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The number of small and medium enterprises (SMEs) is surging in Southeast Asia. Not only are they a major contributor to the GDP of ASEAN’s economies, but they are also responsible for creating and sustaining employment.

Based on the Directory of Outstanding ASEAN SMEs 2015, it was estimated that there are more than 62 million SMEs in ASEAN’s emerging countries, which includes micro enterprises in Indonesia and the Philippines.

It is not surprising given the massive impact of SMEs on the local economy that policy makers are paying a lot of attention to helping SMEs grow. UNESCAP’s report on SMEs in Asia and The Pacific defined a matrix of SME development by the policy makers in 5 different groups:

  1. Training and information: such as vocational training for employees
  2. Financial services:  such as micro-loans, venture capital
  3. Support structures: such as B2B portals and e-business platforms
  4. Policy advocacy: such as government procurement, taxation
  5. Capacity building: for all the stakeholders

While four of the above have been in place for decades, one group is relatively new: B2B portals and e-business platforms. Thanks to the internet, support for the growth of a SME business is now at a whole different level: faster, scalable, and more efficient using a B2B ecommerce platform.

It’s never been easy to trickle down a concept into execution, especially in emerging markets with its unique challenges and opportunities. Take Indonesia for example, with a significant share of SMEs across the region, creating a workable model there will mean a greater chance of replication in neighboring emerging markets.

Bizzy Case Study: SME To B2B Ecommerce, Concept To Execution

Bizzy is one of the leading B2B ecommerce platforms in Indonesia that focuses solely on B2B ecommerce and has become one of the pioneers in educating Indonesian SMEs on how to procure online. Founded in 2015, the platform is backed by both regional and local ventures: Ardent Capital, Sinarmas Digital Venture, and Maloekoe Ventures.

By identifying the top two challenges for doing B2B ecommerce in a leading emerging market like Indonesia, it is easier to see how these challenges are very much related to how multiple segments of customers behave differently and how businesses can overcome them.

Challenge #1: Small Enterprises Reach a ‘Demand Planning’ Dilemma

In emerging markets, micro and small businesses are big fans of “just-in-time inventory”. They rely on a petty cash system to procure their supplies in nearby convenient stores or groceries by cash or personal reimbursement.

There is no rigorous demand planning in this segment. When the copy paper is out of stock, they will go to the nearest stores to buy one pack; no more no less.

In contrast, the concept of B2B ecommerce platforms for this segment suggests a demand planning concept because of two key reasons. First, B2B ecommerce will need a service level agreement (SLA) to fulfill the order, not ‘just-in-time’ or ‘walking distance travel time’ as with convenience stores or groceries.

Second, B2B online procurement expects bulk or higher quantity order levels; not a single unit purchase in the case of B2C. SMEs would be required to create a step-by-step plan in advance, in order to make accurate predictions of which office supplies to buy.

Challenge #2: A Medium Enterprise Encounters Procurement-Supplier Relationship Disruption

A good “traditional supplier” will find a way to be the preferred supplier with negotiated rate cards to their medium enterprise customers. The effort is purely a journey of relationship management over many years. Preferred “traditional suppliers” have a great human relationship with the procurement department.

B2B ecommerce sales also work best at the C level where quantifiable savings, efficiency, transparency, and the increase of productivity pitches will hit the nail on the head. C levels understand the power and obvious benefits of online, strategic sourcing, and market place.

Virtually, any SKU is available at the tap of a fingertip, and more importantly, there is no secrecy on pricing as the internet will give several comparisons. The only fluid piece is the cost of finance for term of payment and the delivery cost if the goods are not sent from the domestic area.

When the “let’s try B2B ecommerce and e-procurement” message is sent to the procurement department from the top level, it will disrupt the existing procurement process, and specifically, disrupt the procurement-supplier existing established relationship that has been built for years with preferred suppliers.

The immediate voice of insecurity will come from the preferred suppliers. This is simply because the B2B ecommerce platform will give access to virtually unlimited SKUs and virtually unlimited vendors with (mostly) more cost effective pricing. In some cases, the feeling of insecurity is also transferred to the procurement department because technology creates more efficiency and likely less human intervention is needed, hereby disrupting the traditional system.

