide better customer service by tailoring interaction with customers

And we can draw back on brands in the past which have been able to succeed through analyzing the data from consumer purchases. In 2013, Puma’s efforts to gather and analyze data on consumer interests had significantly improved their brand marketing and engagement strategies. Apple’s use of big data over the years has allowed them to analyze their user’s behavior, build new products and determine what new features should be added to their existing products.

Ecommerce fills a gap when it comes to understanding consumer’s interests. – Tom Davis, Global Head of Ecommerce for Puma

In owning a branded retail store, brands can also obtain indirect information from its customers – a phenomenon known as ‘in-store analytics’. The ability for brands to analyze in-store performance is vital to understanding consumer behavior and manage in-store marketing campaigns, as both factors facilitate shoppers deeper into stores for maximum exposure. In recent years, Topshop was able to install a WiFi-based analytics system and fitting call bells to analyze conversion rates, which provided better insight on how to refine store layouts and position in-store advertising messages more effectively.

Customer analytics therefore enable brands to discover the hidden preferences of their consumers and better understand their needs and demands. According to a 2014 Infosys survey, 78% of consumers claim to more likely purchase from a retailer again if they accurately provided offers targeted to their interest, wants or needs. It is crucial brands maintain strong control over customer data to better understand their customers, and in turn drive sales up.

3. A direct to consumer strategy allows brands to control their pricing structures

Pricing is a factor that significantly influences the overall competitiveness of a brand’s products and affects the generated sales revenue. By selling direct, brands are able to formulate their own pricing strategies to improve sales margins, rather than being influenced by the varying pricing structures set by retail partners. Nike for example, has taken advantage of pricing adjustments by commanding higher prices for its products: a factor which has significantly contributed to its phenomenal gross margins.

Brands also no longer face intermediary costs that once consumed a percentage of its sales so there is no need for brands to negotiate pricing with retailers and brands nor outspend the competition for better in-store position and promotions. SaleStock Indonesia, a fast-fashion startup based in Jakarta, recently took a proprietary merchandise strategy with efforts to eliminate all intermediaries. By vertically integrating their design, manufacturing and supply chain processes, they are able to provide on-trend clothing at a fraction of the general retail cost in midst of the increasing competition of other e-retailers such as Lazada and Tmall.

Costs & risks to consider

In light of all the benefits of the direct to consumer model, there are associated costs. In shifting to a direct to consumer strategy, brands need to take on all the responsibilities that were once in the hands of traditional retail intermediaries. From channel to cross-border management, and from tech-development to fulfillment and delivery, maintaining operations and logistics become a significant upfront cost. On top of that, more emphasis needs to be placed on marketing your brand and its distribution channels.

Read also: How Chatbots Are About to Disrupt Social Commerce in Southeast Asia

For well-established brands such an investment is not an issue but it may be a problem for brands with a smaller consumer base. In midst of the intense competition among brands in the ecommerce and the retail market, it becomes a challenge for start up brands to establish their share in the market place. One of the major difficulties faced by the clients of aCommerce is driving traffic to their newly launched online website, particularly those who lack a strong presence on social media platforms.

Another area of concern brands need to consider is the risk of channel conflict with its retailer partners. Retailers may view brands going direct as a threat, as brands draw more sales data for themselves. Back in 2007, Dell’s shift towards selling directly to end users and abandoning its reseller partner channels caused a negative reaction in their traditional sales channels. Also, Apple’s change in focus of its whole channel towards a direct selling model forced 55% of its partners to go toe-to-toe in competition, with 14%, 33% and 46% of these partners rating the channel conflict as high, medium and low, respectively.

The power of bargaining is definitely something to look out for.

In Southeast Asia, the chances of conflict are even greater. According to Praponsak Kumpolpun, Senior Brand Ecommerce Manager of aCommerce, ‘there aren’t many strict laws and regulations where you have to follow pricing guidelines – so the power of bargaining is definitely something to look out for’. For example, let’s take a look at the big intermediary players of Thailand such as Tesco and Lazada. In holding dominant market share, such retailers force brands to maintain pricing integrity. Brands which go against these retailers and adopt an aggressive pricing strategy will jeopardize their long term relationships with them.

