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When successful, established businesses tell their story, it usually sounds all very straightforward. The founders get an idea, work hard to execute it, and miraculously, it all works smoothly from the very beginning to result in millions of dollars earned.

The reality of start-ups in today’s economy is different – the initial idea is only the starting point that almost always evolves at any point of time. The founders of TheLorry, Malaysia’s on-demand logistics start-up, experienced this firsthand and have been on the tips of their toes since deciding they would capture the market’s overlooked opportunities.

TheLorry is a technology-enabled platform that matches lorry owners and drivers with private and corporate customers who need help moving house, office and/or general cargo.

Founded late 2014 by ex-colleagues Nadhir Ashafiq and Chee Hau Goh, TheLorry was initially intended to be the “Expedia for logistics”, but then became the “Uber for lorries” to focus on the business-to-consumer (B2C) market and then later switched focus to the business-to-business (B2B) market.

Ex-colleagues Chee Hau Goh (on the left) and Nadhir Ashafiq (on the right) have reinvented TheLorry three times within two years, showing how startups can adapt to unexpected factors.

It may sound like there was a lack of vision, but this is the reality of businesses in dynamic markets, especially developing ones. The growth of any company involves adapting to unexpected factors such as new competitors, new technologies or customer demands.

ecommerceIQ sits down with TheLorry co-founder and executive director Nadhir Ashafiq to find out how his company carved out a niche in Malaysia’s competitive logistics landscape and why they decided to pivot.

The Business Model Evolution of TheLorry

2014 – early 2015: Expedia for Logistics

At first, TheLorry built a website that allowed customers to access instant lorry rental price quotes online after sharing some common variables: the type and size of the lorry needed, the start and end points of the journey, etc.

The whole business was a two-man team at that time. While Chee Hau was pumping up marketing and sales, Nadhir was running around Kuala Lumpur and Selangor meeting lorry drivers and giving them Excel sheets to fill in their prices, which would afterwards be uploaded on TheLorry website.

TheLorry initially wanted to be “Expedia for Logistics” where users could choose lorry rental on the startup’s platform from selected service providers based on ratings and prices

Right away, there were several downsides to this model, the most pressing being the scalability of the model. It was a time consuming and tedious process to acquire the price quotes from service providers that sometimes involved over 900 price points.

The other reason was that TheLorry could not prevent customers from going directly to the service provider instead of booking through the website. There were several cases when TheLorry got to know that people were searching for their providers online either by customers’ own admissions or comments from the providers.

“Therefore, around the mid-2015 we moved to an Uber-like model where we would be setting the prices ourselves,” explains Nadhir.

Early-2015: Uber for Lorries

The switch meant TheLorry would need to match providers with jobs. At first, it was done manually until the company built an app in-house and the minimum viable product (MVP) within two months. The drivers could accept the job on the app, and thus the process became automated.

TheLorry built an app for drivers in-house within two months. It automated the process of matching lorry drivers with the jobs available.

As TheLorry had attracted funding at the beginning of 2015 from pre-accelerator program WatchTower and Friends and Singapore’s venture capital KK Fund, the company started scaling up by hiring people for their team. Their obsession became to grow bookings through their website and increase their fleet size.

The need for a second major pivot came when the company realised that lorry rental aimed at individuals was mostly a one-off event as people did not often move homes or offices. And apart from customer referrals, the company would find a difficult time sourcing new clients.

Mid-2015 – present: Lorries for B2B  

This is when TheLorry decided to push for B2B sales targeting commercial cargo market – manufacturers, distributors and freight forwarders with urgent trucking needs. Now business customers make around 60% of the company’s sales when it was only expected to make up around 30% of the entire business.

But every business model, no matter how successful, has its own set of challenges.

“There are a few drawbacks for B2B. First, the onboarding process of each client is longer and sales managers have to be hired to pitch our services and build a long-lasting relationship. Then, we also have to give corporate clients a credit meaning at least 30 or 60 days to pay for the services. But chances of repeat business are high and generated revenue is healthy,” says Nadhir.

Servicing Different Customers: B2C versus B2B

Targeting B2C and B2B segments obviously require different approaches. TheLorry adopted online marketing strategy to acquire more individual customers and invested in Google adwords, Facebook ads and content marketing to drive as much traffic to website as possible.

