End of year is always the busiest time for the retail industry as businesses expect spikes in sales volumes before the official holidays start.

For online players, this period has resulted in some of the most famous annual holiday shopping events such as Cyber Monday, Alibaba’s Single’s Day, and Southeast Asia’s Online Revolution.

In Southeast Asia, the holiday period holds even more significance for ecommerce players as 40% of their sales are generated during the last three months of the year.

eMarketer expects holiday ecommerce sales in the US to jump 16.6% year on year (YoY) in 2017 driven by mobile commerce and competition created by large retailers and digital marketplaces.

Holiday sales Southeast Asia

At least four top marketplaces in Indonesia are holding a shopping event on November 11 (11/11).

In a recent survey conducted by BigCommerce involving 1,000+ brands operating online in the US, around 50% modestly expect up to a 25% sales increase compared to the holiday period last year.

5.4% of businesses expect more than 100% of sales increase. Source: BigCommerce

Some have aimed even higher for good reason.

15.5% of businesses surveyed expect a more than 50% of sales increase during this sales period — even as much as more than 100% sales increase compared to last year. Why?

According to Deloitte, online channels will capture 51% of US consumer budgets this holiday.

With higher sales targets comes more preparation to ensure each part of the ecommerce value chain is ready to handle possible concerns mainly regarding sufficient inventory (50.63%) and delivery expectation (45%).

To full proof operations, over 37% of businesses in the US started planning for this year’s holiday season 1 – 4 months earlier than they did last year.

3.14% of respondents are actually participating in holiday ecommerce sales for the first time. Source: BigCommerce

A lot of preparation is placed during the last few months leading up to the sales event, which for Southeast Asia is coming as soon as this weekend — November 11.

If we look to Southeast Asia, the region has its own holiday mega-sales to prepare for – 11.11 and 12.12 – where order volumes can uplift by almost 300%.

Is Southeast Asia ready for the holiday rush?

The ecommerce markets in US and Southeast Asia draw many similarities. For one, mobile commerce has driven the region’s retail growth for the last two years given the mobile-first behavior of its young population.

There is also enough competition to drive prices down (to ridiculous amounts) and incentivise consumers to shop. Taking a quick glance at advertisements from popular e-marketplaces such as Lazada and Shopee indicate the amount of money being invested to capture consumer holiday spending.

Marketing of end year mega-sales in Southeast Asia. Source: Rappler (left), Shopee Singapore Facebook page (right)

Is your company ready?

Download the Holiday Ecommerce Sales Checklist here.

THE BACKGROUND

Most people would agree that Hershey gives the best kind of kisses — the chocolate kind that is – but did you know the largest chocolate confectionery makers in the US started with a different kind of sweet before getting hooked on chocolate?

Hershey China Ecommerce

Vintage ads for the famous Hershey’s Kisses

Founder Milton Hershey was fascinated with candy ever since his apprenticeship with a candy maker as a teen in 1873. He decided to launch his own candy company and failed twice before discovering the right mix of caramel and fresh milk. In 1886, Lancaster Caramel Company was launched.

His love for chocolate didn’t start until 1893 when he saw a chocolate-making machine for the first time and bought it to make a chocolate coating for his caramels. After witnessing the intensifying demand for chocolate, Hilton sold his caramel business for $1 million to devote himself to chocolate.

The Hershey Chocolate Company was born in 1900.

“Caramels are just a fad, but chocolate is a permanent thing.” – Milton Hershey

The company found success by developing its own recipe for milk chocolate and making chocolate bars affordable to Americans that had never tasted chocolate before.

The iconic Hershey’s Kisses was launched in 1907, propelling the company to a record $5 million in annual sales by 1911.

Over the course of 127 years, Hershey has only grown bigger, adding popular brands to its portfolio including Reese’s, Kit-Kat, and Cadbury. The company leads the US market for chocolate with 44.1%, but how about the rest of the world?

THE CHALLENGE

Success in the US is a double-edged sword for Hershey as it pushed the rest of the world to the back of its mind for a long time. As the result, the company became a latecomer in grabbing the attention of the fastest growing chocolate market – emerging countries like China and India.

Hershey China Ecommerce

Hershey comes in at fifth place for top chocolate companies in the world. Source: Statista.