However, there are also opportunities to generate sales and product awareness through cross-promotion. Multiple channels can be used to stimulate interest and encourage purchases. There are several ways in which brands may do this, some of which are listed below:

  • Offer a store finder on their website so consumers can discover its retailers
  • Give retail partners advertising space to market their unique bundle promotions
  • Promote in-person store events
  • Reward high-performance retailers with prominent listings on your site

 

brands direct to consumer strategy in Southeast Asia

Figure 3: Chanel’s store finder which includes both its own retail stores and its retailer partners

Many brands nowadays incorporate “Online Channel teams” in their operations to structure a trade plan within their company. By doing so, they have the ability to adjust the slot of promotions across channels without a conflict of interest between channels. Such promotions may include bundle sets unique to each specific retailer. This strategy prevents price comparison across each channel. Alternatively, many brands sell and promote brand exclusive products. Figures 4, 5 & 6 below show the varying promotions of SK-II products unique to the SK-II brand and its retail partners.

 

brands direct to consumer strategy in Southeast Asia

Figure 4: SK-II exclusive offers on the official website

 

brands direct to consumer strategy in Southeast Asia

Figure 5: Unique SK-II product bundles from Sephora

 

brands direct to consumer strategy in Southeast Asia

Figure 6: Unique SK-II product bundle from Lazada

Previous studies do not find strong evidence of cannibalization from direct brand to consumer channels. In fact, according to a study commissioned by Digital river Inc and completed by Forrester Research Inc., more than half of the manufacturers are reported to have seen a positive effect on relationships with other sales channels from its direct to consumer strategy.

What’s next for brands in Southeast Asia

 

Ultimately, the best approach for brands is to reach their consumers through both traditional and direct channels by adopting an omnichannel retail strategy. By doing so, they are able to benefit from selling directly to consumers and can use channel conflict to their advantage. The benefits of direct to consumer outweigh the costs and risks. 

BY ALEXANDRE HENRY & YOOREE WOO

Tweet your feedback to @ecomIQ


In a country where there are more active mobile phone subscriptions than people alive – 255 million people versus 326 million mobile subscribers – Indonesian telecommunications providers are in a prime position to shape the future of ecommerce and mobile commerce in Indonesia. But while the telco sector contributed 3.14% of total GDP in Indonesia in 2014 and experienced high growth of 10.36% in the same year, placing Indonesia’s mobile market as the fourth largest in the world and top ten 3G markets, have the original giants of emerging market tech kept up with the online shopping boom?

Indonesian Telcos move to ecommerce

From telecommunications to “telecommerce”

Traditionally, telco companies were the ones who have direct access to customers, but in light of the ecommerce boom, things are slowly changing. The Indonesian telecommunications sector is dominated by three big players; Telkom, Indosat Ooredoo and XL Axiata, which make up 80% of total market share in Indonesia. Not one to miss opportunities, all three companies have aided the archipelago’s ecommerce sector through investments and strategic partnerships. Below is an aerial snapshot of Indonesia’s telco landscape, the evolution from telecommunications to telecommerce.

Telkom x Blanja.com

52.6% government owned, Telkom has the largest telecommunications network and is Indonesia’s largest service provider. Telkomsel, its subsidiary for mobile providers, has control of 46% total market share with more than 152 million users.
Since 2009, the company has ventured into the local ecommerce space by investing $5 million in an ecommerce company called Plasa.com. Plasa.com later became a project under MetraPlasa and was merged with Blanja.com, a joint venture between Telkom and eBay that launched in 2012.
Following the partnership, eBay injected $9.2 million into the marketplace, shifting ownership 49% by eBay and 51% for Telkom. Additionally, the partnership meant that merchants could easily market their products quicker on a global scale and for a cheaper price through eBay’s network.
As a sign of their commitment to stake their place in the industry, the company announced that Telkom, through its subsidiary TelkomMetra, and eBay would inject a new fund of $25 million to the marketplace in April earlier this year. Telkom would lead the funding by contributing 60% of the total round, approximately $15 million. The marketplace has recorded $35 million of transaction value in 2015 and currently ranked #198 in terms of web traffic in Indonesia by SimilarWeb data. Blanja is led by Aulia Marinto as its CEO.
However, even with the aforementioned resources at their disposal, the C2C site’s growth currently is still left behind its competitors like Tokopedia and Lazada. It may be attributed to restrictions put on its vendors such as the requirement of government permits to register on the site and forbidding the sale of second-hand goods.

