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Alibaba’s entry into Southeast Asia served as social proof for many entrepreneurs and businesses that they were onto something big, which led to a year of exuberance for ecommerce in the region.

“We’re just at the beginning, [the Alibaba-Lazada deal] will kickstart the whole cycle. It will attract more global investments into the region, and attract more entrepreneurs who now see this region as a great place to start a business.” — Stefan Jung, founding partner at Indonesia-based Venturra Capital in an interview with Tech in Asia

Even as we get closer to 2018, there are already numerous casualties in one of the most promising ecommerce growth markets in the world.

Alibaba doubled down on its Lazada investment by upping its share from 51 percent to 83 percent and in a push to monopolize the market, put grips on Tokopedia, arguably one of Lazada’s biggest competitors in Indonesia.

Tencent, through JD or directly, also began executing its China playbook by investing in companies like Sea, Go-Jek, Traveloka, Pomelo Fashion and Tiki.vn.

Global attention from the US came from KKR, who through Emerald Media, put $65M into ecommerce ‘arms dealer’ aCommerce in a bid to replicate Baozun’s dominance in the Chinese “TP” (Tmall Partner) landscape.

And the plays won’t stop here.

Leveraging newly consolidated positions of strength, marketplaces will cross traditional boundaries and move into areas like private label brands and offline distribution. Brands will also feel increasingly cornered, facing a “damned if you do, damned if you don’t” situation.

Those that survive 2018 will have to find a niche for themselves, such as in fashion or home, because there isn’t much room left for another horizontal ecommerce player. Others will be tempted to take risky shortcuts like say, raising money through ICOs.

2018 will also see Tencent, not Alibaba or a local company, emerge as the winner in mobile payments in Southeast Asia.

It might be a good time to start learning Chinese.

1. Plata o Plomo: Southeast Asia ecommerce will be increasingly factionalized into Alibaba and Tencent camps, and locals will pick sides

Given its similarities to China roughly 10 years ago, Southeast Asia has become a gold rush for Chinese Internet giants looking to expand beyond the mainland. It was Alibaba’s acquisition of Lazada last year that triggered an arms race between China’s #1 and #2 in Southeast Asia, and in turn, will cause local companies to choose sides.

Image source: Sohu

Alibaba also led a $1.1B investment in Tokopedia in 2017, continuing to place its biggest bets on ecommerce. Moving forward, the company is expected to position Lazada and Tokopedia as the Tmall and Taobao of Southeast Asia, respectively.

Meanwhile, Tencent has aggressively tried to replicate a three-prong formula that was successful in its fight against Alibaba in China: gaming, mobile and payments.

The first step was becoming the largest shareholder of Sea (previously Garena), predominantly a gaming powerhouse that runs Shopee, a mobile-first ecommerce marketplace and the second was placing bets on Go-Jek to become a “super app” like WeChat and WeChat Pay.

Understandable as WeChat Pay now commands an impressive 40% market share in China vs. AliPay’s 54%, up from 11% in 2015.

“Is there a land grab right now for these kind of assets? I think in the land grab they [Tencent] are following us. They are seeing that we have positioned ourselves very well, and they’re sort of playing a catch up game. So what we want to do is, since we already have our positions, is to work with local entrepreneurs.” — Joe Tsai, Alibaba Vice Chairman, in speaking with Bloomberg.

Tencent and Alibaba share price increase over last 7 years compared to Amazon and NASDAQ composite
Source: Yahoo Finance (December 4, 2017)

With both Tencent and Alibaba market caps at all-time highs, we expect this trend to continue throughout 2018 with both sides gobbling up more local companies across the ecommerce ecosystem and upping shares in existing ones.

2. Facing slow organic growth, Amazon will acquire a company to fast-track its ecommerce expansion in the emerging region

Image source: Getty Images

Amazon’s entry into “Southeast Asia” was the biggest surprise and non-surprise at the same time.

A non-surprise because Amazon’s long-awaited and rumored soft-launch into Singapore was widely covered by the media even before the company’s Prime Now services officially became available on July 26, 2017.

A surprise because Amazon’s expected tour-de-force across the region ended before it even started.

Amazon fanboys celebrated the initial launch of a scaled down, poor man’s version of Amazon — Amazon Prime Now — offering a measly one million household items and daily essentials.

“I was expecting more things that I can’t get in Singapore, for example Sriracha or something small that’s not available in Singapore but most stuff on Prime Now are basic things you can get from Fairprice…” — Reddit User Ticklishcat

But there’s good reason for it.

It doesn’t make sense for Amazon to set up a full-blown local presence in the country-state. Singaporeans, under the Free AmazonGlobal Saver Shipping option, were already enjoying free international shipping from Amazon en masse for orders over US$125.

