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In 2015, Thailand’s insurance sector was valued as the 8th largest in Asia, with an annual growth rate of 4.5%. Thai residents spent approximately $334 on insurance every year, accounting for an overall penetration rate of 5.5%.

Life insurance accounts for the largest segment within the insurance industry in Thailand. These are annualized premiums paid out in the event of death or permanent disability; or after reaching a certain age. If you subtract life insurance from the overall industry pie, premiums decline considerably to $100/capita.

Photo credit: Thaire.

And this is where the largest potential for growth lies.

Thailand is already considered to be an upper-middle income country by the World Bank, with a GDP per capita of $6,033. When you combine that with a rosy economic outlook, it’s straightforward to predict that the size of motor and travel insurance will rise, too. Higher disposable incomes will lead to a greater outlay on cars and vacations – and the insurance industry is bound to benefit.

But one of the problems currently plaguing Thailand’s insurance sector is that distribution channels are antiquated and riddled with inefficiencies. To purchase an insurance plan, you normally have to arrange for a broker to meet you, prepare an unwieldy amount of paperwork, and wait for the bureaucratic red tape to churn its wheels.

The entire process is frustrating from a consumer standpoint and expensive for insurance companies too; broker commissions can eat into premiums and the process is only scalable by hiring a greater number of agents.

In 2016, a total of $5.1 billion in non-life insurance premiums were solicited via brokers, agents, and bancassurance channels. Precise figures for online distribution aren’t available, but the channel did grow by 25% as compared to 2015.

One of the startups that’s trying to simplify the insurance acquisition process is Frank. It offers motorcycle, car, and travel insurance direct to consumers in Thailand via its website. Consumers apply for their insurance product of choice, receive an instant quote, and for certain products, can have the policy in a few seconds. It’s fairly hassle-free.

Frank’s co-founder Harprem Doowa admits they’re still a small player in a very “traditional industry” but he affirms their product is largely positioned towards millennials and future Thai generations who are far more comfortable transacting online and will continue to carry these preferences along with them.

“This will take time,” he adds, referring to overall adoption of Frank’s product.

Harprem ecommerceIQ

Harprem Doowa, Co-founder and MD of frank.co.th

Innovating the insurance value chain

Another key challenge for Frank is ensuring that all parties involved in the transaction are equally adept and comfortable with technology. At the end of the day, it’s another distribution channel and isn’t inherently marketing its own product.

Frank’s policies are underwritten by companies like Bangkok Insurance and AXA – large, unwieldy, and geriatric organizations resistant to systemic change and constant reinvention.

“Insurance companies themselves are still not ready with the backend to underwrite policies immediately. Most still require manual approvals,” explains Harprem.

Another problem is that many potential customers opt out of the process because they’re unfamiliar and uncomfortable with scanning and uploading documents. They require the support of an agent or customer support advisor to complete the transaction – driving up costs and somewhat negating Frank’s value proposition in the first place.

The third aspect hampering progress in insurtech are Thai regulations: Harprem explains that while they protect consumers, there’s a real bottleneck towards online conversions because of the multiple in-person verifications required.

Value-add Partnerships

The fledgling insurtech company has experimented with a number of ways to make it more visible and enticing to customers. One of these is partnerships with popular ecommerce players like Lazada, Grab, honestbee, and foodpanda.

ecommerceIQThis may seem like a contrasting list of partners – how does quick food delivery equate to online insurance? – but Harprem is upbeat about the benefits its brought to the table.

“Doing partnerships with many companies increases our exposure 30X and when [consumers] go and search online for insurance, they see Frank. It wouldn’t be the first time and therefore they are more likely to buy from us,” he explains.

That’s a critical takeaway – startups aren’t flush with the kind of cash that large organizations have, they have to stay lean. By leveraging relationships with online companies, even something unsexy like insurtech can be galvanized into a winning brand.

“The more customers see your brand, the more likely they are to buy insurance from you at a later stage,” exhorts Harprem.

Where do the opportunities and threats lie?

Of course, it’s possible that large insurance companies eventually sidestep players like Frank and start selling direct to consumers via web channels but this will involve channel conflict.

Specifically, it will alienate the vast number of brokers who currently provide the bulk of insurance revenues. Another complication is the sheer time insurance companies take to make decisions, hampered by bureaucracy and lengthy internal approvals processes.

Harprem says the team is completely aware of this but isn’t overly worried. Frank’s nimbleness means it can continue innovating and pivoting as and when the need arises.