This tactic, however, did not really work for targeting corporations where it is more effective when sales managers knock on client office doors for a face-to-face meeting – especially in the Southeast Asia business world.

“Online marketing gave us visibility, but to seal the deal, we needed a salesperson on the ground and account managers to meet customers to clearly explain our solutions. B2B sales is all about creating and maintaining relationships,” says Nadhir.

Once onboarded, corporate clients can use TheLorry app to hire drivers directly or in the case of any special needs they can turn to an account manager, assigned to each business. Through the TheLorry platform, clients can view all the past and present bookings and invoices as well as track drivers who are on the job.

As TheLorry is a technology-enabled platform, around two thirds of its business is automated. Compared to other start-ups, Nadhir says the company wants to be fully transparent with its clients and does not promise full automation because of the difficulty it entails.

“There needs to be a bit more scrutiny and a bit more manual intervention in order to get the business to run properly,” explains the entrepreneur.

As quality of service is important to any type of customer, TheLorry interviews all drivers and puts them through 2-3 test drives where their skills and professional manners are assessed. If clients give them 1-star rating after these test jobs, they don’t get the opportunity to join TheLorry driver family.

TheLorry team interviews all their drivers face-to-face and gives them test jobs before accepting them to TheLorry driver family to ensure quality of the service.

What’s in The Cards for TheLorry?

TheLorry still has plenty of room to grow. The B2B lorry rental market in Malaysia is estimated at $3.9 billion. There are no solid figures for the B2C market, but the company estimates that this segment is worth around $22.5 to 45 million based on property sales data.

TheLorry wants to become profitable in 2017 and expand to Thailand in addition to its existing services in Malaysia and Singapore.

Jumping on new and unexplored opportunities to raise revenues is one way to grow. Yet, one piece of advice Nadhir hopes other entrepreneurs remain mindful of is that potential top line revenue always carries costs.

Lured by potential revenue growth last year TheLorry took a business opportunity, which Nadhir did not want to disclose, in a field they had no experience and no clear plan to make unit economics profitable.

“In the end, we ended up in a situation where we were selling our service for 1 ringgit and our cost was 2 ringgits. And there was no way for us to increase the price to 3 ringgits,” said Nadhir, adding they decided to quit the business opportunity later that year.

On the bright side, there also have been surprising successes. In 2016, TheLorry introduced a new product – 4 wheel drive car rental, which turned out to be a hit for small and medium mom-and-pop shops who use them on a more regular basis.

As for 2017, the company’s end goal is to grow revenue by a certain multiple, not disclosed, to become profitable. In the second half of the year, TheLorry hopes to expand to Thailand in addition to its existing services in Malaysia and Singapore.

After raising $1.5 million in Series A funding early last year, TheLorry is still in touch with many investors but has no plans for fundraising as yet.

You can read more about TheLorry in SPARK40 here.

Nadhir Ashafiq’s Tips for Aspiring Entrepreneurs

  1. Validate your business idea – test the product, see whether you will have a market before spending money on it. Prior to TheLorry I spent RM 200,000 ($USD 45,000) on a thing which did not work. Don’t spend so much money for nothing!
  2. Read The Lean Startup by Eric Ries, create minimum viable product and get as many people to review your product and launch as fast as possible at the lowest cost possible.
  3. Learn about online marketing, things such as how to drive traffic, conversion rates, upsell and do email marketing, if you will be working in ecommerce space. Good resources for this are kissmetrics.com, backlinko.com, quicksprout.com, neilpatel.com.  

 

By Aija Krutaine based on an interview with Nadhir Ashafiq

Jack Ma, founder and executive chairman of Alibaba Group, participated in the World Economic Forum Annual Meeting held on January 17-20 at Davos, Switzerland where he shared his insights on the future of online trade and globalization.

Key Topics Discussed with Moderator Andrew Ross Sorkin:

  • Theory on where the US economy might have gone wrong
  • Difference in Amazon and Alibaba’s business model
  • Measures being taken against counterfeit products
  • Sesame Credit System
  • Potential US – China trade war

Right off the bat, Sorkin asked Ma about his meeting with Donald Trump earlier this month. Ma said it was productive and much better than he thought.

“We spoke about how we can help small American businesses sell their products in China and Asia through our network, which can create a lot of jobs for them,” said Ma in regards to his commitment to create ten million American jobs over the next five years.

Note: Minor edits have been made to the transcription for better clarity. 