The country ranks #29 in terms of session/year to Amazon.com on a global scale but #4 when normalized for population size. With an average of 14.04 sessions per person per year visiting Amazon.com, Singapore takes the top spot among all the countries in Asia.

Singaporeans already buying from Amazon, without the latter’s full-fledged local presence: Singapore ranking only #29 in traffic to Amazon.com but #4 when normalized for population size (#1 in Asia)

Source: SimilarWeb, World Bank

The launch of Amazon Prime in Singapore earlier this month makes it even less likely for the firm to set up local operations beyond Amazon Prime Now. Amazon is no longer subsidizing the original free shipping for orders above US$125 to Singapore and Singaporean Prime members have free international delivery only on orders above S$60 on Amazon’s US website for S$8.99 per month in addition to other benefits.

Not much else has been heard about the company’s further expansion into the region, particularly Indonesia and Thailand, where markets are being rapidly carved up by Alibaba and Tencent.

With time running out for a full-fledged, organic entry into the high-growth markets of Southeast Asia, its stock trading at all-time highs, and not too distant memories of failure in China, we expect Amazon to attempt at least one major acquisition in 2018 to accelerate regional expansion.

3. Offline is the new online: pure-play ecommerce to launch physical stores to offset rising online customer acquisition costs and improve last-mile fulfillment

While traditional offline retailers like Central in Thailand and Matahari in Indonesia scrambled to move business online, online pure-play ecommerce is expected to make moves offline.

With online customer acquisition channels like Google and Facebook rapidly reaching saturation and diminishing returns, ecommerce players like Pomelo and Lazada will look to offline channels to reach new customers.

Pomelo dabbled in offline over the last few years but, fresh off a $19M Series B, recently launched its biggest pop-up to date in Siam Square, the fashion center of Bangkok. The store applies “click-and-collect”, enabling customers to order online and try items in store before deciding which ones to keep or return.

Image source: Pomelo

“In fashion, the number one barrier to purchase is still the need to try product on for fit coupled with the hassle of returns. An offline footprint addresses this barrier head on. Additionally customers can be acquired offline and data from online can be used to drive higher sales and greater operational efficiencies offline. In short, a mix of offline and online is the optimal strategy for fashion retail going forward.” — David Jou, Co-Founder and CEO, Pomelo Fashion

Love Bonito, another online-first fashion brand from Singapore, officially launched its permanent flagship store at Orchard Road after seven years of being an ecommerce pure-play.

Image source: Love Bonito

Lazada, on the other hand, may follow Alibaba’s moves in China where the ecommerce juggernaut launched Hema supermarkets in Beijing and Shanghai. In addition to reinforcing a positive brand experience and customer acquisition, these new offline stores serve as fulfillment centers, effectively making up for Southeast Asia’s lack of logistics infrastructure.

Alibaba’s Hema supermarkets in China. Image source: Quartz

Lazada Group CEO Max Bittner already hinted at the possibility physical stores in Indonesia at a conference earlier this year.

Over the last decade in China, Alibaba rode 50%+ year-on-year ecommerce growth to become what it is today, however, as maturation slows, Alibaba has doubled-down on initiatives like Single’s Day (11.11), “New Retail” (smart pop-up stores around China), and market expansion to accelerate sales (Southeast Asia).

Despite the region being projected as the next big ecommerce growth story, online accounts for only 1-2% of total retail today. If companies like Lazada and Shopee want to grow faster than the market allows, going offline will be the obvious choice.

4. New ecommerce startups will use ICOs to raise funding to battle giants

With Southeast Asia increasingly being carved up by giants such as Alibaba and Tencent in a presumed winner-takes-all-market, smaller ecommerce startups will look at alternative ways to finance themselves.

Enter newly hyped Initial Coin Offerings (ICOs).

Raising funds through these means in Southeast Asia was pioneered by Omise, a fintech startup based in Thailand, that successfully raised $25M in a few hours to develop a decentralized payment system.

Given early speculation of Amazon moving into the cryptocurrency space, we’ll have fertile ground for our first Southeast Asian ecommerce ICO. Already a start up called HAMSTER is selling HMT tokens to develop a decentralized marketplace that promises “no fees, no brokers”.

Revolutionary ecommerce platform funded by ICOs or ponzi scheme?

Expect ecommerce startups to use ICOs to fund customer acquisition, new product development, and inventory financing. That is, until the bubble bursts

5. A final wave of ecommerce consolidation sweeps through as local players adjust to a New World Order

We’ve shared numerous stories of casualties and consolidation during the Southeast Asian ecommerce bloodbath in our previous annual predictions.

Japan’s Rakuten sold off most of its assets in the region when it retreated in 2015/2016. Rocket Internet dumped Zalora Thailand and Vietnam in a fire sale in 2016 and sold its Phillipines entity to local conglomerate Ayala Group the year after.