Indosat Ooredoo x Cipika Store

The second biggest telecommunications company in the country has 69.8 million subscribers in its database. Initially a state-owned company, Indosat was acquired by the Qatar-based telecommunication company, Ooredoo Group, in 2009 and changed its name to Indosat Ooredo in 2015. Now, the government only holds 14.29% in the company. Earlier this year, the company announced its partnership with IBM to develop and deliver solutions on IBM’s platform, Bluemix.
Through its subsidiary company IM2, Indosat has launched a marketplace called TokoOn in 2012. In 2014, the marketplace pivoted to an ecommerce platform with a new name, Cipika Store, to sell Indonesian culinary and local handicrafts. Since then, the company has added new categories in its marketplace; lifestyle, gadget, home & entertainment, books and play. It has also allowed people to buy wholesale products at cheaper prices.
The site is ranked #4166 by SimilarWeb, performing way below the two other “telecommerce” companies. Although not selling the exact same products, the site faces competition from Qlapa and KedaiKuka in its Indonesian local products category and the likes of Lazada and Tokopedia in other categories.

XL Axiata x Elevenia

XL is the first private company in Indonesia that provides mobile telephone services, which was originally established as a trading and general services company. In 2009, the company was bought by Axiata Group and since then changed its name and logo to XL Axiata. As of March 2016, it has 42.5 million users, down 19% from 52.1 million users in March 2015.
In 2013, Elevenia launched as a joint venture between XL Axiata and SK Planet, Korean telecommunications operator. The initial investment made was $18.3 million, with both companies sharing fifty-fifty ownership. Lead by James Lee as the CEO, total investment put into the marketplace to date is $110 million, placing it as one of the top three most funded startups in Indonesia.
Since the beginning of its existence almost three years ago, Elevenia has sought to differentiate itself from the other marketplaces with its seller and buyer reward points. Sellers can use the collected points to boost their sales with things like ad placements and providing buyers with discounts. Elevenia is also providing their sellers with education facilities in their ‘Seller Zone’.
Compared to the other “telecommerce” companies mentioned above, Elevenia has the best performance so far, recorded $95 million (1.3 trillion IDR) of revenue in 2015. The site is ranked #21 in the country and they are projecting five times sales growth potential for 2016. 

Key Stats of Telecommerce Companies in Indonesia, Indonesian Telcos move to ecommerce

Key Stats of Telecommerce Companies in Indonesia

Building the ecosystem

Moving into ecommerce is only one way for telcos to make the most out of the resources at their fingertips. Evidently, having direct access to users is not enough to ensure their success in online retail. Telcos need to leverage more of its networks to ensure the success of their ecommerce venture. The recent news about the participation of MDI, Telkom’s venture capital arm, in the latest bridge funding of ecommerce-enabler aCommerce is great news for building a sustainable ecommerce ecosystem.
Many changes still need to be implemented to successfully shift to ‘telecommerce’. Considering the niche market that Cipika Store is targeting, it will be hard to scale up without spending a lot of money to acquire more users. Restrictions made because of its associations with the government are most likely stifling Blanja’s growth despite Telkom having more than three times subscribers of XL Axiata. XL Axiata boasts the most successful ecommerce portfolio out of the three, probably credited to the unique valuables the marketplace offers to its sellers and customers.
Ecommerce in Indonesia is only at the beginning of what looks like a long marathon race, and despite falling short behind big players like Lazada and Tokopedia, there are still many laps for these companies to improve their stance before reaching the finish line.

With Facebook now trialing their new messenger-based payment system in Thailand, the Southeast Asian region is rapidly growing into its social commerce potential. As messaging begins to dominate social interactivity, it is no surprise that businesses are now turning to this platform to inform, understand and sell to their customers. The next stage of this technological revolution is clear: automated robots that can interact with customers to drive and facilitate sales, simulate human conversation and carry out repetitive tasks.

Need help finding shoes to match a outfit? Imagine typing in “what shoes will match this outfit?” followed by a photo of what you’re wearing, and then having the algorithm instantly analyse and respond with three different options that fit your criteria. Imagine being able to complete your purchase without leaving the messaging app. Businesses are providing their customers with a convenient, time-saving and easy to use service. Win win.