The company’s attempts to gain market share in China by acquiring Shanghai Golden Monkey (SGM) didn’t pay off due to issues with its distribution networks. It instead became a hindrance to the company’s growth and pushed them to cut down 15% of its global hourly workforce.

“They added thousands of employees and eventually SGM took down the company’s international business,” said David Mandel, a research analyst with Consumer Edge Research LLC. “I believe Hershey will now try to build its China business through an ecommerce approach.”

With the chocolate market in Asia Pacific expected to outgrow Europe and North America, can Hershey win the region?

THE STRATEGY

Merger and acquisition (M&A) has been the company’s not-so-secret secret to expansion, as admitted by CEO Michele Buck.

“I’m very open to mergers and acquisitions. I see them playing a key role in our growth agenda moving forward. We have an opportunity with M&As to go into spaces where our brands currently can’t travel. And that will be one way we grow,” says Buck.

But it’s careful with its decisions. Last year the company rejected a $23 billion takeover bid from Mondelez International that would have created the world’s largest confectioner.

Another channel the company has pursued to target developing markets such as China, the company turned to ecommerce.

To leverage the appeal of import products in China, Hershey launched a flagship store on Tmall in 2013 and opened another one on Tmall Global, Alibaba’s cross-border ecommerce platform.

Hershey China Ecommerce

Hershey’s store on Tmall Global.

“We found that when consumers search for confectionary online, “imported” is a frequently used search term. And when they search for chocolate, they are particularly interested in imports from US and Japan. We wanted to tap into consumer demand for premium, imported products, and an elevated consumer experience,” said Sylvia Fu, Hershey’s Ecommerce Director.

Hershey China Ecommerce

Sylvia Fu presents Hershey’s strategy at the Tmall Global launch. Source: Alizilla.

Selling on both e-marketplaces allowed Hershey to workaround regulation and trademark rights that limited the company to only selling products online that are also available offline.

“We have been able to win in-store even as ecommerce has accelerated. Right now, we’re focused on partnering with retailers and investing in capabilities to unlock growth for our brands online. I believe we are in a really good position to win in an omnichannel world,” said Hershey’s President Todd Tillemans.

THE FUTURE

Not only is the company looking outwards in terms of market expansion, the traditional chocolate company is also looking beyond its core product. CEO Michelle Buck has expressed the company’s vision to turn into an innovative snacking powerhouse.

“Consumers have lots of different snacking needs. Sometimes during the day they’re looking for a treat, and they know that confection is a treat. They see it for what it is. It’s certainly not a center of the plate category,” Buck said.

“I’m really focused on creating shareholder value, and for me that’s about driving our core brands,” she said. “It’s about making sure we bring great innovation to the marketplace because that’s what consumers are looking for.”

And with the company’s recent bid for Nestle’s confectionery business that is currently up for grab, Hershey might soon secure a sweet spot at the top.

THE BACKGROUND

It’s safe to say that Toys ‘R’ Us is one of the most popular places on earth for kids everywhere. With an endless variety of toys stacked in high racks, it is a heaven created for kids or kids-at-heart alike.

The toy retailer was born after founder Charles Lazarus came back from serving in the World War II and decided to build a baby furniture business during the baby-boom in 1948.

Lazarus started featuring assortments of toys in the store then named “Children’s Bargain Town” after receiving a high demand from parents and soon learned that unlike furniture, toys would keep customers coming back, either for an upgrade or a replacement.

Less than a decade later, he restructured his business to solely focus on toys and opened the first Toys ‘R’ Us store in 1957 — with the iconic backward R giving a childlike impression. To date, the company has 1,600 stores across 38 countries.

“What we are is a supermarket for toys. We don’t have a competitor in variety, there is none,” told Lazarus to the Washington Post.

Toys R Us bankruptcy ecommerce

Toys ‘R’ Us founder Charles Lazarus retired as CEO and president in 1994 while remain chairman. Source: Getty Images.

For decades, the US company was so unbeatable that it had become a classic example of a category killer — a business that successfully specializes in one sector that it pushes out competition from both smaller specialty stores and larger general retailers.

So what happened to the once-booming business that the company filed for bankruptcy earlier this week?