In Thailand, Ascend Group put its assets WeLoveShopping and WeMall on life support to focus on fintech.

In Indonesia, reports surfaced of SK Planet selling its Elevenia shares to Indonesian conglomerate Salim Group, which was quickly followed by news of its Malaysian entity up for bid between Alibaba and JD.

Earlier in the year, Indonesia’s second largest telco Indosat Ooredoo shut down its ecommerce website Cipika. Alfamart, Indonesia’s second largest convenience store chain also had to downsize operations to pivot its ecommerce initiative Alfacart away from a general marketplace play towards an online grocery channel.

Come 2018, all eyes will be on the health of remaining bastions of home-grown, horizontal ecommerce plays. As Alibaba and Tencent up the ante, there will definitely be more casualties in the new year.

6. Go-Pay will venture outside of Indonesia through Sea, Traveloka and JD to become the WeChat Pay of Southeast Asia

Indonesia’s ecommerce today is like what China was in 2008 — the pace of change is unimaginable. When I visited our office in Jakarta 12 months ago, hardly anyone was using Go-Jek’s mobile payment platform and wallet, Go-Pay.

Returning six months later, almost all of my colleagues used Go-Pay to transfer money peer-to-peer and pay for products and services.

In most of emerging Southeast Asia (excl. Singapore and Malaysia), credit card penetration rates are in low single digits and most people don’t even have a bank account.

Source: Global Findex, World Bank

Unfortunately, few fintech and payment startups in the region have created products to address the lack of credit cards and large unbanked population. Instead, the majority happily build payment gateways and e-wallets that rely on existing and legacy credit card infrastructure like in the US (Apple Pay anyone?).

It’s no wonder cash-on-delivery (COD) still makes up over 70% of all processed transactions according to data by ecommerceIQ.

Those that do focus on mobile wallets topped up with cash like Thailand’s True Money struggle to achieve sustainable “core product value” and reach mass.

“Community, Commerce, and Payments are inter-connected in the Digital World. Thus far, all successful mobile payment plays, globally, are centered on the commerce and community axis. PayPal started with eBay, Alipay with Alibaba/TMall/Taobao, WeChat Pay leveraged WeChat/QQ, and Amazon Pay has Amazon. Due to this very reason, standalone payments/wallet business will struggle.” — Gaurav Sharma, Founder at Atlantis Capital

Go-Pay addresses these fundamental issues by allowing users to send payments peer-to-peer (P2P) and top up by giving cash to Go-Jek drivers who act like mobile ATM machines.

Top up your Go Pay mobile wallet by handing cash to a Go-Jek driver

More importantly, with Go-Jek being part of the Tencent faction, we expect the company to push Go-Pay into other Southeast Asian countries through its community and commerce platforms such as Sea (Garena, Shopee, etc.), Traveloka and JD.

Following rumors in November, Go-Jek finally announced its acquisition of Kartuku, Mapan and Midtrans. The latter, being one of Indonesia’s top online payment gateways, will give Go-Pay additional distribution channels and use cases such as Matahari Mall, Tokopedia and Garuda Indonesia, pushing it beyond the realm of P2P into B2C payments.

A strong contender for the “WeChat of Southeast Asia” is Grab, whose 2.5 million daily rides makes it the largest ride-hailing platform in Southeast Asia. GrabPay, launched this year, is Grab’s effort to move Singapore towards a cashless society, with plans to expand across the region in 2018.

Should Go-Jek be worried? Not really.

Singapore is not the ideal test-bed to launch a mobile wallet because the country already has an ubiquitous cashless payment platform called “credit cards”. And GrabPay’s recent partnership in Indonesia with Lippo Group’s Ovo hasn’t garnered much attention or presented wide use cases.

“While it might seem like common wisdom to first test (an idea) in Singapore, and then take it regionally and to the world, with all due respect to the government, I think it doesn’t make sense in today’s world.” — Min-Liang Tan, Co-Founder and CEO of Razer

Go-Pay, on the other hand, is adding value to users in a country where only 36% have bank accounts and 2% have credit cards. Emerging markets like Thailand, Vietnam and the Philippines have a similar (lack of) financial infrastructure as Indonesia.

Go-Jek, by being part of the Tencent faction, has access to a much more diversified distribution channel and offers a variety of common day-to-day use cases such as gaming (Garena), shopping (Sea, JD), travel (Traveloka) and pretty much everything else (Go-Jek itself).

7. New mobile-first fashion and beauty marketplaces will fill void left by Zalora

Zalora, Rocket Internet’s once star fashion ecommerce venture, has struggled in Southeast Asia since launching in 2012. Zalora Thailand and Vietnam were picked up by Thai retail conglomerate Central Group for pennies on the dollar while the Philippines entity was partially sold off to the Ayala real estate group.