What chatbots are doing today

There are many different types of chatbots in the ecommerce sphere, made to serve different purposes such as answering customer queries, providing product recommendations, and simplifying online purchases. Here are a few examples of what is currently being done in the world wide web of chatbots:

Facebook Messenger

When Facebook announced the integration of ecommerce capabilities within its widely-popular Messenger app at the company’s F8 developer conference in April, CEO Mark Zuckerberg demonstrated how quick and easy it was to send flowers. With 1-800-Flowers, users are given suggestions for a variety of occasions (“Thank Yous”, “Birthdays”, and “Love & Romance”), and all details are obtained directly through the chat interface.

chatbot revolution in Southeast Asia

Businesses are already investing a notable portion of their marketing budgets in maintaining personable and engaging Facebook pages to complement their brands and drive traffic to their website, it is a logical transition for them to also adopt a chatbot within Facebook’s native messaging app.

Kik

Kik is another social media platform that has become increasingly popular in the US with more than 270 million users. Its chatbot service has drawn attention by many well known companies – one of them being makeup retailer Sephora. Not only has their chatbot service provided a method for users to purchase products, but also allows them to ask about anything regarding beauty, reviews, product recommendations and tips. The exchanges are sprinkled with emoji’s to make the automated reply appear like a true human brand representative at the other end.

chatbot revolution in Southeast Asia

Sephora chatbot on Kik. (source)

WeChat

With over 760 million monthly active users, WeChat has positioned itself as the dominant messaging app in China. However, its features extend way beyond chatting: without having to leave the app, users can order food, book a taxi, book doctors appointments, follow their favorite brands and pay their bills, just to name a few. Through WeChat, Nike created a chatbot that provides fans with news and updates on the company, and consistently communicates with the user.

chatbot revolution in Southeast Asia

The Nike chatbot on WeChat. (source)

Why chatbots? Why now?

Growing Internet Penetration

A primary factor currently driving ecommerce and soon the chatbot revolution in Southeast Asia is the growing number of people who are increasingly using the internet. The 199 million Internet users in 2014 is predicted to increase to 294 million users by 2017. Out of the 150 million digital consumers who search for products online, two-thirds of them proceed to make purchases there.

chatbot revolution in Southeast Asia

Internet penetration in selected Southeast Asian countries (source)

Mobile is King

chatbot revolution in Southeast Asia

Smartphone user penetration in selected Southeast Asian countries (source)

For users, traditional methods of ecommerce – opening browser, navigating through countless pages and items, and keying in details to check out – still feels tedious and unnatural on mobile thanks to small screen sizes and limited ability to multitask. Businesses need to come up with an alternative solution to ensure that the purchase process is as simple as possible on these devices. The chatbot interface takes advantage of what behavior people have adopted with mobile phones: carry out conversations, anywhere, anytime.

The App Bloodbath

Thanks to the introduction of the iPhone back in 2007, apps have played a huge role in shaping technology, contributing to the dependence on our phones. But the thing is, consumers are growing sick of trying new apps, coming to the realization that they simply don’t need so many. Not only are they costly to build setting you back anywhere from $50,000 to $1,000,000, but further efforts need to be invested into marketing the app, and getting users to download and regularly use it. With a saturation of apps in both the Apple and Android app stores, and limited app discovery tools, it’s becoming harder and harder for new players to cut through the noise.

Smartphone users spend most of their screen time on a single app, which means, as a business, that is where you have to be.

Messaging: The New Platform

Creating chatbots within existing messaging apps is attractive because someone else has already done a large chunk of the hard work for you. In Southeast Asia, there are over 73 million people on LINE. Integrated chatbots give businesses the opportunity to directly reach these large pools of users without forcing potential customers to download yet another application.

“Messaging apps are the platforms of the future, and bots will be how their users access all sorts of services.” — Peter Rojas, Entrepreneur in Residence at Betaworks

Furthermore, these companies are providing developers APIs so that it is easier for businesses to create their own bots since most don’t have the technical skills or resources needed to build a witty chatbot from scratch. And in return, the platform is loaded with customer data; a dream for any marketer. With the versatility evident through Facebook ads that allow businesses to target audiences based on anything from location to interests, imagine the degree of personalization and segmentation that could be made possible through their Messenger extension.