Jack Ma’s Views on Globalization

Jack Ma: First, I think thirty years ago when I was just a graduate from university, I heard America had a wonderful strategy. They outsource manufacturing jobs to Mexico and China and service jobs to India. There is a book called The World Is Flat by Thomas Friedman and I think it’s a perfect strategy. You know the Americans said –  we just want to control the IP, the technology, the brand and leave the lower end jobs to the rest of the world. Great strategy!

Second, the American international companies made millions and millions of dollars from globalization and then the top one hundred companies in America.

I remember when I graduated from university, I tried to buy the Motorola beeper that cost me 250 USD. My pay at that time was 10 USD a month as a teacher and the cost of making that beeper was only 8 USD per chip. So for the past thirty years, IBM, Cisco and Microsoft made tons of money and the total profit they made is much more than the four largest banks in China put together.

Their market cap grew 100X in the past thirty years but where did the money go? This is what I’m curious about because as a businessman,

I have always cared about the balance sheet – where the money is coming from and where the money is going.

Over the past thirty years, the Americans had 13 wars and spent 40.2 trillion USD. What if they spent a part of that money on building up the infrastructure, helping the white-collar and the blue-collar workers? No matter how strategically good it is, you’re supposed to spend money on your own people. Not everybody can pass Harvard so we should spend money on those people who are not good at schooling.

When I was young, all I heard about America was Ford, Boeing and those big manufacturing companies. The last 10-20 years, all I heard about is Silicon Valley and Wall Street. And what happened? The 2008 financial crisis wiped out 19.2 trillion USD in the US alone and destroyed 34 million jobs globally. So what if the money spent on Wall Street and the Middle East was spent in the Mid-West of the US, developing the industry there? That could have changed a lot of things. So it’s not that the other countries stole jobs from you guys, it was your strategy and you did not distribute the money and things in a proper way.

Moderator: Now we’re having backlash as a rebuke of globalization that is happening in the United States. President Xi was here yesterday and quoting Abraham Lincoln. What did you make of that?

Jack Ma: I would say that globalization is great stuff. It’s the US and the developed countries that taught us how to do it. I remember in 2002 before China joined the WTO, everybody in China was worried including me! What if all the international products came to China and destroyed our industry resulting in the loss of jobs?

I believe globalization is good but it needs to be improved. I believe it should be inclusive. Why? Because in the past thirty years, it was controlled by sixty thousand big companies and a hundred years ago, it was controlled by several kings and emperors. What if in the next thirty years we can support millions of small businesses to get into cross-border?

Moderator: Do you think the words of President Xi will happen in reality? Which is to say that China has largely acted on its own behalf for many many years, and now is effectively saying that the US needs to continue acting on everybody else’s behalf?

Jack Ma: Yes, I think the world needs new leadership but in my understanding, leadership should be about working together. It is not necessary to have one leader specifically teach us what to do but it is more about forming partnerships. As a businessman, I feel very proud about President Xi’s statement calling for joint efforts globally to share prosperity. As a Chinese, I am happy about his commitment to the world’s second largest economy.

This is the first time I have heard a Chinese leader make a number commitment stating that in ten years we are going to import 8 trillion USD. This is exciting because China is transforming from exporting to importing. If this concrete number can be fulfilled, it will be a huge change to China and the world.

Moderator: Don’t you think it’s easier today for China to be interested in globalization because of the benefits that can accrue to China because you’re continuing to develop, compared to countries that are ‘developed’?

Jack Ma: Well, firstly, the WTO rule is not made by China. That is something I want to change because some rules are designed for big companies only. China definitely benefits a lot from opening up its market, which has contributed to its growth over the last 10 years.

Moderator: The Chinese market did not open fully. American businesses that want to effectively go into business in China have a very difficult time and need to partner actively with a company that’s there already.

Jack Ma: This is why I said that China has problems just like the world does. I feel confident after President Xi’s talk that he is ready to open up the Chinese market more to the world. I suggest that we should solve the problem through a business community and negotiation. China joined WTO for over twenty years, however, as a business, a country and the world, certain things need to be reviewed and stopped.

Moderator: You’ve been calling for something called EWTP. What is that?

Jack Ma: This is what I was talking about. The WTO was great but it was mainly designed for developed countries and big companies. There’s no opportunity for small business. We want to build up an EWTP – an Electronic World Trade Platform – to support young people, small businesses.  Through mobile phones and the internet, they can sell and buy across the border.