There were even rumors of Zalora Indonesia exiting to local retailer MAP, which were swiftly denied.

A few factors contributed to the company’s difficulties: 1. Price and product variety competition with merchants selling on Facebook, Instagram and LINE, 2. Control of brands by one or two retail conglomerates like Central in Thailand, MAP in Indonesia, and SSI Group in the Philippines.

These two factors made it difficult for Zalora to pivot to an ASOS-style premium brand marketplace.

A shell of its former self, Zalora’s challenges left a void that is increasingly being filled by more nimble, mobile-first fashion marketplaces that see an opportunity in a space dominated by mass-market, general ecommerce platforms like Lazada and Shopee.

As evident from Amazon’s struggle to court premium fashion brands in the US, luxury brands don’t like to sell on mass platforms, where merchandise shows up beside detergent and washing machines.

“After purchasing Whole Foods, Amazon now has access to the wealthiest refrigerators in the country but they still can’t get into our closets because the aspirational beauty and fashion brands don’t want to distribute on their platform. Why? Because they don’t have their heads up their ass and realize that Amazon partners with brands the way a virus partners with its host.” — Scott Galloway, L2 Founder and NYU Stern Professor

Over in China, both Tmall and JD had to exert a Herculean effort to attract fashion brands. In October, JD launched TopLife, a standalone online luxury platform to provide a high-end experience that high-end brands promise. Alibaba also launched Luxury Pavilion, a section within Tmall tailored to luxury brands like Burberry and Hugo Boss.

Spearheading a new wave of mobile-centric Southeast Asian fashion marketplaces are Zilingo, fresh off an $18M Series B, and Goxip, a Hong Kong based startup that recently completed a $5M Series A with plans to enter Thailand. In Indonesia, there’s LYKE, ironically founded by the ex-Zalora CMO.

With the benefits of hindsight and understanding of the importance of social commerce on driving fashion, these emerging players will offer elements like chat, content and an influencer network to offset some of the customer acquisition cost challenges inherent in scaling ecommerce.

8. Marketplaces will grow up and clean up ‘grey market’ for blue-chip and luxury brands

Over the last six years, most of the region’s initial ecommerce growth was focused on driving GMV by tapping into any merchant and brand willing to sell online.

In 2018, marketplaces like Lazada and Shopee will continue to attempt to onboard bigger global brands but their success will require them to control grey market sellers and counterfeit goods in order to cultivate an environment in which blue-chip brands will feel comfortable selling.

Alibaba went through the same process in China when discussions surrounding counterfeits and grey market goods on Tmall and Taobao peaked around the company’s IPO in 2014.

Based on data provided by marketplace analytics platform BrandIQ, 80% of SKUs from consumer product giants like Unilever, Samsung, and L’Oreal on average are sold by unauthorized, grey market resellers. These grey market SKUs are sold at a price 30% lower than official flagship stores and authorized resellers.

Why all the fuss? Because grey market sales impact the image of brands selling in official stores.

“Lately, the explosion of third-party sellers on the site has led to authentic goods from companies such as Nike, Chanel, The North Face, Patagonia and Urban Decay being sold on Amazon even though they don’t authorize the sales, undercutting their grip on pricing and distribution,” said the Wall Street Journal.

Nike, for example, refused to sell directly to Amazon for a long time, fearing it would undermine its brand. But by not selling on marketplace creates space that will be quickly filled by grey market, unauthorized third-party resellers looking for arbitrage opportunities as seen from the previous BrandIQ data.

Customers buying from these grey market resellers perceive this as buying from the brand itself and, when having a poor customer experience, end up blaming the brand rather than the unauthorized reseller.

BrandIQ data shows that the average rating for grey market SKUs are 24% lower than reviews for similar products sold through the official shop-in-shop or flagship store.

We’ll see a push from the marketplace and brands to address grey market sales in Southeast Asia in 2018. Marketplaces will employ a tighter grip on third-party resellers in order to attract better brands, while brands will set up an official presence on marketplaces as a way to pro-actively manage the customer experience and brand image.

9. Marketplaces and e-tailers will introduce its own private label products and alienate brands

As the ecommerce market in Southeast Asia matures and consolidates, marketplaces, e-tailers and ecommerce startups will be increasingly scrutinized for margin growth. Gone are the days of aggressive top line growth and market share grabs at all cost.

With Lazada post-Alibaba acquisition and Shopee post-IPO (as part of Sea), what other value-added services will these companies tap into for sustainable revenue growth?

In this instance, companies in Southeast Asia have taken a cue from the China playbook. Lazada launched a Lazada Marketing Solutions unit to monetize its 23M active annual customers through advertising similar to how Tmall and Taobao charge for ads in China.