The B2B online platform could be seen as a clear and present danger by the ‘traditional procurement’ process.

This situation could bring a risk to the adoption of a B2B platform as it will take a longer time. It needs to resolve the relationship disruption effect that a disruptive technology brings to the equation.

Bizzy’s “Tier Pricing” Solves the Small Enterprise Challenge

To educate small businesses to start using the 21st century online procurement system and move away from “traditional procurement”, internet-first B2B platforms like Bizzy and Mbiz would need to provide a value unit that is perceived higher compared to the ‘just in time’ supplies concept from the nearest convenience store or groceries.

To address some of the aforementioned challenges, Bizzy for example has introduced a “tier-pricing” system that creates a value unit to compete with the traditional way of how small businesses procure products. Tiered pricing gives an upfront discount based on the tier volume. The tiered-price approach is the first and the only in Indonesia today (see picture below).

bizzy b2b

Small businesses can easily see the difference between buying a product, like glue, in small quantities or buying a larger quantity online from Bizzy with an upfront discounted price based on a periodic basis (aka demand planning).

The benefits of consolidated procurement and demand planning of supplies will also give more predictability of spending ahead of time for small businesses.

Buying from a B2B platform like Bizzy will also give them a tax refund as they register their tax ID to the system. If supplies are bought through retail stores, tax ID is not always an option for purchases.  

Bizzy’s ‘Select’ Solves the Medium Enterprise Challenge

It is super important for Bizzy in its sales motion to not position the offering for medium businesses as a “new supplier” who will compete with the existing preferred suppliers and create potential friction within the internal procurement department.

Rather, Bizzy should be seen as a “platform” that serves both internal procurement department and their preferred suppliers.

Recently, Bizzy introduced Bizzy Select as a unique platform for Medium Enterprise customers.

What is Bizzy Select?

  • A personalized e-procurement platform with e-catalog for medium enterprise customers
  • Customers can build their own e-catalog based on needs and Bizzy can onboard existing preferred suppliers to fulfill the requirements.

 

bizzy b2b

For the existing suppliers, onboarding to Bizzy Select will also give them access to new business customers to scale. These customers will have access to an e-Catalog with a virtually unlimited amount of SKUs as well as connection to a much broader list of other suppliers to anticipate both existing and the new needs.

In this mutually beneficial situation, moving both customers and “traditional suppliers” from the “traditional procurement” process to a more strategic procurement process is now doable.

The majority of medium sized businesses have not yet adopted ERP solutions, especially for procurement systems.

The offering of Bizzy Select, which includes approval flow, budgeting, e-quotation, shipment tracking, analytic dashboard, etc., is a compelling tool for medium businesses as they will instantly gain access into e-procurement without additional investment.

The Path forward

All the factors that contribute to the tipping point of B2B ecommerce are already apparent. The adoption of broadband – thanks to the aggressive smartphone penetration – means that consumers are already educated with the B2C and C2C buying-selling processes.

The large, addressable market of SMEs means that B2B ecommerce growth in Indonesia, and most likely other emerging markets in the region, is solid and bullish. The transformation of traditional procurement into strategic procurement for SMEs is happening today.

Now it’s the matter of the players such as Bizzy to switch paper based procurers into paperless.

by Hermawan Sutanto, Chief Commercial Officer at Bizzy Indonesia

Fatfish Internet Group, a startup investment company headquartered in Singapore and Australia, has agreed to sell some of its assets to Zurich-based company builder Mountain Partners as part of a strategic partnership to invest in Southeast Asia, reports Tech in Asia.

The assets worth $9.2 million will be housed in a ‘special purpose vehicle’, which will be 100% owned by Mountain. Fatfish will get a combination of shares and cash in the sale.

A joint venture to be branded as ‘Mountain Asia’ will then be formed and majority owned by Mountain, but managed by Fatfish.

Mountain Partners is a global company builder that has been involved in funding over 150 tech businesses, such as members only fashion site, BuyVIP (acquired by Amazon) and food delivery Lieferando (acquired by Takeaway).