The other thing is that the WTO  is a very interesting organization where two hundred government officials are put together in one room and asked to agree on something. It’s hard to imagine that they can all agree on something together.

We believe business should be decided by business people so the EWTP should be something where business people sit down together, agree and negotiate on things then get an endorsement from the government.

The Key Difference in Alibaba and Amazon

Moderator: Let’s talk a little bit about Alibaba and the model itself because many in the West don’t necessarily understand it. I could try to compare it to Amazon, which I know you think is an unfair comparison. One of the things that is so fascinating to me is that Amazon and Jeff Bezos have pursued what might be described as a very asset heavy business model.

They are buying airplanes, they want to hire supply chain from beginning to end and Alibaba is the opposite of Amazon where you don’t want to own the warehouses and logistics companies. What do you think about that? Is Jeff Bezos right or you and is there is there going to be a meeting in the middle?

Jack Ma: I hope both are right because the world can never have just one correct model. That’s too boring.

Amazon is more like an empire where they want to control everything by themselves. Alibaba’s philosophy is to be an ecosystem.

The goal is to empower others to sell, serve and make them more powerful than us. With Alibaba’s technology, innovation, partners and ten million small business sellers, they can compete with the likes of Microsoft and IBM. Our philosophy is that by using internet technology, we can make every company become Amazon.

Remember that our GMV last year was more than 550 billion USD. We needed five million people to deliver the sold goods for us. So how can we do that? The only way we do that is by empowering service companies and logistics companies to make sure they are efficient and they are making money to be able to hire people.

Jack Ma’s Dream

Moderator: But without owning the whole chain, can you do it as effectively? The idea that you are watching Amazon being able to deliver things within hours literally.

Jack Ma: We made deliveries to 125 cities within a day last year. Imagine, just ten years ago, a delivery from Beijing to Hangzhou took eight days. Now it can be done within 12 hours. It is improving. You cannot expect these things to happen within 24 hours. We have patience. Do you know that on 11.11 single’s day, we sold 17 billion USD and delivered more than 600 million packages within three days? This is happening and we are proud not because of the amount of money made and how powerful we are but because of the inclusive technology that every small company can use. That is my dream.

I started my first small business in 1992 in China and it took me three months in order to borrow 5000 USD from the bank. It is so difficult to be a small business. We can empower the SME’s with technology. It is something I want to do.

Measures Against Counterfeit Products

Moderator: One of the critiques which continue to linger around Alibaba is the piracy issue. There’s an IP issue and it’s an issue all over China but it is you who takes the brunt of a lot of it. How much progress have you made in your mind and how do you think about some of the regulatory bodies in other countries including the US that continues to criticize?

Jack Ma: First, when we start a business of this size you have to take all the criticism. You have to listen to what is right and wrong.

Second, in ecommerce, when you put 10 million small businesses and empower them to sell 550 billion USD, every product cannot be checked. We do not buy like Amazon does. The ecommerce model has its own flaws.

Third, I would say that in the past 17 years, Alibaba has been the leader of this anti piracy issue protecting IP but we are internet companies and do not have law enforcement on piracy. If we find that someone is selling fake products, their account is deleted but we cannot arrest them. However, there is a huge process involved where we are working with the police to get them arrested.

Last year alone, we put 400 people in jail. There are 370 million fake products listed on our website. I would say we are the leaders using data to find out who is buying, selling and manufacturing fake products. I call these people criminals. They can sell anywhere but not on Taobao or Tmall because using our data we would trace who and where they are then deliver their contact details to the police. I’m happy that the world, especially China, and all the government organizations have begun to realize the issue.

On the Quality of Counterfeit Products

Jack Ma: It’s not that I’m praising the fake products. I’m stating that the quality of fake products in getting better. When people say something is fake, we have to reach out to a third party institution to check whether the quality is fake and sometimes it turns out it is even better than the branded quality. The scary thing is that there is one branded company that told us they are selling fake products because they found nothing wrong with the quality. So we bought something from their flagship store but when we returned it, they did not accept the goods saying its fake.

So it is all confusing. The war against counterfeit goods and greedy humans is not easy but you have to continue to fight. We have put 2000 people and one billion RMB fighting against it. The war cannot finish in two years but we are happy with the progress we have made despite the criticism. Some people praise me saying I’m great but we are not great. Some people say we are doing nothing but we are doing a lot of things.