THE CHALLENGE

When news of the Chapter 11 filing (“reorganization” bankruptcy”) by the toy retailer broke, media was quick to blame Amazon and the rise of online retail as the reason of yet another traditional retailer struggling to stay in business, known commonly as the Amazon Effect.

But the real reason for the bankruptcy is more complicated than this and what set off “a dangerous game of dominoes” was actually accumulated debt.

Toys ‘R’ Us had managed to sustain a crushing debt for more than a decade after getting bought by KKR and Bain Capital in 2005. The private equities bought the retailer, which at that time was valued around $7.5 billion, for $6.6 billion that consists only of $1.4 billion in equity.

They then used the company’s assets to raise $5.3 billion in additional debt, creating a total debt of $6.2 billion — based on the assumption that they would be able to cut the retailer’s operating costs and sell under-utilized assets to raise cash and repay the debt.

But they failed to predict the retail shift to ecommerce, which created a completely different competitor from the ones Toys ‘R’ Us had been facing in the past such as Walmart or Target.

The assumption that retail real estate would increase in value also failed them as the US became saturated with retail space once businesses began shutting down.

The company barely had enough money to repay its $5 billion debt and fight traditional retailers, let alone build a major online presence to go up against Amazon.

Given its fragile situation and end year sales around the corner, the company was forced to file for bankruptcy protection in order to provide the vendors with cash in advance as nearly all of them refused to ship products to fill the retailer’s inventory for the holiday season.

THE STRATEGY

With the new protection, Toys ‘R’ Us received a commitment for over $3 billion to help address the financial constraints in a lasting and effective way, as stated by Toys ‘R’ Us CEO Dave Brandon in the courts filling.

“Together with our investors, our objective is to work with our debtholders and other creditors to restructure the $5 billion of long term debt on our balance sheet.”

The company doesn’t plan to close stores and its operation in location around the world will continue normal operations. Toys ‘R’ Us also plans to spend $64.8 million before 2022 to make it more enjoyable to shop in its stores.

“Toys ‘R’ Us stores will be interactive spaces with rooms to use for parties, live product demonstrations put on by trained employees, and the freedom for employees to remove products from boxes to let kids play with the latest toys,” explained Brandon.

The plan also includes the creation of augmented-reality video games that customers can play on their smartphones while shopping at the store.

Toys R Us bankruptcy ecommerce

The iconic Indoor Ferris Wheel in Toys ‘R’ Us’s Time Square store that was closed in 2015 because of its high rental cost.

The suppliers’ support for the reorganization plan for Toys ‘R’ Us is also key to dragging them out of bankruptcy.

“Vendors are why they are in, they will be a big part of why they get out,” said Bloomberg Intelligence analyst, Noel Hebert.

Some of the key vendors such as Hasbro and Matte have rallied support and stated they were standing by the company.

Earlier this year, the company also expressed its commitment to take action towards the lack of its online experience with a $100 million investment to revamp its website.

“Some organizations recognize faster than others there are shifts in the ways customers want to be communicated with and the way customers want to purchase products,” said Toys ‘R’ Us CEO David Brandon. “It probably took us awhile.”

Toys R Us bankruptcy ecommerce

The company’s current ecommerce website: www.toysrus.com

CEO Dave Brandon has said that the company will not engage in a “race to the bottom” of a discount war that is usually employed by online retailers in order to gain new customers.

Despite accusations of being slow to adapt to the online shift, Toys ‘R’ Us was, in fact, one of the first companies to sign a deal with Amazon in 2000 to sell toys exclusively through the online retailer.

The exclusive agreement marked the first “click-and-mortar” collaboration between traditional and online retailers but Amazon broke the deal and began allowing other toy sellers in its platform because Toys ‘R’ Us stock couldn’t keep up with the high demand.

Toys ‘R’ Us sued in 2004, and Amazon ended up having to pay $51 million out of the $93 million that the toy retailer asked for to settle the lawsuit five years later.

THE FUTURE

Despite the woes of the company in the US, its Asian operations remained unaffected.

In April this year, the company unified its Japanese business with the operations in Greater China and Southeast Asia — bringing together 223 subsidiaries stores across Asia and 34 licensed retail locations in Macau and the Philippines.