Currently, the partners entered into a term sheet, but not a binding contract yet. The whole deal is expected to close in Q4 of 2016.

What is Fatfish?

Fatfish has been compared with Rocket Internet, but without the high profile products.

It acts as a strategic investor in companies by providing them with funding and resources to grow their businesses. The company has backed ventures such as fashion ecommerce website Dressabelle (which has been acquired by iFashion Group) and car insurance service company RajaPremi.

The company did not disclose the amount of assets sold to Mountain Partners, but it did announce that it will continue to hold certain investments on its own. The company has expressed investment interests in gaming studio iCandy Interactive.

The collaboration will focus on building companies in Southeast Asia.

A version of this appeared in Tech in Asia on August 18. Read the full version here

A quick search of ‘ShopClues’ yesterday would have pointed the ecommerce firm as a potential acquisition target for Alibaba. News outlets such as Tech in Asia and Times of India have reported on the rumors of the Chinese ecommerce giant acquiring India’s newest unicorn.

Will Alibaba enter India? The story so far

Alibaba indeed has its eyes on India, but it will not enter through buying a stake in ShopClues, or its rival, Flipkart, contrary to the rumors of late.

According to Tech in Asia, a company spokesperson denied the rumors in an email.

We are not currently preparing any investment into ShopClues or Flipkart. India is an important emerging market with a great potential and we are committed to developing this market for the long term.

Alibaba Group views India as a ‘natural progression’ of its strategy to expand globally. No further comment was provided regarding the ecommrce giant’s future plans for India.

Earlier this year, Alibaba Group President J Michael Evans has acknowledged that the company has been ‘exploring ecommerce opportunities’ in the country, but again, no details were given.

According to Tech in Asia, the Chinese company’s entry into India is inevitable, and it has already held talks with various possible partners, according to multiple sources from the media site.

What is ShopClues?

ShopClues is India’s top online marketplace that sells mobile phones, laptops, home appliances, fashion, home products. The company was founded in California’s Silicon Valley in 2011.

Alibaba ShopClues

Alibaba rumored to be entering India through acquisition of online marketplace ShopClues. Source: mediainfoline.com

What would this mean for India’s ecommerce landscape?

Local media has been buzzing with news of a possible stake purchase in India’s leading ecommerce company, Flipkart. However, that rumor has too been shut down.

India’s ecommerce landscape is peppered with local players such as Flipkart and Snapdeal, and of course, Amazon. The global giant has been making strong pushes in the country, most recently launching Amazon Prime for Indian shoppers and setting up six new fulfillment centers across the country in July.

India is currently in a two-way race between home leader Flipkart and Amazon, with Snapdeal coming in third place. According to Tech in Asia, the top five ecommerce companies in India hold about 80% of the market, with Flipkart owning 50% of the market share. It seems that India’s ecomemrce landscape is heading towards a new level of growth, with only the big players making strides and battling each other.

If, and when Alibaba does make a play for India, it will put the ecommerce company directly head to head with Amazon. But as of now, more speculations of possible buyouts and acquisitions will indeed run rampant.

Versions of this appeared in Tech in Asia on August 18, read the full versions here and here.

A new breed of startups are trying to tackle rural ecommerce in Southeast Asia, reports Tech In Asia.

Kudo agents source products from a number of ecommerce stores. The agents typically sit in mom and pop stores in rural Indonesia and install the app to sell a wider variety of goods without having to stock them.

The agents will help customers to pick items from the app’s product channels, place an order, and take cash in return.

From countries such as Cambodia to the Philippines, this is a common problem for ecommerce companies; most people are not familiar with the tools that would help them shop online.

Most  importantly, people need a bank account to make payments. In Indonesia, more than half of the population over the age of 15 do not have one. As a result of this, less than 1% of Indonesians actually shop online.

The untapped window of missed opportunities is large, especially for people living in remote areas. Agung Nugroho wants to solve that problem by working with small town shopkeepers and turning them into ‘agents’ that help others make online purchases. This is how his new startup, Kudo, was born.