“It took one of our partners two years to update their home page.”

There are two additional areas which, if done right, could provide considerable value in the coming years. One is ‘microinsurance’, or insurance for low-income households that provides protection for health risks, property damage, or other specific perils.

Harprem says there’s definitely a business case for it in Thailand but adds that it’s not a priority for Frank right now.

The other opportunity is changing fintech from just another distribution channel to overhauling the entire product in itself. That’s where technologies like blockchain have the greatest potential.

In Singapore, this is already becoming a reality. Electrify, which allows users to buy electricity on the blockchain, closed a $30 million ICO yesterday. Insurtech company PolicyPal, which is powered by blockchain technology, allows underbanked consumers to purchase products like agriculture, property, life, and personal insurance.

“This, in my humble opinion is true fintech,” says Harprem.

THE BACKGROUND

Asia Pacific really likes their whisky.

The gold liquid makes up 40% of multinational alcoholic beverage company DIAGEO sales in Asia, compared to only 25% of its global sales. One of the brands that sit under the behemoth is Johnnie Walker, the world’s most widely distributed blended whiskies.

The immensely popular liquor started out life in 19th century Scotland when John “Johnnie” Walker began selling it from his grocery shop. It was his son, Alexander Walker, who took the elixir global with a simple distribution model.

Shippers would take the bottled whisky with them on their journeys around the world, sell them, take a commission and handover remaining profits to the firm. Over 100 years later, the brand sells over 120 million bottles across 200 countries in bars, restaurants, breweries and lounges.

Four bottles of Johnnie Walker are consumed every second” – Pittsburgh Post-Gazette 

So the question arises, if in today’s digital world, people can order clothing, groceries, razors and even pets online, why not alcohol?

Companies like Drizly, Saucey, Paneco, Wishbeer and yes, Johnnie Walker, are attempting to offer their own solutions to ensure that consumers can enjoy a drink at any time of the day, but not many have found lasting success.

The Challenge

After shutting down its luxury e-tail site “Alexander & James” after a short four year run, DIAGEO publicly acknowledged that it was struggling to find success in online direct-to-consumer, referring to it as,

A pot of gold at the end of the rainbow that you need to keep on chasing.”

The company recently lost its place to Kweichow Moutai as reigning liquor market leader in China as the Chinese taste shifted to premium brands, especially for gifts and elaborate events.

DIAGEO Online

Moutai’s market capitalisation reached $71.5 billion on the Shanghai exchange in April, while Diageo’s London capitalization is $71.1 billion. Source: FT and Bloomberg.

In light of the company’s closure of “A & J” earlier this year citing that “consumers don’t look for specialty shops online”, the company is shifting focus to sell its products on platforms like Amazon and Tesco.

A partnership with a mass marketplace is appealing for two reasons; (1) it already has a large audience and (2) enables the sale of DIAGEO products online.

“We can raise awareness, but if they can’t buy the products, it’s void. [The partnership with Amazon] gives us that complete circle – we can entertain and educate viewers with how-to guides, and then make it as easy as possible for them to make the purchase,” said Johanna Dalley, World Class Global Director at Diageo Reserve.

“It’s the perfect storm – we are creating content that inspires people to buy our brands, and we can directly look at conversion and click-through rates.”

But what happens when strict regulations in emerging markets like Thailand prohibit the use of photos or celebrities to promote the brand’s lifestyle?

THE STRATEGY

Big C, one of Thailand’s largest retailers, offers a range of beverages from beer to wine online but the website states it cannot display any photos/logos/names of alcohol due to the country’s Alcoholic Beverage Control Act.

DIAGEO Online

Big C product selection for liquor on its website. Thailand has banned the promotion of alcoholic beverages sales but many companies risk the fine.

On the other hand, Wine Connection and Wishbeer, both operate websites in Thailand that contain photos of wine bottles, craft beers and sales. The companies are risking the 150,000 – 200,000 THB ($6,040) in hopes of a stronger payout.

A fair assumption given a recent study found that approximately 30% of Thai people started to drink alcohol after seeing images of their favourite celebrities posed with drinks.

If DIAGEO is willing to risk the fine, which no reports indicate it has ever been enforced, it has a strong direct-to-consumer opportunity in Southeast Asia – especially Thailand, Singapore and the Philippines – because of the region’s growing online adoption and preference for spirits and beer.