“Toys ‘R’ Us (Asia) is open for business and continuing to serve our customers as we always do. We are financially robust and self-funding retail operation, which continues to significantly grow and invest in this region,” said Toys ‘R’ Us Asia president, Andre Javes.

The company even plans to open another 22 store in China the coming weeks.

The journey that Toys ‘R’ Us facing will not be easy but the CEO remains optimistic.

“As the holiday season ramps up, our physical and web store are ones for business, and our team members around the world look forward to continuing to put huge smiles on children’s faces,” said Brandon.

Toys R Us bankruptcy ecommerce

THE BACKGROUND

IKEA. There is no other furniture brand as iconic as the blue and yellow giant famous for its ready-to-assemble flat-pack furniture, dizzying warehouse stores,  and difficult to pronounce product names (GRÖNKULLAFYRKANTIG).

The Swedish giant claims its beginning started in 1926 when founder Ingvar Kamprad was born but it was only at the tender age of 17 when he started a mail order business selling pens, watches, jewelry, and picture frames after receiving seed money from his father.

Furniture would be introduced into the company’s product offering five years later and become a success.

IKEA ecommerce

Ingvar Kamprad, the founder and senior adviser of IKEA, is the world’s 10th richest man. Source: Aftonbladet

Six decades later, IKEA’s 300+ stores around the world require over 1%of the global supply of wood to make over 100 million pieces of furniture. No business can come close to the Swedish conglomerate’s size…right?

THE CHALLENGE

While no furniture business has been able to even remotely achieve the same brand identity and global scale that IKEA has in the last 60+ years, the world’s shift to ecommerce has forced the company to re-think its retail strategy.

The biggest threat comes from low-cost manufacturers going direct to consumer by following a “Warby Parker business model”, popular examples include Interior Define and Bryght in the US.

“By cutting out high-rent showrooms and warehouses, big-budget ad campaigns and big-name designer, these companies can offer great prices and bring in greater profits.” – NYT

“This year has been quite challenging in terms of sales. After many years of good sales, this year we have seen weaker launches, stiffer low-price competition and changing consumer behavior. We are revising sales targets downward for the year, but remain very optimistic and ambitious,” Jesper Brodin, IKEA CEO, then MD, told a global suppliers’ conference in Almhult earlier this year.

“People are making choices in different ways. Retail is getting tougher, and there is a bigger fight for the marketplace than ever before. We need to be much more aggressive and the price-volume equation, which is part of IKEA’s DNA will help us.”

With the success of ecommerce companies like Amazon making headlines everyday, IKEA, along with every other retailer in the world is being reminded that retail is evolving and the traditional company finds itself having to learn new tricks.

THE STRATEGY

While late to the online shopping scene, up until 2016, the company was officially present in 28 countries and offered ecommerce in 14 of them. Even with no new ecommerce ventures in 2016,

IKEA recorded at 30% jump in online sales to $1.6 billion, a small fraction of total sales but nonetheless impressive.

“We weren’t one of the early adopters but we’ve matured in our thinking about it,” Peter Agnefjall, former IKEA CEO told the New York Times. “We realised this is not a trend, it’s a megashift.”

The company has never been one to shy away from innovation. Its successes include its in-store cafeteria and very own startup incubatorfocused on food innovation, disruptive technologies, customer experience, disruptive design, sustainability, manufacturing, supply chain, and analytics.

It’s not then surprising to learn that IKEA has become one of the first to actually incorporate VR into its brand new mobile app launched only yesterday.

IKEA Place is part of the first wave of augmented reality apps that work with Apple’s new ARKit technology and iOS 11 to allow customers to “place” furniture in their apartments. While late to the show, the company has managed to outpace other pure players.

IKEA ecommerce

IKEA Place uses VR to allow users to easily visual what a piece of furniture will look like in their homes. Source: IKEA

Its push into applications could be attributed to world’s growing affinity for the mobile phone and by analyzing its own customer behavior. In Australia, the company’s website pulls in 40 million visits per year – 50% of which comes from mobile.

At this point in time, IKEA sells its products only on its own websites but has dabbled in the idea of establishing an official presence on Amazon but no confirmation has been made by the company yet.