A Society of Social Commerce

The Southeast Asian economy already heavily engages in social commerce, a marketplace built within the walls of social media. According to a Bain & Company study released this year, more than 80% of digital consumers use social media or messaging apps to research products and connect with sellers. Moreover, social sales comprise of up to 30% of all transactions online. Thailand boasts the world’s largest C2C market, with over 50% of research respondents saying that they buy items found on social networks such as Facebook and Instagram.

chatbot revolution in Southeast Asia

A typical social transaction: users find items they are interested in, and get in touch with the seller who listed the item via chat.
Source: ecommerceIQ exclusive research

The magic of chatbots is that they are able to closely imitate the essence of conversational commerce. Set within the same interface, customers can talk with bots in a similar manner in which they would talk to human sellers through a series of questions and responses. In such a setting, algorithms may even be created to simulate the bargaining dialogue that occurs in everyday transactions.

Still some way to go

Through chatbots, businesses have the opportunity to initiate conversation directly with their target consumer that is highly personable. The brand-to-customer interaction is something that has not truly been scalable until now. While chatbots can not replace the feature-rich user interface provided by a website, they bridge the gap between functionality and convenience.

“Every brand is going to move into the mobile commerce space very quickly. In the next years, we will probably see 20-30% of the big brands having their own bots in chat apps, starting with Facebook’s messenger platform.” —  Pat Wattanavinit, Product Manager at aCommerce

The current state of chatbot functions are still quite linear and rigid, too early for companies to start replacing their customer representatives. Some users report conversations as being frustrating and slow due to the bot’s limited understanding and capabilities, think about your own interactions with Siri. Chatbots won’t truly be invaluable and gratifying until AI is able to achieve a human level of understanding but that’s another story in itself.

By Shirley Liu & Alexandre Henry

Tweet your feedback to @ecomIQ 

When renovating spaces in Jakarta, always be aware of the flood season risks!

Despite the onset of banality of the term ‘world class’ (which, in Southeast Asia, seems to signify that something functions adequately without posing gross health and financial risks) my team and I sought to reinvigorate the term when setting up an ecommerce warehouse in Indonesia. What ‘world class’ meant for us was to design an ecommerce warehouse that could sustainably handle a 200% uptake in order growth. Our hot startup ecommerce client has been enjoying an intense surge of ecommerce success and needed long-term scalability, fast and not rely on sloppy patch-work processes typical of fast-growing startups everywhere.

When setting up an ecommerce warehouse in Indonesia, the targets were the following:

  1. Exceed our competitors in terms of magnitude (400+ employees)
  2. Scalability (operational capacity triple initial capacity)
  3. Innovation (semi-automated conveyor system and technology)
  4.  Customer experience (detailed project updates and account management).

With my seven years of solution design and project management experience with notable German global logistics providers, my obsession with efficiency and quality (not only a German stereotype) and a scrappy and clever team, I didn’t think it was out of our reach. But by no means would it be easy.

Our learnings for industrial engineers & logistics PMs in emerging market ecommerce

My advice to young solution designers, industrial engineers or logistics project managers in the ecommerce market, the devil is in the details –critical information gathering is what differentiates one solution designer from the other. A successful implementation depends primarily on the level of details the solution entails.

Here is a recap of our trials and tribulations to setting up said world class fulfillment center in Indonesia.  While not totally comprehensive, you will learn about the key considerations and parameters in crafting or implementing your next ecommerce fulfillment solution or project.

So what was in store for us? First we had to build a complete new warehouse, redesign all existing processes and hire manpower, all within a six months’ timeframe. The challenge was not just in pure size of the project but the tight deadline we were working within.

1.Sizing up the problem – order volume projections

The first thing we did was get our Solutions Design Team assembled to start analyzing historical data against projected volumes. Using detailed solution templates and tools, we submitted a proposal simulating the required warehouse space, storage solution, resource requirement and process maps for the operation.

The expected growth calls for a warehouse design that meets both storage-picking optimization and long term scalability requirements. The projected sharp increase in handling volumes also meant that we had to reassess the current technology and operational processes that could no longer support the projected growth in transactional volume.