DIAGEO Online

Source: Chartsbin

DIAGEO, in particular Johnnie Walker, has long been eyeing emerging markets. Brazil, Mexico, Thailand, and China are some of the brand’s top seven global markets.

How has the company approached selling in these markets?

In Diageo’s case, the company has created a four-part ecommerce strategy:

  1. Developing a strategy and getting its ‘house in order’ (internal restructuring, hiring, etc.)
  2. On-trade and off-trade strategy
  3. Activating ecommerce channels (strategic partnerships with pure players, delivery companies, etc.)
  4. Direct to consumer through individual brand websites

Anyone looking at DIAGEO’s key moves in the online space cannot say the company hasn’t tried.

In 2016, the company announced a partnership with Deliveroo to offer an ‘alcohol-on demand’ service called thebar.com in certain areas in the UK. It’s a similar and popular strategy like Wine Connection’s partnership with delivery company, honestbee, in Thailand.

DIAGEO Online

honestbee home delivery of Wine Connection products.

Charles Ireland, Diageo GM for Great Britain, Ireland and France, says DIAGEO is spending more money on digital platforms like Google, Facebook, Instagram and even dating app Tinder, than traditional media for the first time. The goal is to use videos and other forms of content to educate and raise awareness.

“There is a shift towards content marketing within Diageo more broadly. In terms of monetisation, we will see more partnerships with Amazon from a commercial perspective. Other retailers are content hungry too, and are looking for content for their websites. [We will] provide them with content if it helps people click through to purchase,” said Dalley.

THE FUTURE

In Asia, the demand for alcohol is not the problem when beer sales consistently outpace GDP growth like in Vietnam since 2009. The biggest challenge is lack of awareness and oscillating regulations.

“In terms of direct to consumer [selling], I think there are consumer goods companies that are doing it quite successfully, but we haven’t quite hit a successful formula yet and we’re continually working on it,” says Charles.

Keep walking Johnnie, you’ll get there.

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

Southeast Asia’s first ecommerce program kicked off last Thursday with three lecturers from honestbee, L’Oreal and aCommerce teaching a full class of C-suites and Senior Managers from banking, travel, retail and FMCG industries, etc.

Every week after class has wrapped up, we will be sharing a few highlights from each session.

Welcome, Class of 2017.

1. Thailand’s Emerging Digital Consumer, the Super App, and Marketplace Verticals

PAUL SRIVORAKUL, ACOMMERCE GROUP CEO, CO-FOUNDER ARDENT CAPITAL   
LEAP Ecommerce Course Southeast Asia

Paul Srivorakul, aCommerce Group CEO, co-founder Ardent Capital

Messaging platforms are the emerging leaders in the ecommerce space to watch for because they’re no longer just social platforms but have the capacity to move up and down the value chain to become a ‘super app’.

An example is LINE: LINE@ (advertiser), LINE Shop (ecommerce) and LINE Man (on-demand).

LEAP Ecommerce Course Southeast Asia

Convergence of media, advertising, ecommerce and logistics. These brands move up and down the value chain

With millions of dollars behind titans such as Go-Jek, Lazada and Tokopedia all fighting for the region’s 200+ million internet users, what’s left for SMEs? According to Paul, the future is in vertical marketplaces.

“It’s more important to build a community around your company’s products and services than continual subsidizing because what matters is the consumer experience.”

2. What is a Product?

BOUNTHAY KHAMMANYVONG, HONESTBEE THAILAND COUNTRY MANAGER

product can be the feel of your packaging, it is the brand image, the UX on your website, it is essentially everything that reaches your end consumer.

LEAP Ecommerce Course Southeast Asia

Bounthay Khammanyvong, honestbee Thailand Country Manager

“It is imperative to define and understand your product to understand who is your real competition and whether you can avoid a war.”

And for ecommerce, make sure to offer consumers something they won’t be able to find offline. Otherwise, what’s the point?

3. The 10 Golden Rules to Succeed in Ecommerce as a Brand

PRAPONSAK (CAFAE) KUMPOLPUN, L’OREAL ECOMMERCE MANAGER

As a brand builds its digital strategy from the initial strategy, business plan to constructing the right internal ecommerce team to execute and measure the right KPIs, there are a few questions the Ecommerce Manager should always ask:

“What do you need to do to succeed?” and “why should you do this?” at each stage of this 10 step ecommerce strategy.

