Southeast Asia in 2010 started to experience an ecommerce boom with the likes of Ensogo, Rocket Internet’s Lazada and Zalora, Groupon, etc. It seemed to be at the height of its peak with money pouring in, mergers and acquisitions happening every day, and Amazon finally moving in to capture the region’s potential but amid these buzzworthy headlines, down rounds plagued startups such as Lazada, were sold for scraps like Zalora Thailand, or shut down completely, such as Ensogo.

What happened? Smaller startups began venturing into other fields providing human resources (Getlinks), car wash services (Wash Mobile), recruitment (JB Hired), agriculture (EverGrow), hardware (DriveBot), and more. It seemed that startups were shifting focus to offer niche services to carve out their own demographic in a saturating market but could they sustain themselves?

A Sustainable Model: Fintech

Across the region and even in once-upon-a-time unicorns such as Flipkart and Snapdeal, news reported large reductions in hiring, peaking salaries, and a slowdown in capital flow shadowed the once profitable businesses VCs banked hard on. The customer behavior in Southeast Asia, more specifically trust, is simply not mature enough.

It also cannot be denied that a capital and inventory intensive model requires deep pockets. After running a successful ecommerce company in Thailand for three years, I realized it was necessary to go back to the basics, to start a business model that encompassed the three components of sustainability:

  1.       High margins
  2.       High customer lifetime value (LTV)
  3.       Low customer acquisition cost

A business with these characteristics usually has a strong foundation and presents a good investment opportunity because it shows promise for profitability down the line. While ecommerce does have low customer acquisition due to the nature of retail and lower commitment products, such as retail and consumer goods that are being sold, it severely lacks in margins and customer LTV (lifetime value).

Margins are often eroded away by high operation costs, packaging, shipping, and inventory while LTV is nullified by heavy competition as most ecommerce companies do not have exclusivity on products and pricing. After all, it isn’t in the best interest of product owners and manufacturers to only distribute their products through one single channel.

Fintech on the other hand, a recently booming industry, does not suffer from these disadvantages. Like most tech companies, there is no inventory to hold, the margins are much larger and once you have acquired a customer, you have an 80% renewal rate for at least the next four years (Bangkok Insurance’s internal data). By building better fintech, it would change the behavior of consumers in Southeast Asia and eventually fuel the growth of ecommerce in the region.  


Lack of Innovation: More Room to Grow?

Fintech is ripe for entrepreneurs because existing legacy players such as Viriyah and MSIG in the market lack innovation. Companies like Bangkok Insurance, HSBC, and other traditional financial institutions are only beginning to realize the magnitude of the tech wave that has hit the world.

As the saying goes, it is hard to steer big ships, and ships seldom get bigger than the companies that make up our financial industries. These companies earn a vast majority of their profits from traditional channels, leaving the unexplored to opportunistic entrepreneurs like myself with and many others who have managed to convince investors for support.

A recent report from Accenture found that global investment in fintech has skyrocketed from $930 million back in 2008 to over $12 billion by the beginning of 2015. Europe experienced the highest growth rate with an increase of 215% to $1.48 billion in 2014. Globally, fintech startups have raised investments totaling $19 billion according to a insight report published by Citibank. This has begun to eclipse other startup sectors as it continues to grow.

Challenges of Fintech

The next big thing does not come without its own challenges. Fintech startups need to realize very early on that there are many rigid regulations which were not created with innovation in mind. For example, in Thailand, selling insurance online requires a business to report to at least three different governing bodies all of which have their own set of rules to abide to. This increases admin work for small companies and also requires legal knowledge that most new companies lack.

Companies are also not allowed to call a customer to confirm purchase as that would be considered “telemarketing insurance sales” and requires a different license. One of the biggest challenges for fintech companies is encouraging users to trust young companies with their financial information, savings, and future to adopt its products and services.

It takes time and a lot of marketing dollars to explain to customers who you are and why they should trust you with their money. These challenges do get easier as more startups enter the space and educate their audience through smart marketing initiatives.

