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Most parents will buy rattles and dolls for their children from a very young age up until the child hits his/her mid-teens – with just the types of toys purchased changing as the child grows older.

The potential of the global toys & games industry is heavily influenced by demographic trends such as the number of households and birth rate. There’s also a seasonal variation in the types of toys & games currently popular around the world; depending on blockbuster action flicks, emerging WWE stars, and fashion trends.

Thailand’s demographics in particular hint at a widening market for the toys & games industry. The natural birth rate in 2017 was about 240,000 – this refers to the number of births in a year subtracted from the number of deaths – representing a population growth rate of about 0.4%.

Population growth rates peaked in the 1970s at about 3% but aggressive public awareness campaigns by Thai authorities have brought this figure down substantially.

At the same time, annual household income more than doubled from $1,089 in 1999 to $3,276 in 2015. Thai families might not be growing as quickly as before but they definitely have more to spend.

Source: Ceicdata

Higher disposable income also means the sale of toys & games isn’t restricted to children only. Older consumers are forecasted to impact sales too, especially in categories like action figures and accessories.

According to Euromonitor, the value of Thailand’s toys & games industry was estimated to be worth US$376 million in terms of sales volume in 2015. The same report forecasts sales to increase to US$541 million by 2020, or by an average of 9% a year.

That’s a sizeable chunk that brands like Hasbro and Mattel should be eyeing carefully, especially as internet retail is predicted to grab a larger piece of the pie in the coming years, making it critical to double down on mobile/web acquisition channels.

Where do Thai consumers buy toys?

ecommerceIQ initiated a survey to understand online consumer purchase habits for toys & games in Thailand. There were over 300 participants spread across the country.

What was interesting to find was the availability of offline retail wasn’t a bottleneck to transacting online. Only 2.9% of respondents said they ignore online channels because of malls or shopping centers.

The largest inhibiting factor for online purchases is the prevalent lack of trust.

Thai people feel either the pictures online are either heavily photoshopped or they’re usually disappointed when receiving the product after purchasing.

Top reasons why customers don’t shop online for toys in Thailand. Source: ecommerceIQ

But not all is lost. Survey respondents in the 18-24 & 25-34 age category were, on average, 43% likely to indulge in online purchases for toys and games. Those were the two youngest tiers surveyed and it is likely as they grow older they’ll carry these preferences with them.

If online channels optimize the overall buying experience, it’s plausible that the proclivity towards web shopping will increase when it comes time for them to buy toys for their children.

Another encouraging trend that forecasts enhanced ecommerce market share in the future is the amount that users spend online. People with higher basket sizes are more likely to shop online. The largest segment actually spends north of $100/order.

And what toys are people in Thailand purchasing exactly? The survey shows Nerf guns are wildly popular for online purchases along with board games like Monopoly and Transformers action figures.

The overall survey results are consistent with Euromonitor’s analysis of the toys & games industry in Thailand that says the popularity of internet shopping is expected to continue its trajectory of rapid growth, fueled by younger shoppers.

40.1% of this category were secured by web channels in 2015, as compared to 13% in 2010 (although this does include video games, which our survey results excluded).

Euromonitor also makes another prediction: traditional toys and games distributors are expected to expand their internet retailing options over the coming years as more users flock towards this medium.

How can toy brands take advantage?

It’s not enough to list your products on a marketplace and engage in paid campaigns every now and then. Users don’t trust online advertisements; they’re eager to purchase but the one thing holding them back is the nagging uncertainty that the product won’t match expectations.

Often they’ll visit an offline store to see the product up close and personal before purchasing. Little wonder why influencer marketing is becoming so important in a brands’ marketing mix.

Influencer marketing platform MuseFind says 92% of consumers trust an influencer more than an advertisement. And with adblockers flooding browsers, it’s likely that your target consumer simply won’t even view your advertisement, no matter how much money you pour into the campaign.

In Southeast Asia, brands can take a cue from China’s bold forays into live streaming. Quartz predicts this is now a U$5 billion industry with once ordinary citizens catapulted into superstardom simply by broadcasting their lives for the world to see. Such online influencers routinely recommend products they use and their audiences follow suit. Evocative marketing is becoming the new normal.

Other than live streaming, product reviews by YouTube stars is another channel that potential shoppers gravitate towards. An unboxing video can help lower the trust barrier significantly as users know what to expect inside the package.