Today, Lazada offers display ads and programmatic promoted product ads to its customers but is expected to launch pay-per-click search ads in 2018 competing with Google, Facebook and similar networks out there. Across the region, Shopee has already launched pay-per-click search ads.

Beyond advertising, we can expect more marketplaces and e-tailers to follow Amazon’s foray into private label brands to boost margins. With the data collected from selling third-party brands, these ecommerce platforms know exactly what kind of products sell best, to whom, at what time and where.

Flipkart, one of India’s top marketplaces competing with Amazon, recently announced its aim for 20-22% sales contribution from private labels in the next five years.

“When we first decided to foray into private labels in mid-2016, a ‘Tiger Team,’ for private labels was created internally to research 50-odd retailers around the world, including Europe, the US, China and India, to envisage what the private label landscape would look like for Flipkart over the next few years. Research revealed that private labels can contribute 10-20 percent of the company’s business. For instance, US-based Costco Wholesale’s private label brand Kirkland contributes 20-25 percent of its business,” said Adarsh Menon, Flipkart’s Head of Private Labels in an interview with The Hindu.

Launching private label brands in Southeast Asia isn’t something new. Zalora launched its own fashion label called EZRA as early as 2013 followed by Lazada’s LZD Premium Collection in 2014. With the focus on top line growth in the period of 2013-2016, private label brands have taken a backseat as seen from the limited number of them listed today on Zalora and Lazada.

Althea, a Korean beauty e-retailer that recently raised a $7M Series B, specifically said to be using the new funds to launch more private label products.

Althea private label product sold on their website

“Based on the vast amount of user data that we have gathered… we are now able to understand the specific needs of our customers in each market, garner feedback almost instantly through our online platforms, and quickly turn that into a product within a month or two,” said Althea Co-Founder and CEO Frank Kang. “We have deep insights into our customer base that traditional brands simply cannot match.”

In light of all this, it’s not surprising Zalora has expressed renewed interest in pushing its own private labels, “Something Borrowed” and “Zalora”, for the new year.

10. B2B ecommerce to disrupt offline distributors, blurring lines between online and offline distribution

Despite the rosy outlook for ecommerce in Southeast Asia, the reality is that B2C ecommerce today is still in the low single digit percentages. Given aggressive growth targets, brands, marketplaces and e-tailers will increasingly look toward non-B2C channels such as B2B and B2E (Business-to-Employee) channels for revenue.

Zilingo, the Sequoia-backed fashion marketplace, launched its Zilingo Asia Mall B2B marketplace to allow fashion buyers in the US and Europe buy Zilingo merchandise at wholesale prices, effectively creating an “Alibaba” for fashion.

Shopee launched a wholesale feature earlier this year, allowing merchants to set lower unit prices for larger order quantities.

 

Shopee Malaysia offering wholesale feature

aCommerce, Southeast Asia’s ecommerce enabler and e-distributor, fresh off a $65M Series B from KKR-backed Emerald Media, coined a new term for all this — “B2A” or Business-to-All.

The company is behind the B2B and B2E initiatives for brands like Samsung and L’Oreal. According to the company, B2B ecommerce now contributes to 30% of total revenues at aCommerce, up from 10% a year earlier (disclaimer, I work here).

Written by: Sheji Ho, aCommerce Group Chief Marketing Officer

Opinions expressed are solely my own and do not express the views or opinions of my employer.

As more Thai people shift online to conduct their shopping – 14 million by 2021 – there is little doubt that the country will reach its projected ecommerce potential of over $11 billion.

The government’s roadmap for Thailand 4.0 is another boost for the digital habitat as investors often see bureaucracy in the region as a hinder to business.

So now the path is smooth to promote growth and money is coming in from the Chinese, how has the ecommerce landscape in Thailand changed over the last year?

1. Strong players emerge in fashion ecommerce  

After acquiring Zalora in Thailand and Vietnam last year, Central Group finally shed the old image to relaunch as LOOKSI earlier in June this year in attempts to revive the brand.

The change wasn’t only in the name, fashion labels housed by Zalora were cut by half to about 1,000 brands. The company also moved away from discounted products and began offering seasonal products instead.

But it was Thai-bred fashion startup Pomelo that created buzz after raising a $19 million Series B led by Chinese retail giant JD.com and participation from ally, Central Group.

Pomelo currently operates local ecommerce websites in Thailand and Indonesia but with new funds, the company is eyeing further expansion in Southeast Asia and even Europe. It’s also a firm believer in a multi-channel retail strategy, launching a offline store in Bangkok’s fashion hub Siam to offer click & collect

2. Global fashion and beauty brands get local

This year, more notable global brands launched local ecommerce websites to penetrate the Thai market.