2. Choosing the right warehouse & location

There weren’t many options from a real estate perspective as we needed to find a ready space of approximately 7,000 sqm in the heart of Jakarta within two weeks. Fortunately for us, there was an old carpet manufacturing factory in Cawang (East Jakarta) that was winding up and looking to rent out the space immediately.

It was the perfect site based on its location, size, availability and price; it even had a mezzanine floor which could be transformed into offices for our client.

setting up an ecommerce warehouse in Indonesia

Interior of the factory.

3. Redesigning the space to be ecommerce optimized

However, it being a factory, the specifications of the building structure were not meeting our initial warehouse design. Some key areas that we needed to fix asap included the low height of the factory, damaged flooring, excessive interior configurations, poor network and electrical systems etc. The factory was also positioned on a lower ground right next to a river bend making it highly vulnerable for floods.

Often mistaken, the key criteria in designing an optimized storage solution lies in the pick profile of the operation instead of its inventory profile.  

The solutions team started plotting the space requirements based on the blueprint of the factory. The proposed design included a 2500sqm 4 level mezzanine storage structure equipped with 2 cargo lifts, a semi-automated conveyor system, an office space to accommodate up to 150 office staff as well as a state-of-the-art studio room for photoshoot.

The proposal also highlighted the required renovation to the original state of the factory such as roof elevation and demolition of existing columns and rooms.

setting up an ecommerce warehouse in Indonesia

Before beginning, we developed layout design and work flow simulation.

The main focus for the warehouse setup was the roof elevation since nothing can be done until the roof is up. Unfortunately, a considerable amount of waiting time was invested to governmental approval and regulatory certification. The actual roof reconstruction works were then impeded by rain- each time it rained the project paused and when the rain stopped, had to wait for drainage drills to kick in before continuing the construction.

4. Selecting the contractors & sticking to timelines

With the approval from the customer, we proceeded to seek quotations from warehouse vendors. The vendor management process included our assessment and recommendation based on the solution designed as well as the customer’s budget. After almost a month of negotiations, three vendors were selected to participate in 8 key areas of this mega build out.

setting up an ecommerce warehouse in Indonesia

Warehouse setup deliverables

With the sign off on the overall solution, proposal and investment budget, the project implementation timeline started. All in all, we had 3 months to transform the old factory into a “world class” facility. As most activities were interdependent; for example, activities within the factory needed to hold up until the roof elevation was completed, the mezzanine buildout could only start after the required floor repair and site demolition were completed – timeline management was particularly challenging.  

Once the project timeline was set, weekly meetings were held with all vendors as well as key project stakeholders to make sure the timelines were met and that all potential risks raised were mitigated.  

Fortunately, it didn’t rain much during the construction phase and the skeleton of the warehouse was completed on schedule.

setting up an ecommerce warehouse in Indonesia

Before and after the roof construction. This was one of the toughest parts due to weather.

5. Building the inside

The setup proceeded with parallel work on mezzanine installation, workstation setup, office buildout, roadworks and electrical setup. It was a good learning experience for the team as we participated in electrical distribution layout design, network cabling blueprints as well as water reservation and supply including the number of toilets required.

Just when we thought the rain could no longer serve as a threat to the project, a heavy downpour in the middle of the night coupled with a broken dam leading to the river resulted in a flood in the warehouse through the overflowing reservoir at the back of the warehouse.

setting up an ecommerce warehouse in Indonesia - jakarta floods

When renovating spaces in Jakarta, always be aware of the flood season risks!

6. How we dealt with the Jakarta floods

This led to an additional project milestone on enhancing flood preventive measures. Corrective action plans were immediately put in place. A response team was formed to drain the water out of the warehouse – sandbags and temporary floodgates were installed in preparation for the next heavy down pour while deliverable items such as enlarging reservoirs, renovating the walls as well as installing additional drainage facilities were carried out in phases.

Fortunately, no assets were damaged during the process but the overall timeline definitely took a hit; since then, a rain-phobia was developed throughout the project.

Other challenges such as the overall safety of the mezzanine as well as the levelness of the conveyor led to several assessments and trial and error to achieve the most optimal setup for the operations. By mid May, the warehouse was completed.

setting up an ecommerce warehouse in Indonesia

Cawang fulfillment center completed.