We do not always have to argue and debate about what people are saying. Just keep doing what you believe in.

Sesame Credit System 

Moderator: One of the things you mentioned was using big data on the piracy side but the other thing that you used a lot of the big data to do is to provide credit and banking the unbanked. How are you able to use big data effectively to figure out who deserves credit and who doesn’t? And in a marketplace where some of these people had no credit history before?

Jack Ma: Well before we did that, we had a system called ‘Teach Computers’. We had Alipay and lot of people tried to cheat with that so the system taught computers how to catch that. We’ve been doing what is called artificial intelligence for ten years now.

We are a data company.

Eight years ago we said to ourselves, Alibaba should not be an ecommerce company but a data company. That’s because we have data from the consumers, manufacturers, logistics companies, and transactions. But to make all this data beneficial to the society, China needed a credit system for the many credible small businesses.

Creating a rating system based on the data we have has been so powerful in the last four years. Every individual and every small business that used our services were given a rating system so in the last five years, we’ve given five million business loans. They only borrow 5000 USD and within three minutes we can decide whether we can give the money and how much.

The sesame rating system has even become useful for other aspects such as dating where the mother in law says if you want to date my daughter, show me your rating system of the sesame card. (Laughs) It is so funny that even to rent a car or house now you are asked to show your sesame card because if you do not pay back, your rating will go down and you may never be able to rent a house for example. We want to build the system in such a way that the card will also show if you are selling fake products.

On Hollywood

Moderator: There’s been a lot of speculation that you’re going to get into the business of Hollywood. Your name Alibaba Group has appeared at the beginning of a couple of big films recently. What is the ambition for Alibaba in the entertainment world?

Jack Ma: In the beginning, we reviewed our strategy every five years. Now our strategy is to look ahead ten to thirty years. With every strategic decision we make, we ask the follwoing questions:

  • What society problem will this decision solve? This is because we believe that the bigger social problem you solve, the more successful you are. If it does not solve any social problems, we don’t do it.
  • Is this project going to succeed? If this is going to be successful in ten years, we’ll do it. If it will take one year or one month to succeed, we won’t do it.

Five years ago we had a big debate in China about what the Chinese people and the world will want in the next ten years- Happiness and Health – Two H Strategy. We believe the movie industry brings people happiness. Today neither the rich nor the poor are happy but at least when I watch a movie, I feel happy.

So I think we should partner with Hollywood. You know in China we have a different way of living. The heroes always die at the end of the movies here but in American movies, your heroes never die. So in my movie, I want to make the heroes live as well. It has just been two years for this so we still have eight years to see how it goes. I want to make our company one that inspires people.

I learned a lot from my favorite Hollywood movie Forrest Gump. Life is tough and it inspired me to be hard working. That is why when people call me a crazy and stupid questioning if Alibaba will work, why it has a different model from Amazon and eBay, I just go ahead anyway. I told myself Forrest Gump said to never care about what other people say and just went ahead.

He also said no one makes money by catching whales. They make money by catching shrimps. So we go after the small businesses.

Potential US-China Trade War

I think China and the US should never have a trade war. I think we should give the President-elect some time as he’s open minded. He’s listening. I think it is not so easy to launch a war but it is so difficult, almost impossible sometimes to terminate a war. Iraq and Afghanistan war, is that finished? No! I believe one thing that trade stops the war starts. Trade is something that makes people communicate, exchange culture and values. I would be happy if China and USA agreed on war.

I would destroy the Alibaba business model if that could stop the war. Because how can you imagine the world’s first and second-largest economy having a trade war.

It’s going to be a disaster for both the countries and for the world. If anybody can do something to stop it, they should.

Moderator: Did you have a reaction to Trump and the situation with Taiwan and how he’s thinking about that? (This question is in relation to the complaints in Beijing)

Jack Ma: I think this is not the something about the government. This is not something about a business either but it is something about the people. The Taiwan issue is about going against 1.4 billion of the population. So this is another issue. We’re talking about trade not about Taiwan.

Audience: With the Sesame Credit score, how do you assure you are not messing up peoples’ lives and you are not dictating the whole credit system?

Jack Ma: I’m not sure. People say this is a very uncertain world. The only certain day was yesterday. I’m not sure what I will be like in the future. That is why I want to retire early when I am young. I have a lot of things I want to do –  be a philanthropist, a teacher, go back to school. The world is so wonderful, why should I be the CEO of Alibaba all the time?