Rabbit, a company based in Thailand, is the first integrated online/offline payment platform in Thailand accepted in multiple retail stores, restaurants and used for public transportation. Its partnership with LINE earlier this year means over 5 million users are slowly allowing their financial information to be connected to some sort of a tech platform.

“This joint partnership [Rabbit LINE Pay] will strongly support government policy in driving Thai people into a cashless society,” says Nelson Leung, chief executive officer of BSS Holdings, the operator of Rabbit card.

Influence from neighboring countries such as Singapore and Malaysia, a lot of which have already set up country specific ‘sandboxes’ to trial for fintech regulations, are also moving towards a cashless society to drive the realization that there is a need for innovation in the financial sector.

Ecommerce is a big marketbut until the shopping habits of Southeast Asians are shifted to online spending habits, it can never reach its full potential. The emergence of fintech and its supporters mean that by building the fundamentals, companies in the entire ecosystem can benefit from its success. 15 years ago, people would call a travel agent and ask them to book a ticket. And now? When was the last time someone called a travel agent to book a flight or hotel room? Behaviors change, but it takes innovation and time.


1. Sephora wields AI for new wave shopping experiences, innovating in personalization

The technology will be an organic ancillary to Sephora’s online buying process and will encourage transactions by allowing the consumer to visualize product benefits post-transaction. The platform is the product of a partnership with facial analysis and visualization technology firm ModiFace.

Read the rest of the story here


2. Indonesia’s logistic sector lags behind other ASEAN countries

Indonesia needs to work on its logistic sector because its performance lags behind those of other ASEAN countries such as Singapore, Thailand and Malaysia, Finance Minister Sri Mulyani said.

Read the rest of the story here.


3. Yaok offers online service for luxury boutiques

Chinese company Yaok has built an online reservation service for offline brand boutiques to tackle the online/offline conflict. Through Yaok, a brand can have its own official reservation platform, giving it absolute control in managing its image, product inventory, order status and customer database. It also allows instant communication between brand and customer.

Read the rest of the story here


4. Line is not getting any new users

Line now has 220 million monthly active users, which is exactly the same as in the previous quarter. The figure is barely up from the 212 million it had exactly a year ago.

Read the rest of the story here

Having a busy morning? Check out these headlines before your day gets more hectic.


1. LINE is building a slack rival

Another company that’s aiming to change the way colleagues communicate. To speed up the development, Line has tapped a team called Works Mobile that, just like Line Corp itself, is a Japan-based offshoot of the Korean web giant Naver. Read the rest of the story here.


2.Local ecommerce not fazed by Alibaba expansion plan

Bukalapak co-founder and chief financial officer Muhammad Fajrin Rasyid said that unlike social media, which adopted a general model for their users worldwide, e-commerce business models needed a so-called “local touch”. This was because customers’ preferences for goods, methods of payment and logistic systems were different in each country. Read the rest of the story here.


3. Mobile is like having a makeup artist in your pocket: Estée Lauder exec

For consumers that already have a profile on a brand’s ecommerce site, the beauty label can send a text suggesting a product to buy and the recipient can buy simply by texting a response. The consumer’s identity is confirmed via their email address, and their order is placed. Read the rest of the story here


1. Chat app Line backs VC funds to unlock global growth opportunities

 In an announcement, the company said these investments are designed to pave the way for it to move beyond its focus on Asia and grow its current 218 million monthly active user base. Read the rest of the story here.


2. Why Indonesia’s mobile market is attracting international companies and talent

E Market Research estimates that revenue from the mobile entertainment market will grow to a staggering US$845 million in 2016. The mobile boom has also fuelled Indonesia’s ecommerce growth, making it rise from US$12 billion in 2014 to US$18 billion last year. Read the rest of the story here.


3. Thailand, China to cooperate in five new areas to drive growth

The new areas are basic infrastructure with technology, new industries, information technology and communications, science and technology, and alternative energy. Read the rest of the story here.