7. Operating the warehouse – hiring the manpower

Using productivity numbers collected from existing process cycle timings and calculated assumptions made on new operation processes, we simulated how many people we would need to handle the projected volumes.

The resource modelling tool allowed us to define clearly the number of manpower required by positions, functional roles as well as shifts – making it easy for hiring. The challenge however was to have all 408 headcounts qualified, interviewed and hired on time for training, migration as well as Go live.

We overcame this by engaging with local established headhunting firms and manpower agencies and successfully hired 80% of the required manpower with the outstanding positions filled out by the existing team to add experience and stability to the run operation. Unfortunately, the hiring process was not all straightforward, replacement or rehiring processes was an ongoing procedure due to natural attrition and absentees.

It is important to note that an influential warehouse manager is the key to staff retention. An effective warehouse manager creates strong family-like bonds within the team, develops a team of trusted leaders and is respected by all.

Two key responsibilities of a warehouse manager are 1) Ensuring the team’s commitment towards go live and 2) Sustain operation excellence after Go live.

8. Training & knowledge transfer to local management

There will come a stage in the project where the project manager will start transferring ownership and controls to the warehouse manager. The warehouse manager will take over on training deliverables, shift planning and overall discipline of the team.

The team sat down to plan out the rotational training schedules and deliverables targeting to get all 408 employees ready for the launch- Go live. The topics covered product knowledge, system processes as well as hands on operations in the existing and new warehouse. Each employee was assessed on what the topics covered at the end of each day to ensure that we have everyone in sync before we moved forward.

Workstations readiness and network connectivity were stress tested during the User Acceptance Test (UAT) exercise to ensure all potential risk were managed prior to go live. To curb with the intensive operational requirement, we had installed a backup line for network as well as power distribution.

The last week of training was held in the new warehouse where dummy orders were created to simulate end to end operational process in the new warehouse. There, situational tests were created to assess the employees’ response and rectification initiative.

9. Migration challenges & Jakarta’s travel ban

The lead-time given for migration from old to new location was five days.  Using the same solution templates and tools, we were able to define the targeted letdown and the number of trips required per day. These targets were translated to the team to ensure we stay on track for each day.

The main challenge during migration was the travel ban that only allows vehicle movements after 9pm. As such, coordination between the operations and transport team were crucial to ensure we optimize the letdown and loading process effectively before the travel ban is lifted.  

Other considerations such as inventory accuracy, quality assurance and system management were key to the successful migration. All in all, approximately 1.4 million units over 90 trips were transferred.   

Setting up an ecommerce warehouse in Indonesia

Migration process of 1.4 million items to the completed center

While there is no perfect project where all factors can be foreseen when setting up an ecommerce warehouse in Indonesia; experience and dedication are what minimizes that inadequacy and in order to get there, it takes no less than pure focus, passion, structure, top management commitment and hard work and maybe some luck with mother nature.

By Mitch Bittermann, Group CLO and Kenneth Thean, Regional Director of Solution Design at aCommerce

 

ecommerceIQ Summit panel

Pioneers of ecommerce in Thailand at the ecommerceIQ Summit in Feb 2016. Tarad, Kiehl’s, Lazada, aCommerce discuss the difficulties of moving online.

In the era where two-thirds of the world are going online, a phenomenon known as FOBO, or the Fear Of Being Offline, is becoming a real one. People panic when they lose access to the internet, no matter how temporary those situations might be. But did you know the reverse is experienced by companies in emerging markets?

Despite the massive opportunity of ecommerce in Southeast Asia ($70  billion by 2020, according to Bain and recent Amazon and Alibaba forays into the region), only 3% of total retail sales come from the online channel. What’s going on? In order to understand the apparent slow migration into online retail,ecommerceIQ surveyed 132 senior level retail executives in February 2016 at the eIQ Summit in Bangkok.