Some juvenile YouTube stars have racked up millions of subscribers on their page with their videos routinely garnering 10 million+ views.

Children need to feel they’re on the same wavelength as their peers, so if it’s ‘cool’ to buy a new toy then they’ll pester their parents until they get their hands on it.

And what’s cool is what’s trending on the internet.

Blibli.com is best known for being Indonesia’s first established online retailer where shoppers can find quality vacuums and handphones to local Indonesian fashion labels.

The ecommerce veteran has been around since 2009, raised over $13 million in funding and runs in-house operation of over 1,000 employees to ensure that its 5 million monthly customers receive their packages within two-days. How do they manage it?

eIQ caught up with Lisa Widodo, Blibli’s Head of Operations and Product Management, at Last Mile Fulfillment Asia to discuss one of the most common questions asked in logistics, buy or build?  

To answer this question, there are many factors to consider and understanding where the company stands is a good place to start.

Growing in a crowded B2B2C space

A quick glance at the e-marketplaces available in Indonesia show that there is already a number of strong horizontal ecommerce players.

To succeed in a saturated market like Indonesia, companies either need to differentiate or allocate a large budget to marketing to get their site in front of the eyes of consumers.

Blibli focuses on product differentiation and based on the latest data in 2016, has over 12,000,000 sellers, 12,000 brands and more than one million products on its platform to attract a growing population of wealthier young Indonesians.

By 2030, the highest concentration of top income earners will be 30-34 year olds (Euromonitor: Income and Expenditure Indonesia 2016) and Southeast Asians in general are willing to pay more for better everyday products especially in personal care and food (see chart below).

This is good news for Blibli.com as the company’s shoppers are comprised of equally male and female (55% and 45%, respectively), between the ages of 25 – 35, and digitally savvy.

Galeri Indonesia is the newest vertical by Blibli.com that puts local Indonesian entrepreneurs in the spotlight. These small shops sell items like handmade wooden watches, speakers that run without electricity, grow-at-home mushrooms and jewelry made out of rice.

Blibli internal data shows sales from this category has been growing 1197% MoM since its launch last year.

“Locals like to shop locally,” says Lisa.

The company also recently began offering hotel bookings and soon train tickets under Blibli Travel and electronic tokens for Indonesians to pay their utility bills with under Blibli Digital Product.

The company, Lisa assures, is in it for the long run.

So buy or build?

Blibli currently has five warehouses strategically placed near Jakarta’s airport, near Jakarta’s port, in the middle of the city and in Medan. The company’s facilities, which also includes a fleet operating out of five hubs in the Greater Jakarta Area, and two hubs outside Jakarta, serving all orders coming from Java – 70% of Blibli’s total volume.

Out of the five warehouses, only one was outsourced to a local provider because the company knew it would be set up faster and that the packing process was standard meaning irregular shaped items like guitars or products that needed special handling weren’t going to be stored there.

But even so, the warehouse management system used at the outsourced warehouse belongs to Blibli for complete product transparency tracked by four statuses:

  1. Order comes through and payment has been received → package will be delivered within two days, otherwise the merchant will incur a penalty
  2. Ready for shipment
  3. In shipment
  4. Delivered

Only 10% of Blibli’s orders are paid for with cash-on-delivery, which is quite low for Indonesia.

“What sets Blibli apart is our dedication and empathy towards our customers,” says Lisa. “This means we must have complete control over their happiness, their complaints and the ability to track the problem back to the source.”

Because Blibli holds its customers in such high esteem, it needs to ensure the last mile experience is of quality.

 

“Even down to smallest dent in a box, it all matters,” comments Lisa. “The only touch-point we have with the customer is the package at their door so it needs to be perfect.”

The company sends all new merchants a care package that includes free Blibli branded boxes in various sizes and tips on how to pack a product properly.

“Currently we work with 12 different last mile service providers to serve customers outside of Java and we’re always open to working with others as long as they have a solid business plan.

Buy or build? In short, if the company is a class brand that sells at a higher price point thus needs to prioritize a quality customer experience to keep retention healthy, they should spend the resources to build its own operations.

Other factors to take into account would be local knowledge, the urgency for expansion and financial allowance.