I have not come into this world to work. I want to enjoy my life and not die in my office. I want to die on the beaches.

Moderator: Thank you Jack Ma for the wonderful message.

Final Advice from Jack Ma at the World Economic Forum

Every government should pay attention to the next thirty years, which are critical for the world. Every technology revolution takes about fifty years. The first twenty years technology companies and the next thirty years, the implication of the technology. My advice is to focus on the next thirty years.

  • The first 20 years, eBay, Facebook, Google, Alibaba are good. The most important thing here is to make technology inclusive and make the world change.
  • For the next 30 years, pay attention to those that are 30 years old because they are the internet generation. They will change the world as they are the builders of the world.
  • Third, pay attention to companies that have fewer than 30 employees.

30 years, 30 year olds and 30 employees – that will make the world much better.

Editing by Ruchipha Thakral

Let us know what you think on Twitter @ecomIQ

Welcome back to eIQ in 2017! Here are the news you should know for today.

1. Indonesian logistics startup Anterin opens new R&D centre in Jogjakarta

Indonesian on-demand logistics startup Anterin began the new year by announcing that it is opening new R&D centre in Jogjakarta, as a result of its partnership with local software developer company TLAB.

Currently only available in Jakarta, the company has eyes on a nationwide expansion this year.

Read the rest of the story here.

 

2. Viettel pioneers free roaming in Cambodia, Laos, Vietnam

Vietnam’s state-owned telecom Viettel will eliminate overseas roaming charges between its operators in Vietnam, Laos, and Cambodia from January 2017.

Military-run Viettel posted revenue of $9.7 billion in 2015 with 13% year-on-year growth, and profits up 8% to $2 billion.

Read the rest of the story here.

 

3. Wall Street stays bullish on Alibaba

Wall Street remains bullish about China’s internet giant Alibaba Group Holding Ltd amid a spate of stock selling by its principal stakeholders in the past six months. Among the latest moves was the share sale plan adopted by Joe Tsai, which allows the firm’s executive vice-chairman to sell up to 6.5 million shares of the company’s stock through October.

“We believe that Alibaba is in the early stages of unlocking the value from what we view as its most valuable asset – a rich database that continues to accumulate from its well-controlled and extensive closed-loop ecosystem, through advances in data technology,” Morgan Stanley’s Grace Chen and her team said in a report in December.

Read the rest of the story here.

 

4. Maybank launches mobile money transfer service in Malaysia with Western Union

Maybank and Western Union have launched a digital remittance service in Malaysia via the Maybank2u (“M2u”) mobile banking app and Maybank’s website.

The service enables Maybank customers to transfer money to more than 500,000 Western Union® Agent locations in over 200 countries and territories. The money transfer service is available 24 hours a day and customers to transfer up to RM10,000 daily. Recipients will be able to receive money quickly after it is wired by the sender.

Maybank Group Head, Community Financial Services, Datuk Lim Hong Tat added that new service will help the bank to grow its digital transactions business.

Read the rest of the story here

 

5. Chinese retail is obsessed with Donald Trump

“This is the first time we’ve had a president who is a brand, and it’s not unusual to see various markets try to co-opt brands for their own success,” said Greg Portell, lead partner for consumer industries and retail practice at global consulting firm A.T. Kearney. “But China, in particular, is trying to capitalize on the Trump brand.”

“If you go back to what retailers are looking for in general, they’re looking to drive traffic and drive conversation. Selling products is almost secondary,” Portell noted. “In China, they’re achieving all the above.”

Read the rest of the story here


If you’re interested in reading more about how 2016 was for ecommerce in Southeast Asia, find out which articles were most popular on eIQ in 2016 here.

Here are today’s top ecommerce news.

1. Payment innovation continues to drive growth in Thailand

Demand for innovative payment solutions is on the rise in Thailand, according to global payments technology company Visa, as the value of transactions made by Thai cardholders continues its high-growth trajectory.

Visa is also expanding the acceptance of electronic payments across the country. The number of merchant outlets that accept Visa cards has grown to almost half a million in 2016, particularly outside of Bangkok. The number of active mobile point of sale (mPOS) devices is almost close to fifty thousand.

Read the rest of the story here.