Global fashion retailer Zara officially unveiled its ecommerce website and mobile application earlier this year, and integrates online and offline shopping by providing a pick-up service and return in-store for online purchases.

Thailand ecommerce landscape 2017

Thailand ECOMScape in 2017 (right) see more beauty brands launch their own ecommerce website than in 2016 (left).

Global beauty brands such as Lancome, Biotherm, and YSL have also launched local ecommerce websites in hopes of capturing the growing online segment.

3. The long-standing battle for logistics dominance continues

To talk about the rise of online shopping in the country isn’t complete without mentioning the vital and often forgotten pieces of the ecommerce value chain such as logistics.

The red ocean sector still draws new players despite the handful of names already dominating the space i.e. lalamove, Kerry Express, etc. One of the new additions includes Singapore-headquartered online food and grocery on-demand provider honestbee.

honestbee launched its logistics service called Goodship earlier this year to capture the growing demand, focusing on last-mile and same-day delivery services.

Thailand Ecommerce landscape 2017

General Manager of honestbee Thailand Bounthay Khammanivong at the Goodship launch.

Singapore-based NinjaVan also entered the Thai market in August and hopes to raise a $60 million Series C round. Who can bleed the longest?

4. JD gets its grips on Thailand

Chinese companies have certainly made some aggressive moves in Southeast Asia, and JD.com has chosen to make waves in Thailand this year.

The company announced a $500 million joint-venture with Thai conglomerate Central Group earlier this year that will be spent on ecommerce and fintech development, as well as promising the latest technologies to woo the country as its hub for Southeast Asia.

The ecommerce lovechild of the joint-venture, called JD Central, is expected to launch by April next year.

Thailand is JD’s second major investment outside of China after plans to win Indonesia hit a roadblock. The company lost the bid for leading C2C player Tokopedia to Alibaba and its own ecommerce site JD.id has yet to push top five in the country in terms of web traffic.

Thailand Ecommerce landscape 2017

Are we missing any key players or do you have an opinion on the 2017 Thailand ECOMScape? Let us know via Linkedin | Facebook | Twitter

Download the high-resolution of ECOMScape Thailand 2017 here.

ecommerceIQ, together with Sasin SEC, created the Leadership Ecommerce Accelerator Program (LEAP) to provide the fundamental knowledge and skills needed to successfully run an ecommerce business in the world’s fastest growing market.

Ecommerce, as the name suggests, is the process of buying and selling a product over the internet. The ability to shop online is not confined to only laptops and PCs, but more and more, being conducted on smartphones and tablets in developing regions.

Opportunity is where the people are; in Thailand alone, mobile social users make up 42 million out of the country’s total 68.22 million population making the smartphone an important channel for retail companies.

The sixth week of LEAP looked at the potential of mobile commerce, introduced the fundamentals of app marketing, and illustrated how an omni-channel strategy is possible in even Thailand’s oldest, highly reputable, retail players – Central Group.

1. Three Mega Trends of a Mobile-Driven Economy

NATHANIA CHRISTY, TRENDWATCHING INSIGHTS & COMMUNITY LEAD APAC

Brands often ask, “what do customers want next?”, the truth is that many of them don’t really know what they want.

Instead of watching customer behavior for trends, it’s better to watch innovative businesses.

LEAP Ecommerce Course

Nathania Christy, TrendWatching Insights & Community Lead APAC

According to TrendWatching, brands must create something that serves the basic needs of humans as well be aware of how these needs will evolve. This is how to achieve what Nathania calls the “sweet spot”.

LEAP Ecommerce Course

She discussed three mega trends during her lecture and how businesses can integrate them into core products:

1. Helpfull – contextualizing a brand’s omni-presence to serve convenience-oriented consumers. It does not have to be online or involve with sophisticated technology.

Example: In Indonesia, government officials employ WhatsApp to allow Indonesians to schedule appointments with government agencies. Effectiveness does not require fancy technology, your goal can be achieved as long as it answers a basic need – convenience.

2. Infolust – information is everywhere, today’s consumers want to be informed in real-time.

Example: Japanese supermarket “U” proves that its produce is fresh by launching an official Snapchat account and filming the journey of its fish through “Stories”.

3. Joyning – there are various types of connections made possible through a mobile-driven society:

  • Instant Encounters are about making direct, face-to-face contact to create relationships
  • Middlemen Removal becomes the new business model where intermediary is eliminated and in return, brands are able to produce goods of better quality and price
  • Digital Detox is much needed as more consumers are glued to their phones and less people are connecting in real life
  • Mass Mingling offers an activity for consumers to get together and do meaningful things in groups

Example: KLM Royal Dutch Airlines brought strangers together during Christmas time by preparing a Christmas feast that was only accessible if every seat around the dinner table was filled. Take a look at the heart-warming application of Mass Mingling by KLM here.