4. How Sephora’s new Android shopping app expands its education-driven monetization

Sephora’s latest mobile offering is an Android application that enables users to shop its inventory, scan products in-store to access how-to tutorials and watch videos, underscoring the beauty giant’s efforts to drive commerce with education-based content. Read the rest of the story here.

personal touch in Ecommerce Thailand

Source: Dario Pignatelli — Bloomberg/Getty Images

A global survey by PriceWaterhouseCoopers revealed that more than 51% of Thai online shoppers made their purchase via social media. In second place is India with 32%, followed by Malaysia and China at 31% and 27% respectively. This trend is driven by the key consumer trend, which is based on trust.

The importance of personal touch in Thailand ecommerce 

The “personal touch” that shopping via social media offers has been highlighted as a reason behind this environment of trust, which the larger ecommerce companies selling products via websites are unable to muster. LINE or Instagram accounts allow people to communicate directly with sellers, unlike the impersonal experience with web administrators of an ecommerce website, says Pavida Pananond, associate professor of international business at Bangkok’s Thammasat University.

Thailand’s B2C Stats

  • Products $14- $42  per order, accounted for  approximately $13.4 million of Thailand’s $59.7 billion of ecommerce sales in 2015
  • B2C sales in 2014 came to $11.6 million, out of $57.4 billion in total ecommerce sales

However, social commerce has also had its share of bad eggs. The mainstream media and online chats are occasionally peppered with reports of unscrupulous sellers trying to rip off unsuspecting buyers in this predominantly cash-based market, where cash still accounts for 90% of payments nationwide.

However, such setbacks barely dented the direction the online market is taking. The subsequent spread of ecommerce is reflected in the online trade countrywide, with once-dominant Bangkok now accounting for just 30% of the market, with the majority of ecommerce transactions now taking place in the provinces.

“In the provinces, it is not about the online experience but an easier way to get stuff you want,” says Santit Jirawongkraisorn, co-founder of Lalamove, a Bangkok-based logistics company.

A version of this appeared in Nikkei Asian Review on June 26. Read the full article here.

India’s Meesho wants to make social selling through WhatsApp less frustrating, reports Tech Crunch.

Messaging services like Line, WeChat and even Facebook Messenger have become platforms that let business users get dedicated usernames and accounts, manage group chats, set up stores and use bots for communication, but WhatsApp has remained very basic as a social commerce platform.

WhatsApp only added a web-based interface last year. Prior to that development, businesses had to key in updates on mobile phones. This method doesn’t scale when dealing with over hundreds of customers.

WhatsApp has over 100 million users in India. As the country’s most popular app, WhatsApp also acts as a distribution channel for selling online or for acquiring customers, like how Line is used in Thailand.

Meesho, a Y Combinator startup recognizes the pain points in WhatsApp for social selling, and has launched an application to make selling easier for merchants in India. The company is called ‘Shopify for mobile’, in the most basic level. It adds commerce features to WhatsApp to allow businesses to engage with customers and sell products more effectively.

“Small businesses in India use WhatsApp groups a lot, posting details of their products daily, and then using cash or bank transfer to collect payment,” says Vidit Aatrey, Meesho Founder.

The whole model has many challenges, especially for the buyer who cannot search, and the seller who cannot categorize products. There are hundreds of photos in the chat group each day, and customers get spammed a lot. Photos also get downloaded to their device, so it takes time to clean out their phones each day.

WhatsApp owner, Facebook is testing social commerce solutions of its own, and Meesho has identified a genuine problem here.

How does Meesho work?

On Meesho, customers can browse through a carousel of products, ask questions directly to the buyer, and make an online payment through a clickable URL. Meesho will also alert merchants when potential customers are viewing their store on the platform.

“Facebook is generally used by small businesses for customer acquisition, but they do not keep their customers there because they can’t push messages to all users,” Aatrey explains. This is important given that small businesses in India that Meesho targets don’t tend to invest money in Facebook ads, boosting their posts or any money related marketing activity at all.

Meesho claims over 1,000 businesses on its platform right now, but is not monetizing its service at this point. Aatrey says there are no current plans to make money, but when the time is right, Meesho will take a commission from sales it helps facilitates.

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