 

2. App Annie predicts 2017 mobile trends

Not only will apps become primary revenue drivers for digital businesses, but it will also play critical role in strengthening traditional business models in industries like retail and food service.

The report gives an example of food delivery services such as UberEats, Deliveroo, and Foodpanda, which are predicted to experience an uptick in 2017 (despite Foodpanda exiting earlier this month). Junde Yu, Managing Director, App Annie Asia Pacific, comments,

“By the end of the year, we expect $52 billion in gross consumer spend on mobile app stores and a staggering $77 billion in gross spend on mobile in-app advertising.”

Read the rest of the story here.

 

3. Recommended Reading: Supply chain trends in 2017

When it comes to ecommerce and logistics, when ecommerce goes from 9% of retail to 30%, how feasible will it be to deliver all those packages? This problem is also an opportunity. Large 3PLs, like DHL, are investing in drones and crowdsourcing solutions; and large automakers, such as Mercedes Benz, are investing in some very interesting last mile delivery vans.

Read the rest of the story here.

 

Interested in finding out more about Southeast Asia’s mobile landscape and more? Check out eIQ’s insights on the region’s ecommerce roadmap here.

Here are today’s top ecommerce headlines.

1. iCommerce expands to Indonesia with pre-series A funding

Singapore-based ecommerce enabling startup iCommerce Asia announced today it has raised US$1.4 million in a pre-series A round. Nine-month-old iCommerce provides a full range of services relevant to ecommerce. It handles operations like warehouse and order management, cross-border customs clearance, and reverse logistics, as well as tech services like web and mobile development.

Its unique proposition is enabling smaller ecommerce and retail businesses in the region to export goods into Indonesia, giving them access to its promising customer base.

Read the rest of the story here

 

2. CIMB launches mobile wallet app for cashless payments

CIMB Bank Bhd has launched a lifestyle mobile application, CIMB Pay that provides combine secure cashless payments with deals and offers.

With Masterpass, shoppers will be able to use their CIMB Mastercard debit or credit card along with the shipping information saved on the mobile app to complete online transactions. Customers can make payments by simply tapping their phone on any contactless terminal based on Near Field Communication technology. The app also has an in-built notification system that alerts customers on nearby contactless terminals and flash deals.

Read the rest of the story here

 

3. Hong Kong’s Easyship raises pre-series A to expand to Singapore

Hong Kong-based logistics startup Easyship has raised an undisclosed amount of pre-series A funding from 500 Durians. The startup will be expanding into Southeast Asia via Singapore, following the validation of its business model and building of traction in the Hong Kong market.

The expansion to Singapore provides strategic access to Southeast Asia and leverages off the city-state’s logistics infrastructure and networks.

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Interested to learn more about Asia’s logistics landscape? Check out our series on Alibaba’s Cainiao Network here: part I, part II, part III, part IV.

 

This is the last of a four-part series breaking down Alibaba’s plan to shake up logistics in China: Cainiao Network. PART 1, PART 2, PART 3

Cainiao’s Platform Model Versus Jingdong’s Direct Model

By analyzing the aforementioned five pillars of Cainiao Network, we find that the implementation of its strategies cannot be achieved without collaboration with other partners such as warehouse storage operations. This reveals Cainiao Network’s business model implementation approach: a data-driven “platform model” (i.e. decentralized, horizontally integrated, asset-light).

Clearly, the platform model advocated by Cainiao Network is very different from the “direct model” (i.e. centralized, vertically integrated, asset-heavy) represented by Jingdong and SF Express and represents a different logistics development approach.

But it’s not a simple comparison – whichever fits a company’s own needs at any given stage is the most appropriate approach.

The advantage of the direct model of Jingdong lies in the high degree of control and better experience it can bring. As long as ecommerce logistics has massive demand reflected in warehousing and distribution, Cainiao’s platform model can achieve rapid growth.

In Cainiao Network’s view, the platform model is the inevitable future of logistics. Cainiao’s president Tong Wenhong believes that the direct model has no future and “Jingdong will eventually use Alibaba’s model in the future” on the grounds that Jingdong needs seventy to eighty thousand logistics personnel to process a daily parcel volume of one million and SF Express needs close to 400,000 logistics staff to handle a daily capacity of 4 million parcels.