LEAP Ecommerce Course Southeast Asia

Praponsak (Cafae) Kumpolpun, L’Oreal Ecommerce Manager

What L’Oreal focuses on when establishing its ecommerce presence on multiple online channels is A+ Content – engaging content that inspires purchasing.

The next LEAP class is on Thursday September 14th, 2017. Stay tuned for this week’s learnings.

Sign up for the eIQ Brief to receive weekly ecommerce insights.

honestbee Thailand officially introduced its on-demand groceries services to the public on March 16th earlier this year in Bangkok with a buzzy press conference.

This isn’t the company’s first step into Southeast Asia, the Singaporean based company is already present in eight markets since its initial launch in 2015.

eIQ sat down with Joel Sng, CEO and co-founder of honestbee, to talk about the company’s on-demand model, product market fit and scalability in a developing market.  

Groceries online in Southeast Asia

Delivering apples and milk to a customer’s front door isn’t a new concept. Instacart, US born groceries service, took off in 2012, serves 25 markets in the US, and raised $400 million in March. The company’s valuation was $2 billion in 2015.

Jakarta based on-demand service HappyFresh that raised a $12 million Series A and an undisclosed Series B launched in both Indonesia and Thailand two years before honestbee entered the same markets.

Why has there been so much money swirling around groceries?

According to Nielsen, 30% of Millennials (ages 21-34) and 28% of Generation Z (ages 15-20) respondents say they’re ordering groceries online for home delivery, compared with 22% of Generation X (ages 35-49), 17% of Baby Boomers (ages 50-64) and 9% of Silent Generation (ages 65+) respondents.

And groceries are only the beginning. honestbee doesn’t only offer apples and oranges, they want to be the ‘everything, everyday’ app.

Much like the mentioned businesses, honestbee shares similar value propositions:

  • Exclusive partnerships with supermarkets and other retailer partners
  • A single check-out purchase through a mobile app
  • An operations network composed of part-time workers and motorbikes taxis
  • A vast inventory of groceries and fresh produce
  • Scheduled “slotted” deliveries
  • Asset light business: no warehouses, only hubs (grocery stores) and no delivery trucks

There are a few differences that make honestbee stand out: the company makes money from delivery fees and revenue share and can actually save up to 30% on labor costs because shoppers are hired as independent contractors, not traditional full-time, salaried employees.

Product market fit for a demanding income bracket  

Unlike the others, honestbee targets the top 10% money makers in each market by being more selective with partners to offer a service consumers are willing (and able to afford) to pay a premium before the rest of the market adopts the behavior.

Current exclusive partners include Villa Market, Fresh Deli, organic produce provider Fruits for Health, and all natural household cleaning line Pipper Standard.

“We figure out what each market needs and work with the right partners to bring value and convenience to our customers,” says Joel.

What also differentiates honestbee from its competitors is the varied service it offers across markets. How does the company decide what to launch? Through regular customer focus groups like the one held in Singapore of March this year.

A few questions the focus groups aim to answer before officially launching a new service:

  • Do the customers like our partners?
  • How do they suggest we improve the shopping methodology?
  • Is the infrastructure already there or do we need to build it?
  • Is the market growing fast enough in terms of age and adoption of behavior?

These feedback loops help honestbee work out what each market needs and led the company to discover certain market intricacies:

  • Offering garbage removal in Taiwan would be an instant success as the country has high stringent waste policies   
  • Launching an on-demand laundry service in Hong Kong works as there is large expat population in the country
  • Singaporeans would not pay for marked up meal deliveries as offered by rivals foodpanda, UberEats
  • Online grocers in Japan accounted for only 2%, or $5.5 billion USD, of the retail grocery market in 2015

Although each market is different, the core of the business still remains its groceries delivery service and is always launched first.

A teeny problem: “Managed crowdsourcing”

There are a few challenges with on-demand models:

  • Shopper retention and shortage because of fluctuating wages in a developing market
  • Expectancy for shorter and shorter delivery times by customers: same day → in two hours → next hour
  • Out of stock items and inaccurate deliveries – balanced with a “Bee” training program

Although it is risky to be spreading services so thin in concession, Joel is confident the company has the resources and isn’t concerned about needing more external investment aside from the $15 million it raised last year.

“We are comfortable with our economics right now,” comments Joel.

honestbee aims to become a one-stop solution for customers and make it possible to have anything available at the touch of a button by marrying the online and offline world.  