Kudo’s network of agents grew from just hundreds in May last year to over 100,000 currently. 50% of agents are in Java, while the remaining 50% are spread out across other provinces, to Aceh to Papua.

Maybe you don’t trust the online seller, but you would definitely trust the owner of the small shop next to your house, who happens to be a Kudo agent. – Agung Nugroho.

The startup also plays a role in last mile delivery. Trusted shopkeepers who are familiar with the neighborhoods can fill that gap.

One of the best selling items is gold. People buy gold from certified merchants on ecommerce marketplace Bukalapak, which is one of the shops connected with Kudo’s app. It is considered a safe way to invest for the future.

Kudo’s next goal is to have one million agents spread across the country. Agung hints that the startup is making several million US dollars in monthly transactions.

A version of this appeared in Tech in Asia on August 10. Read the full version here

Australia Post has spent nearly $100 million to take a 4.5% stake in Dubai-based logistics and transportation company Aramex, reports The Australian.

The Australian postal firm swooped on the stake following the recent exit of Aramex founder Fadi Ghandour from the company. Australia Post’s investment is aimed at establishing a strategic ecommerce alliance with Aramex to open emerging markets to Australian businesses and online shoppers.

The deal gives Australia Post 100% of the last mile delivery of parcels in Australia and a split of revenues from the joint venture from the rest of the world into Australia.

That joint venture will use Australia Posts’ StarTrack International courier business and Aramex’s global express delivery networks.

Under the deal Aramex will acquire a 49% stake in Star Track International and Australia Post will snare a 4.5% stake in the Gulf company. The arrangement will allow Australia Post to grow the Australian ecommerce market, capturing more inbound parcel volumes and providing a platform for outbound growth, particularly for small and emerging businesses.

For parcel volumes generated by the joint venture, Australia Post will provide last-mile delivery services in Australia using its network of drivers.

For Australia Post, the move follows a similar deal completed in Asia with Alibaba and JD.com, to expand its service to the high demand Chinese market. Australia Post has also partnered with China Post’s Sai Cheng Logistics International to help deliver parcels to the Australian market, fully investing in a cross-border strategy. This new partnership with Aramex will ‘compliment’ the company’s other partnerships in Asia.

A version of this appeared in The Australian on August 3. Read the full version here.

Facebook has partnered up with Mandiri, Indonesia’s largest bank to introduce a new payment option for ads, to increase efforts to turn itself into a commerce platform relevant to emerging markets, reports Tech in Asia.

Ads can now be paid using debit cards. Prior to this, the only accepted payment methods for ads on Facebook were credit cards or bank transfers.

Enabling debit card payments gives more people access to an instant online payment method.

It’s a move aimed to help Facebook reap profits in emerging markets like Indonesia. The social network counts 88 million active users in the country

Only 16% of Facebook’s ad revenues, its most important source of income are from Asia-Pacific, shows Facebook’s most recent earnings report. It pulled in a record high $1 billion in revenue in Asia.

NBC reported that Facebook will let emerging market companies sell through their pages. This is a part of the company’s efforts to build up potential advertisers in fast-growing regions.

The move is Facebook’s first foray onto online commerce in emerging markets. The company launched a service last year allowing some merchants to sell items through paid ads on Facebook’s app. The latest service will instead be free, and purchases can be made through merchants’ own Facebook pages.

By making sellers more reliant on Facebook, the company hopes that more businesses in emerging markets will eventually decide to become paying advertisers.

There are more than 60 million businesses worldwide using its service that can set up pages for free in an attempt to reach more customers out of Facebook’s 1.7 billion global monthly users. Eventually, Facebook hopes that firms of all sizes will become paid users of Facebook advertising. It is boosting this through fixing the infrastructure of emerging markets.

Facebook has launched ‘Free Basics’, a free, pared-down version of the internet in more than 30 countries without reliable internet connections. It is reportedly also working to test drones that will provide communities without internet, access to wifi. These initiatives are integral to Facebook’s global strategy of seeking to reach a large group of potential users in emerging markets.

Versions of this appeared in Tech in Asia and NBC on August 4 and 3. Read the full versions here and here.