The Summit was attended by Director and C-level executives from a majority (67%) of top brands, retailers and e-tailers in Thailand such as L’Oreal, Essilor, LINE, Central Group, Casino Group, P&G and more. Here is the result of their survey responses.

ecommerce research Southeast Asia


1. Limited internal know-how (47.7%)

Forming an ecommerce team to build an online strategy is one of the most strenuous bottlenecks encountered in Southeast Asia. The region remains low tech intensive and resources are so scarce that Lazada, Southeast Asia’s largest online marketplace, has taken the talent challenge into its own hands by educating the first ecommerce generation and generating local expertise out of fresh graduates.

Sheji Ho, aCommerce Group CMO, explains, “Because of the lack of talent, companies are constrained to hire ex-digital marketer or brand managers as to run ecommerce divisions but the scope encompasses warehouse management, delivery, fulfillment, reverse logistics, it is a much broader set of activities than what they are used to.”

2. Cannibalizing offline sales (24.2%)

Channel conflict is when online sales cut from offline sales or if you’re a brand looking to sell direct to consumer, you immediately create a channel conflict by putting yourself in competition with your distributors. In Brand Commerce, channel conflict can be crippling, as retailers can sometimes punish brands offline positioning due to ecommerce promotions or perceived exclusive offers. To overcome this, brands like L’Oreal are creating coordinated online and offline promotional campaigns that compliment and encourage each other. 

3. Not enough demand (23.5%)

With ecommerce slated as less than 3% of all retail sales in Southeast Asia, businesses simply do not think the market is ready yet. But as the Bain report showed above, the market is evolving rapidly. Others believe that the demand is there, but because the customer experience is so poor, Southeast Asians are not compelled to repeat purchase. The internal ecommerceIQ Beauty Report findings in Thailand showed that only 20% of top global brands have a customer experience rated higher than 70%. 

II.What are the top in-demand services?

offline business fear of going online

Source : ecommerceIQ Thailand 2016 Survey

Interestingly, strategy and consulting is the top sought after service for ecommerce in Southeast Asia. This reflects the very nascent level of ecommerce development for the vast majority of retailers in the region still who are not ready to get operational and is very much indicative of an emerging market. Below is a ranking of the top ecommerce services businesses are looking for in Southeast Asia:

#5 Web Development

A website serves as the first touchpoint with customers in an online world so an experienced team dedicated to its development is key to a successful strategy. It helps the company reach millions of internet users who may become potential customers. UX, UI developers are highly sought after. 

#4 Fulfillment, Logistics & Delivery

The ecommerce ‘business-to-consumer’ model requires a different set of systems and mindsets. In Southeast Asia, the complexity of deliveries due to the region’s poor infrastructure, difficult geography, complex cross-border commerce, high rates of cash on delivery all take the challenge to an entirely foreign level. The company must also take into account the customer demand for visibility and transparency. Reverse logistics in case of returns must also be taken into account.

#3 Omnichannel enablement

The omnichannel experience leverages customer behavior across all relevant sales and distribution channels, online and offline. It is basis for a consistent, personalized interaction between brand and customer. Having an omnichannel strategy is the next step to reaching your customer and providing them with convenience to shop anywhere at anytime. 

#2 Performance Marketing

Data collected online is a powerful tool to enhance marketing to a level that cannot be reached with offline tools. A combination of new advertising tools and innovation makes performance marketers able to help retailers and affiliates grow their businesses and drive online sales. Performance marketing done right creates win-win opportunities for both retailers and affiliates.

#1 Strategy and Consulting

It is necessary in today’s digital age to have an online presence if businesses want to continue growth. In order to get pass the fear of going online, finding the right ecommerce service partner to provide strategy and consulting will take the brand to the next stage of ecommerce maturity and rid them of FOGO once and for all.

III. Value of the ecommerce B2B landscape

The good news is that these potential ecommerce businesses are willing to invest into the process, although almost a quarter of participants are not willing to spend more than $20 thousand annually. In ecommerce terms that’s barely enough for a website and fulfillment of very few items per week, according to The Evolution of Brand Commerce in Southeast Asia, which gives a cost breakdown of ecommerce.

ecommerceIQ Summit budget survey questions

Ecommerce in Thailand and Southeast Asia is being restrained by a lack of expertise and fears of offline retail legacy politics. But as the region wakes up to the opportunities inherent in online, much like the US and China before them, businesses will find a way to overcome the bottlenecks.

By Alexandre Henry

Tweet your feedback to @ecomIQ and @alex_Nry