Want more mega trends? We’ve shared the TrendWatching deck here.

2. App Installs Do Not Translate into Success  

JONAH KADISH, APPSFLYER CUSTOMER SUCCESS MANAGER

For brands that offer a mobile application, getting consumers to install the app may be a main objective but it doesn’t guarantee success.

Why? Because consumers uninstall applications all the time. Thailand has a 34% rate of uninstalls for Android app users.

LEAP Ecommerce Course

Jonah Kadish, AppsFlyer Customer Success Manager

So how can brands measure app success? Rather than focus on driving installs, focus on in-app events. They include:

App usage – Is it frequent within a week?

Session length – Is it long enough to make a purchase?

LEAP Ecommerce Course

3. The Importance of Omni-Channel in the View of Central Group

BHUMSARAN (TOP) AMTHONG, CENTRAL ONLINE SVP HEAD OF COMMERCIAL

As the world of commerce evolves, so does a customer’s’ expectation.

LEAP Ecommerce Course

Selling goods is no longer defined by the famous 4Ps (Product, Price, Place and Promotion) but rather the experience that consumers are expecting to get. Khun Bhumsaran shares a private case study regarding Topshop’s success moving into an omni-channel strategy.

LEAP Ecommerce Course

Bhumsaran (Top) Amthong, Central Online SVP Head of Commercial

The next class is on Thursday October 19th and will take a look at logistics and fulfillment, from industry leaders include Lazada and Pomelo. Stay tuned for next week’s takeaways!

[LEAP Week 1] eIQ Insights: The New Ecommerce Opportunity in Thailand

[LEAP Week 2] eIQ Insights: Refinement of an Ecommerce Channel Strategy

[LEAP Week 3] eIQ Insights: Market-Product Fit First Before Anything

[LEAP Week4] eIQ Insights: Central Marketing Group’s Shares Phase II of Digital Strategy

[LEAP Week 5] eIQ Insights: Startups Need to Have an Independent Source of Income to Survive

Here’s what you need to know today.

1. Thailand’s Power Buy will be going omnichannel

Power Buy is an electronics retailer that operates under Thailand’s retail giant, Central Group. The department is a permanent fixture in Central Department store’s offline locations nationwide.

Currently, Power Buy has 86 locations spread across the country, and its new omnichannel strategy will leverage from that.

Power Buy also has an online platform, and management believes the integration of online and offline will lead to an 8% increase of sales for this year.

Power Buy will make it easier and quicker for online consumers to shop on its website, and train its staff to integrate technology touch points in offline stores. Employees will be able to use tablets to check stock lists and look for discounts right away in store, which will lead to better service for customers.

Read the rest of the story here.

 

2. How is Amazon disruption grocery?

There’s no real mystery to why Amazon would be so assertive in grocery: Total 2015 U.S. supermarket sales were $649 billion, according to the Food Marketing Institute.

As a high-frequency purchase, grocery makes a lot of sense for Amazon.“They want that consistent customer back in the fold. Most consumers look at grocery shopping as utilitarian. It’s not passion purchases, so to some degree any time you remove the pain points you win. Grocery is ripe with opportunities,” said Brendan Witcher, Forrester analyst.

“Forget about department stores. Groceries is where retail is going to be won over the next five years.” Cooper Smith, research director at digital insights firm L2.

As Amazon learns the ropes of grocery retailing, that leaves a window open for traditional retailers to move assertively to maintain shopper loyalty. But the window is narrow — and shuttering quickly.

Read the rest of the story here.

 

3. Recommended Reading: How Boohoo is beating the rocky American retail market

The online pure-play brand that quickly churns out trends targeting a Gen Z and millennial audience reported a 145 percent revenue growth in the U.S. in its financial year ending February 28, from $17 million to $43 million.

Boohoo is quickly gaining ground in a market that has proven volatile for retail. Department stores like Macy’s, JCPenney and Sears are closing hundreds of physical locations, while retailers like American Apparel, Wet Seal, Payless, Rue21 and The Limited have filed for bankruptcy.

Boohoo’s focus, meanwhile, on the American market kicked into gear over the past year, including its acquisition of Nasty Gal. While it recognizes the value in a physical retail presence, Boohoo’s biggest competitive strengths play out online.

“Retailers have been able to follow the same playbook for decades, only to have recently had the rug pulled out from under them,” said Drew Ungvarsky, CEO of digital agency Grow.
“Younger, online-born companies have room now to come in with a new relationship between the physical and online space. Ultimately they’re finding a reason for people to go to the store.”
Read the rest of the story here.

Thailand’s COL, a subsidiary under Central Group held a shareholders meeting Wednesday and made significant announcements regarding the future of its online business. The group is planning to sell its B2C online businesses to its parent company to focus on growing online B2B operations.