“Blibli.com had over 7.5 million transactions last month, it makes sense for us to do as much as we can in-house to give our customers their money’s worth,” comments Lisa.

If the company’s selling point is low priced goods, it should focus on scaling before investing in its own operations. Other factors to take into account are cash reconciliation, difficult delivery routes outside of the metropolises and capabilities of its tech solutions.

And of course, a hurdle to overcome is the key resource needed to make ecommerce operations a success – talent.

Changing the mindset of the people

As Lalamove International Managing Director Blake Larson commented at LMFAsia 2017,

“Technology isn’t magic dust you can simply sprinkle on logistics, it still requires a human element to work.”

Lisa believes the company’s strongest asset is its people and as with most digital companies in Southeast Asia, finding the right employees can be a challenge.

“It’s really about changing the way the general population thinks and getting them to take more ownership,” says Lisa.

She personally vets each employee during the onboarding process to ensure that there is a culture fit. Coming from a mechanical engineering background, Lisa identifies strongly with logical thinking as a necessity for anyone joining her operations “super team” of 400.

The Blibli mission

There are two main objectives for the future of this online company:

  1. Expansion in Indonesia
  2. Putting local talent on a global stage

“We plan to keep monitoring the data to determine how quickly we need to expand our reach outside of Java,” comments Lisa. “SLA and cost also need to match up.”

“We hope to make these small businesses internationally known through mentorship programs like The Big Start Indonesia. The strength of Indonesia is its local talent but it needs to be nurtured,” says Lisa.

By: Cynthia Luo

Observe a supermarket. It’s normal to see shoppers carry out heavy bags of dog food and pet care essentials but the habit of buying pet food online remains a rarity. Probably because there is only a scarce number of brands in Thailand that offer an attractive selection of pet products online. This is interesting seeing as a growing economy such as Thailand’s experienced pet food sales of $736.7 million in 2015 and alone claims 44% of Southeast Asia’s pet care market.

And global spending is only expected to grow, especially in developing regions such as Southeast Asia, thanks to urbanization, popularity of the internet and increase in pet-product information availability. The pet food sector grew by 4% to $70 billion globally in 2015, and more of that spending is happening online as an estimated 38% of total pet food sales occurred online in China during 2015.

As the region follows closely in the footsteps of the superpower, it shows a huge opportunity for the growth of online pet related sales in Southeast Asia.

At the Petfood Forum Asia conference last year, Mariko Takemura, lead analyst for Euromonitor International, shared that Thailand reached $737 million in overall pet care sales and continued its five-year CAGR of 13.7%. There is clearly a demand for pet related goods in the country, so who is creating it?

Thailand’s pet owner demographic

60% of pets, both cats and dogs, in Southeast Asia still eat homemade pet food or leftover scraps because of the low penetration of commercial pet brands. According to Harprem Doowa, founder of PetLoft, one of the first companies in Thailand to offer pet products online, the behavior of giving pets homemade food is a sign of a developing economy but as the spending power of the population and the ‘humanization’ of pets increase, pet owners will look to providing their pets with more vet-recommended products.

“In Singapore, we typically see pet owners who demand quality and unique products and services for their pets. These owners consider their pets to be members of their family and they are really into organic or human-grade food for them,” says Jennifer Lee, the events manager for Pets Asia expo in Singapore.

In Thailand, this trend is also becoming a norm. The increase in pet-ownership and humanization of pets has led owners to turn to premium products to focus on the holistic well being of their pets, rather than feed them leftovers. And they’re able to afford it – Thailand’s middle class is expected to surge as GDP is predicted to grow by 3.2% this year and single-person households are on the rise.

“In developing regions like Southeast Asia, the pet product market is still an emerging market and the pet food business is growing rapidly,” says Neil Wang, global partner and president for Greater China at Frost & Sullivan. “In line with the region’s economic growth, an increasing number of people consider animals as family members and are willing to make purchases for them.”

But Thais won’t spend carelessly. Research from “Winning the zero moment of truth in Southeast Asia” showcases how nowadays, consumers, especially the prices conscious ones in the region, will research and compare prices before purchasing everyday use products. This extends to pet food as well as almost one third of respondents have compared and contrasted different pet food brands on the internet.

On demand delivery startup Lalamove also revealed that one of the most popular products purchased off its platform in Thailand is pet food.