“Groceries is such a generic term,” comments Joel. “We never envisioned just being in the groceries business – we want to solve problems for our customers.”  

Here’s what you should know today:

1. P2P lending startup Julo raises seed funding

Indonesia’s peer-to-peer (P2P) lending startup Julo raises undisclosed seed funding led by Skystar Capital, East Ventures, and Convergence Ventures.

The funding will be used for product development, machine learning investments, team development, and distribution. The platform provides unsecured personal loans targeting the millennials.

The startup is founded by Silicon Valleys alumni Hans Sebastian, and Victor Darmadi.

Read the full story here

2. Singapore’s online grocery market to triple in 2020

International grocery research organization IGD forecasts that Singapore’s online grocery market will triple to $350 million by 2020 from $91 million last year.

At the end of 2016, online grocery accounted for 1.2% of Singaporean grocery market.

In three years, online will increase to take 4% of the grocery market share in Singapore. 80% of shoppers cite convenience as their number one reasons for shopping online.

Read the full story here. 

3. honestbee launched in Tokyo, aimed to be a global marketplace

Speaking at the honestbee’s launch in Tokyo, CEO Joel Sng revealed the firm’s vision to be a global marketplace.

“We are going to open a global store that allows any customer across all the regions we operate in to buy from the best producers in Hokkaido and the freshest seafood in Japan, and get that delivered to their homes, and vice versa.”

After the global store is launched, shoppers will gain cross-border access to more than 120,000 products from stores within honestbee’s network across its eight markets. The service is planned to be available next year.

Read the full story here.

In the US, consumers have more channel choices when it comes to purchasing toiletries, soft drinks, processed food and other fast moving consumer goods than ever before.

According to Nielsen, 50 retailers accounted for nearly 80% of all FMCG sales in 2016. Specialized companies drove more than half of all FMCG growth over the last few years by focusing on particular verticals, while the bigger companies on average posted flat growth.

Beauty and pet care specific companies are experiencing higher sales than others, evident by the popularity of beauty subscription boxes – Althea and Birchbox – and pet food/accessories platforms such as Chewy.com in the US.

The wide FMCG umbrella is increasingly filling with online players that are offering what Nielsen coins the “total customer” something more than simply walking into a department store.

A total customer is someone who wants to the ultimate shopping experience from top quality, to brand value and a personalized product offering.

In the US, beauty care and pet care are the two categories with the highest ecommerce dollar share of total sales.

As the grocery-retail landscape continues to incorporate digital, there are six core (and relatively broad) factors that make determine whether customers will likely stay your customers.

  1. Trust
  2. Value
  3. Experience
  4. Assortment
  5. Convenience
  6. Personalization

It’s pretty obvious to most retailers that the total customer wants products delivered on time without damages, special discounts to save money, and an easy to navigate online interface.

But the latter three factors: assortment, convenience and personalization are particularly important to the more digitally engaged shopper as they tend to have higher expectations.

So what kind of things will appeal to this group?

Well, when it comes to experience, assortment and personalization, these online players are currently doing it right.

According to Nielsen, “click and collect” services like Amazon Fresh Pick Up will increasingly bring perimeter-store shoppers online. Currently available to only employees, Amazon-run stores will have groceries brought out to your car if you order online as a Prime Member.

In China, both Alibaba and JD.com lead online grocery sales. Why? Because delivery men on electric bicycles pick up orders from supermarkets and small corner shops to provide same day delivery.

Grocery delivery service Instacart from the US focused on personalization by partnering with PlateJoy last year to deliver customized meals to customers who shared their health and taste preferences.

Entering groceries in Southeast Asia

Although not as mature as the west, the rising popularity of on-demand platforms such as honestbee and HappyFresh, and food delivery specific services such as foodpanda, Line Man and UberEats creates a highly competitive space.

Each player is attempting to entice Southeast Asians with aggressive promotions and value added services. In Thailand, HappyFresh often has “buy-one-get-one” periods, 30% flash sales and more recently, begun targeting pet owners, stated by Nielsen as a growing vertical for ecommerce.

Source: HappyFresh Thailand Facebook

Competitor honestbee is instead working on creating a “convenience ecosystem” for its shoppers by adding extra verticals such as a laundry service and food delivery.

It’s very likely each market in Southeast Asia will have its own dominant grocery service as the region is highly fragmented and therefore highly differentiated preferences but one thing they all have in common is their obsession with convenience and personalization.