COL has three key businesses:

  1. B2S books and stationery stores
  2. OfficeMate stationery stores
  3. Online platforms Central.co.th, Robinson.co.th and Zalora.co.th.

According to an attendee of COL shareholder meeting, originally posted on LongTunMan blog, the following took place:

The most significant moment of the meeting came after a reflection of last year’s performance. Management explained why they were “taking a step back from online business”. The main reasons being:

  • Market leader and new competition within the ecommerce landscape
  • Unlikely to be profitable in the near future (subsidies too high)
  • The online business requires more monetary investments at a large scale

Source: COL business plan presentation at the Annual shareholders meeting

“Currently, ecommerce in Thailand is a cash-burning race. The top performing player, LAZADA, is losing billions of baht. Central is not ready to experience losses of that scale in order to participate in the online race. All B2C online businesses under COL will be sold to Central Group, which has significantly more resources to fight the competitors,” wrote the attendee of the meeting.

COL business plan* shows that in 2016 the net loss of its digital & online business was 330 million THB (9.5 million USD).

That is almost double the net loss of 185 million THB (5.3 million USD) in 2015. Stepping out of online business will significantly improve COL profits.

Source: COL business plan presentation at the Annual shareholders meeting

The attendee of the shareholder meeting noted that as soon as the management made their announcement, shares went up 22% to 39.5 baht. What do shareholders think about this?

“Some may be disappointed that COL is pulling out. However, shareholders prioritize a company’s profitability. If we were to study performance results from 2016, it becomes clear that by removing its online businesses, the company will gain 86% in profit,” says the LongTunMan post.

Next steps for COL

In its business plan, COL has defined that one of the key strategies to continue sustainable growth is to develop a new online B2B platform that matches vendors and potential customers in various industries.

By focusing on B2B operations, it will serve as a quicker win for COL. The company already has a strong consumer base in that area.

Source: COL business plan presentation at the Annual shareholders meeting

According to LongTunMan, “management has announced that COL will now be an abbreviation for “Central Omni Logistics”, as the company will shift its focus to B2B.

This is where the company’s expertise lies, and remains a market leader. COL currently claims 80% of market share for office supplies.

“This decision shows that in some cases, it is better to take a step back in order to move forward and focus on where your business’s strength lies. Simply put, it is not worth it for COL to put all of its resources into fighting with other players, who have more resources to burn,” says the LongTunMan’s blog post.

In addition to moving to B2B online operations, COL also wants to step up its logistics game and in the future sell third party logistics and fulfillment services to other market players.

Source: COL business plan presentation at the Annual shareholders meeting

These changes in COL are aimed to turn the company into “the region’s leading business solution center”. The company is moving away from loss making activities to focus its efforts in the B2B area in hopes of a more profitable business model and where it has significant strengths.

Source: COL business plan presentation at the Annual shareholders meeting

Find the COL business plan presentation from the annual shareholders meeting in English here.

The original version of COL shareholders meeting attendee was published in Thai, and can be found on LongTunMan’s blog here.

* NOTE: The original version of presentation from the COL shareholders meeting, accessed by ecommerceIQ on April 7, included the slide which detailed how big company’s net profit would be without its Digital & Online business. This slide, however, is missing from the latest version of its business plan’s presentation available on their website.

BY: NIKI CHATIKAVANIJ AND AIJA KRUTAINE

Here’s what you need to know today.

1. Singtel to help F&B businesses go digital

Singtel has announced a new initiative with the two Singapore-based polytechnics — Nanyang Polytechnic (NYP) and Singapore Polytechnic (SP) to help F&B and retail businesses go digital.

It will collaborate with the Singapore Institute of Retail Studies to help these SMEs hire digital professionals who will offer their expertise in ecommerce, retail analytics and digital marketing solutions such as SEO and SEM.

Read the rest of the story here.

 

2. Central Group to focus on ecommerce

Central Group aims to raise the share of its ecommerce sales to 15% over five years, up from the present 1%.

About 10% of the $1.3 billion capital investment allocation this year will be devoted to online business.

The funds will mainly go toward developing a logistics network and an omni-channel platform.

Read the rest of the story here.

 

3. Recommended Reading: How luxury fashion brands in China use WeChat in 2017 

Luxury fashion brands started to develop WeChat-specific features through their official accounts, that took advantage of the added-value services offered by WeChat.

Today, two-thirds of the luxury fashion brands active on WeChat now operate a service account, a step up from subscription accounts, which are primarily used by news and media entities.

Something to think about: Only 24% of the luxury fashion brands analyzed were integrating call-to-actions and links to an ecommerce platform, no brands currently offer the possibility to set up an appointment in-store or request a call-back from the sales staff.

Read the rest of the story here.