When the number of China’s packages reaches 200 million, how many logistics staff will be needed to deliver them? The director of strategic cooperation at Cainiao Network, Li Wei, has said that “in the pyramid-shaped management structure of the direct model, each layer added will result in additional management costs of about 30% being passed along.”

The direct model ensures better service and timeliness, but it cannot solve the problem of scale. Cainiao hopes to help logistics companies through a platform approach with the goal of improving service and timeliness through technical means rather than brute (human) force.

Cainiao’s Platform Model Has its Skeptics—SF Express

Although Cainiao is very confident about its own platform model, its partners are not and some are even rejecting it. When Cainiao Network was established, it claimed bring innovation to the express delivery industry using a cloud system and warehousing storage system.

Two years later, these original strategies became the previously highlighted five key strategies: the express delivery strategy, the warehousing and distribution strategy, the pickup stations strategy, the cross-border logistics strategy and the rural logistics strategy.

The first three strategies almost closely control the operating lifeline of courier companies: that is, they intervene in terms of data, control delivery routes, and seize the last-mile. Needless to say, it will cause resistance by courier companies.

Take SF Express as an example. Even though SF Express and the “Three TOs and One Da” were all 1% stakeholders when Cainiao was established in 2013, they have expressed disagreements regarding their position with respect to Cainiao.

During the “Cainiao Jianghu Assembly”, more than 10 representative courier companies led by the “Three TOs and One Da” appeared to support Alibaba; only SF Express was absent. When facing the matter of business alliances, the strategies of the “Three TOs and One Da” are completely different from that of SF Express.

“The Three TOs and One Da” have difficulty coming to a resolution, while SF Express wants to get rid of the control of Cainiao Network platform and its ambition to be independent is abundantly clear. To show you why, let’s look at a simple comparison of SF Express and Cainiao Network.

cainiao business-model

Through the above comparative analysis, SF has been keeping an alert and sober eye on Cainiao for some time, and it has even tried to “challenge” Alibaba. The “Three TOs and One Da”, on the other hand, have been strategically ambiguous.

At present, it is hard to say who will win and who will lose—this is a long-distance race, and at this moment, the competition is more about who has made the best preparations for the future.

Conclusion

This three part series aimed to systematically review and analyze the commercial trajectory and development of Cainiao Network over the past two years since its establishment in 2013.

It also focuses on Cainiao Network’s strategic positioning to complete Alibaba’s own business ecosystem, and points out the five current strategic directions and implementation approaches of Cainiao Network. The main conclusions are as follows:

  1. Consumers have long complained about poor logistics in China. With the growth of the direct logistics approach of Jingdong, Alibaba’s logistics business has been at a greater and greater competitive disadvantage. This is the real reason why Cainiao has doubled-down building its own warehouses.
  1. Compared with the ecommerce and financial services business that Alibaba has successfully launched before, Cainiao’s current efforts involve many offline courier and logistics issues.

The complexity involved in completing the full integration of online and offline is beyond imagination – no precedent outside of China can be referred to. Also, Cainiao’s partners are cautious and alert and have their own contingency plans. Therefore, it is difficult to say whether Cainiao’s platform approach will be successful in the future.

Implications For Logistics in Southeast Asia

As Alibaba may have noticed, Southeast Asia shares a lot of similarities with China a decade ago, especially in terms of a nascent and fragmented logistics ecosystem.

Because of the pain points in logistics, plenty of investor funding has gone into this space. Companies like Ninja Van, Deliveree and the now-defunct Zyllem have raised millions to tackle the last-mile challenge in SEA – even Lazada invested in its own delivery fleet as part of Lazada Express (LEX).

In this kind of environment, introducing a platform like Cainiao would make a lot of sense. A central platform with large address database and route optimization would improve the efficiency of logistics in the region.

On the other hand, it could also spell bad news for last-mile delivery companies in the region because Cainiao would end up controlling the supply of packages, the data, the rules, and potentially turn last-mile logistics into a price-driven, commodity play.

Alibaba was able to get Cainiao off the ground due to the massive order volume from Tmall and Taobao combined. In SEA, there’s no single dominant player who commands the bulk of all orders making Alibaba’s acquisition of Lazada a likely first step towards introducing Cainiao. As we’ve seen with Alipay and Ant Finance, Cainiao in Southeast Asia may not be a matter of “if” but rather “when”.

The original first appeared in Chinese on Yunbao88. Concluding excerpt by Sheji Ho, editing by ecommerceIQ team.