Capturing the opportunity online

Research from L2 states that pet care in the United States, worth $760 million, has the highest ecommerce penetration among the home care sector. Amazon.com and Chewy.com, both originally pure play ecommerce companies, were revealed to hold the most market share of pet food online. Why? Because they saw the potential and started selling online early. Retailers and brands in Southeast Asia can use this insight as a benchmark to capture the region’s million dollar pet potential online.

The bulkiness of pet food packages, large range of products and regularity in consumption make the product an extremely viable candidate for ecommerce. Packaged Facts, a US market research company, conducted a survey that revealed about one-third of dog owners and cat owners like the idea of home delivery for pet food because it’s an “essential product consumed at a steady rate.”

Through an online platform, brands can offer delivery, a wide product selection and even package deals, product bundles, subscriptions or a variation of discount strategies to further incentivize shoppers.

Thai pet owners unfortunately do not really have these options available to them. Aside from pet specific online marketplaces such as Petpro.co.th and dogilike.com, there is still a lack of reputable products online even though the demand exists. Only recently, Lazada Thailand reported 600% growth rate in its pet product category, mostly made up of third-party merchants.

Even well known global premium pet food brands such as Alpo, Royal Canin and Purina can be found through select online marketplaces such as Orami.co.th and Lazada.co.thThe absence of brands, especially in the mid-priced range, with their own site to promote pet information and offer a new selection of products leaves the online space wide open for new entry by someone new.

No pet related brand has launched a brand.com

Brand should look at adopting the direct-to-consumer model for the following reasons:

  • Full control of a branded platform to use in capturing the attention of information-seeking pet owners with educational, SEO-optimized copy with smart content-marketing.
  • Less competition with similar pet brands in a marketplace or the pet aisle of a supermarket.
  • Direct access to consumer data used to increase customer lifetime value in the long run and re-target them later in the marketing funnel.
  • Save costs by jumping over the middle man -a brand would have to pay 5% commission on a marketplace it sells on.

The American website of Purina by Nestle dedicates an entire landing page to outlining the nutritional value of all its products and its benefits for animals – all to attract attention and persuade the browser to buy.

“A pet food brand with enough SKUs would have a good chance at infiltrating the middle class pet owner market,” – Harprem Doowa, co-founder of PetLoft.

Case study: Leveraging Pedigree’s offline popularity

Although competition is set to intensify between brands looking to capture the mid-range pet product market, Mars Thailand remains a market leader in the country. One of the best-performing brands under its portfolio is Pedigree.

The household name for pet food has maintained its popularity through a series of both online and offline strategies. The brand held a successful “Valentine’s Day” campaign through its community initiative, Pedigree Foundation, where it took to social media to spread awareness about donating to help stray dogs using the hashtag #ValentinesDay and solidified itself as a dog brand that cares.

The PedigreeUS Twitter account alone has over 18,000 followers and its various other country specific accounts have over 1,000. An online following such as Pedigrees could easily be utilized to send traffic to a shoppable landing page.  

Pedigree’s #ValentinesDay online campaign

Pedigree products at aCommerce Thailand’s warehouse

By only having online visibility on marketplaces, Pedigree does not have access to customer data, no control over grey market distribution and lacks control over content and personalization.

It becomes more difficult to sell online when the brand is up against competitors for the same customers on the marketplace.

Timing is everything.

Thailand’s pet industry is wide open for brands, both old and new, to enter and grab market share. And more and more global companies and VCs are figuring this out. 

Recently, Thai VC firm 500 TukTuks announced its investment in Singapore’s PerroPack, an online petcare ecosystem that includes Perrobox, an ecommerce subscription service for pets and PerroMart, an ecommerce platform for all things pets. It won’t be long before the same business models are implemented in Thailand.

As the Thai market begins to condense with the flood of global players and diversified consumer demand, more sectors become less attractive but the pet industry remains an empty bliss. Going online to find a necessity like pet food and pet care products will eventually become the norm as Southeast Asians grows increasingly familiar with the habit of ecommerce.

“The pet product market in Asia is becoming increasingly mature and diversified, and is likely to grow faster than the world average in the coming years, “ – Neil Wang, global partner and president for Greater China at Frost & Sullivan.

Any pet brands ready to graduate from the doggy paddle?