There has however, been a partnership between IKEA’s “smart light bulbs” and Amazon’s virtual assistant device Echo to promote the latter’s line of smart home products. Owners of IKEA’s voice controlled light bulbs will be able to adjust the brightness of the bulbs through voice command by not only Alexa but Google and Apple’s Siri as well.

IKEA ecommerce

IKEA Smart Light Bulbs controlled by voice command.

“Unlike other companies, IKEA doesn’t fear the cannibalization of offline channels by online channels.

This is not without precedent, IKEA’s UK online store becoming the region’s largest outlet, without absorbing sales from existing stores.

“It’s just one among our many initiatives to make our products available for as many people as possible. And we are seeing big opportunities by leveraging upcoming digital technologies to their fullest,” said Inter IKEA Group Chief Executive Torbjörn Lööf.

THE FUTURE

IKEA Group is aiming for 50 billion euros in sales for 2020 and to open 18 new stores by end of year. It also has been eyeing growth opportunities in India and Southeast Asia but execution has taken much longer in these emerging markets.

As a fully independently owned company, IKEA must ensure that an average of 30% of the production value of sold goods should be sourced from within India, and within five years of the initial investment. As ecommerce is new to the Scandinavian company, it must test various fulfillment models including pickup points, third-party depots and the use of small-format stores for click and collect.

But the company hasn’t stopped making strides towards its aggressive target and continues to invest heavily in ecommerce. IKEA recently announced that a shoppable IKEA webstore would go live in Singaporein two weeks and in Malaysia in 2018.

IKEA ecommerce

Jesper Brodin, IKEA CEO. Source: dagensps.se

New IKEA CEO Jesper Brodin, who recently succeeded Agnefjall in May this year, will focus on building multi-channel retailing in almost all of its markets before 2017 finishes. He definitely has a tough job ahead moving the giant forward.

But according to Agnefjall, the CEO job involves “working 365 days a year, 15 to 16 hours per day”, which explains the admirable dedication founder Ingvar Kamprad still has for the company.

“Oh, I have so much work to do and no time to die,” he said.

Amen to that.

Emerging markets continue to drive the global sales of smartphones as its citizens discover the internet for the first time.

Southeast Asia’s smartphone shipments grew by 6.5% last year, recording nearly 28 million devices. Its largest market, Indonesia, is projected to be the four largest market for smartphones by 2020, reaching almost $10 billion in sales.

One of the global household names eyeing the region is Apple.

The company has been attempting to grab market share from dominant Chinese brands selling at much cheaper prices such as Oppo and Huawei in the sector. Apple’s global sales took a slight drop in Q2 2017 and 400,000 less iPhones were sold compared to the same period last year.

Apple market share Indonesia

Apple and Samsung struggle to grab market share against Chinese brands. Source: Frontera

Apple recently opened its first official store, a “Town Square”, in Singapore last May.

Apple market share Indonesia

Singapore’s first official Apple Town Square. Source: 9to5mac

This followed a commitment to invest more than $44 million in R&D in Indonesia after the company couldn’t release the iPhone 6s and 7 in the country for failing to meet the requirement of having at least 30% local components.

Indonesia not breaking the bank

Recent data from International Data Corporation (IDC) shows only 1% of 7.9 million smartphones shipped in Indonesia during Q2 2017 cost more than $600 or fell into the “ultra high-end” category.

Apple market share Indonesia

Devices from the “low-end” category costing $100 – $200 are still the most popular among Indonesians as they prefer a more affordable option.

In nascent markets like Indonesia, Chinese and local players like Huawei, Oppo, and Advan will continue to occupy the top five smartphone brands in the country.

And given Apple’s newest price tags – the iPhone X initial pricing exceeding $1,000 – its share will unlikely exceed more than 1% of Indonesia’s total shipment anytime soon, unlike the US market where Apple has 31.3% market share.

But it’s not all doom and gloom for Apple. Indonesia’s consumer smartphone affinity is heading towards the higher end as purchasing power increases.

Mid-range devices costing between $200 – $400 grew to 28% from 13% in the same period last year and with the lowered iPhone SE price to the “midrange” category, it’s not impossible to see more iPhones in the hands of Indonesians.

The name Dara Khosrowshahi has been everywhere in the news lately. Why? The Expedia CEO of 12 years has officially confirmed reports that he will be joining Uber as its new CEO.

The ride-hailing platform has had its fair share and sometimes self-inflicted misfortunes. In Southeast Asia alone, it is under high scrutiny from the Thai transport authorities calling for a crackdown, it recently paid $9.6 million in fines after the Land Transportation Franchising and Regulatory Board in the Philippines banned it, and is going up against Grab, the region’s unicorn soon to close an investment round of $2.5 billion backed by Toyota, Softbank, and Didi Chuxing.

Who is Mr. Khosrowshahi and what does he bring to one of the world’s most valuable and troubled startups?

A great answer was shared by angel investor Terrence Yang, excerpt below:

In a perfect world, Uber would just hire Sheryl Sandberg. But in the real world, there’s no way Sheryl would ever join Uber. If you were Sheryl, would you? Becoming Uber CEO poses massive downside risk and and only moderate upside for Sheryl.

Among other things, former CEO Travis Kalanick keeps meddling/trying to come back, Uber has massive problems with recruitment and retention, Uber is highly unprofitable and probably needs (not wants) driverless cars to happen sooner than later to make the economics work (but Alphabet’s Waymo is suing Uber for, shall we say, inappropriately appropriating and basically colluding with Lewandowski to steal Waymo’s self-driving tech).

Here’s what’s great about Dara:

  • Dara is a grown-up Travis. Like Travis, Dara was and remains ruthless, smart, tough. But unlike Travis, Dara developed empathy and soft skills that Travis failed to do for years. Dara is also much more humble and learns fast, including learning soft skills.
  • Travis was the right person to lead Uber when he did. Uber was the fastest growing big startup company in the world by some measures. It’s a truly impressive accomplishment. Travis will go down in history for that. But Travis also went down – because Travis never evolved. Dara did. That’s why Dara is the best realistic choice for Uber.
  • Jeff Immelt and Meg Whitman just don’t know much about the travel industry. I don’t see how leading GE, eBay or HP is very relevant to leading Uber. Dara’s experience is much more relevant (and, no, you are not going to be able to hire the CEO of Lyft right now).
  • Dara bought HomeAway, which competes with Airbnb. Expedia also tried to compete with Airbnb directly. Airbnb is a good model of how to technically violate laws (e.g. turning homes into hotels) without pissing off so many people. Unlike Uber. And Dara is even an investor in freight startup Convoy. Uber is trying to make UberFreight a success.
  • Dara started as an investor in Expedia and CFO of that investor. Benchmark is suing Travis in part over Uber’s lack of CFO.
  • Dara learned to be a great CEO of Expedia. He’s been ranked in the top 100 CEOs in 2015 and 2016. Expedia stock and revenues are doing great.

Southeast Asian startups need…adults?

The lack of experienced digital professionals, coined the talent challenge, has always been a looming backdrop to the bustling nature of startups, especially in emerging markets like Southeast Asia. As long as someone was able to get the job done, they were hired. Age was just a number.

But given the growth of these companies from a team of 10 to 300 in the span of a few short months, businesses need leadership and maturity, two things that usually stem from experience. This is not to say that older means better but that a great leader is able to recognize what a company needs at Stage 1 is completely different than what it needs at Stage 3 and willing to implement the necessary changes.

Dara Khosrowshahi Humility

Source: Medium, Al Doan

Given the 48-year old’s track record leading Expedia to become “one of the largest online travel companies in the world” and positive reviews by Expedia senior execs, it isn’t surprising that 93% of employees told company review site Glassdoor that they currently approved of his leadership.

How many startups in the region can confidently say their leaders are this well-received?

Probably one of the biggest indicators of his maturity and most importantly, humility, is witnessed from the memo he wrote to Expedia staff regarding his departure obtained by Recode.

“This has been one of the toughest decisions of my life. I’ve had the privilege to run Expedia for 12+ years now, and most of you who have been on this journey with me know it has not been easy going.”

“I have to tell you I am scared. I’ve been here at Expedia for so long that I’ve forgotten what life is like outside this place,” he added.

Best of luck Dara.