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Here are the headlines you should know before you head out for lunch:

 

1.  B2C Ecommerce heats up in Southeast Asia

The forecast predicts retail ecommerce sales for the six countries studied will surpass $14 billion in 2016. Read the rest of the story here

 

2. Concerns linger over Singpost despite improved corporate governance

“While the new directors add to diversity and strengthen the board’s financial and legal capabilities, we think the main letdown is the lack of experience in the e-commerce or logistics business,” said CIMB. Read the rest of the story here

 

3. Alibaba backs PlaceIQ, a startup that combines location data with first-party data

Although the deal has not been disclosed by the two companies, the investment is more of a ‘strategic partnership’. Alibaba could use PlaceIQ’s technology in a variety of ways, including marketing, product recommendations and providing data for broader decision-making. The startup can determine not just whether someone’s visited a car dealership,but whether they’re actually shopping for a car, and what kinds of TV stations they’re likely to watch. Read the rest of the story here

Thailand Ecommerce Landscape

Thailand, while not the most populous nor richest of the Southeast Asian nations, is currently the fourth largest ecommerce market in the region, valued at $900 million and is expected to increase its ecommerce business 12-fold to a value of $11.1 billion by 2025.

What does the attractive Thai ecommerce market looks like now and what can be expected in the coming years? ecommerceIQ shares ECOMScape: Thailand to provide a quick snapshot.

1. Lazada is the dominating marketplace, while others compete in niches

What differentiates Thailand from other markets in Southeast Asia is that one online marketplace – Lazada – has significantly advanced over its local ecommerce rivals. The traffic of Lazada’s two closest competitors WeLoveShopping.com and Wemall.com combined makes only around a quarter of Lazada’s monthly traffic.

Yet, that and the fact Lazada now has the support of Chinese ecommerce giant Alibaba, is not scaring off competitors. Korean ecommerce marketplace 11street is expected to launch in Thailand in time for campaign season, 11/11, in hopes to replicate its success in Indonesia and Malaysia. The group’s claimed annual gross merchandise value of $7 billion is 7 times bigger than that of Lazada Group, but will it manage to challenge Lazada in Thailand?

Deep pocketed conglomerates are also moving in to steal market share, such as Thai CP Group, which belongs to the richest family in Thailand – brothers Chearavanont, owns Tesco Lotus, Shopat24 and 24Catalog. The second richest man in the country, Charoen Sirivadhanabhakdi, this year bought BigC and Cmart (formerly Cdiscount). While Central Group, the operator of Central department stores and distributor of several tens of foreign brands in Thailand behind which stands the third richest – Chirathivat – family, owns online marketplaces Central.co.th, Robinson and Tops. All of the above mentioned retailers have both – offline and online stores.

Thailand Ecommerce Landscape

Despite Lazada’s dominance, competitors are not easily scared off, especially deep pocketed Thai conglomerates who want their share of etailer online market.

Fashion & Apparel is one of the most competitive online market segments. In Thailand, this category represents a healthy mix of local players like Pomelo and WearYouWant, regional players like Zalora, Reebonz and global brands such as Adidas and Uniqlo.

Thailand Ecommerce Landscape

The competitive Fashion & Apparel online market in Thailand represents a healthy mix of local, regional and global players.

Brand.com webstores are also gaining traction in Thailand, which is best observed in the beauty category. Brands such as Maybelline, L’OccitaneEstée Lauder and Kiehl’s in Southeast Asia embrace the ecommerce market boom and use the opportunity to sell on their brand web stores, marketplaces or through distributors to capture the widest possible audience.

Thailand Ecommerce Landscape

Beauty brands go all-in in Thailand selling their products online on their own webstores, marketplaces or through distributors.

2. Old school vs new kids on the block compete in C2C

Classifieds and consumer-to-consumer (C2C) marketplaces were the first ‘ecommerce’ businesses to operate and remain an important part of the online journey in Thailand. Three of the most popular C2C marketplaces – WeLoveShopping, Tarad, Pramool – were created around the millennium and are run by local companies. However, newer market entrants like Shopee, supported by Southeast Asia’s largest gaming company Garena, are on their heels.

Tarad and Pramool ecommerce sites can be accessed on desktops, while the newest competitors – Shopee, Blisby, as well as WeloveShopping – all have mobile apps, which rank among the top 10 most popular C2C ecommerce apps in Thailand. Since approximately 85% of online shopping outside the major metro areas in Thailand takes place through mobile, it is easy to see that the new kids on the block are disrupting traditional, desktop-first marketplaces.

3. Social commerce is driven by Facebook, Instagram and LINE

An ecommerce business model specific to Thailand is social commerce – merchants set up ‘shops’ on Facebook and Instagram where they post images and details of their products so online browsers can inquire about the product and other details to further facilitate the deal.

Thailand Ecommerce Landscape

Thailand is the leading country where half of online shoppers buy directly from merchants through social networks.

According to a PwC report, Thailand is the biggest social commerce market and around 50% of online shoppers purchase products through social networks. Therefore it was no surprise when this June, Facebook started testing social commerce payments in Thailand and later in August launched Facebook Shop, the first in the world.

Companies like Shopee are looking to lure merchants selling on social networks to its online marketplace with aggressive marketing by offering easy integration of their Instagram shops and reimbursing shipping, cash on delivery fees to sellers. Other players like LINE also have eyed this market segment. LINE Shop was created to utilize the wide audience of LINE messaging app and tap the social commerce market. Yet technical issues such as a requirement to upload merchant product catalogues on the app through mobile phones, as well as limited payment options through LINE Pay, has hindered the success of LINE Shop.

4. Cash is still king

Thailand is still a cash driven society and cash on delivery (COD) is the preferred payment method for 70% of ecommerce shoppers, making payments a bottleneck for faster ecommerce growth as many sellers cannot offer COD. There are various mobile wallets offered by telecom companies, banks as well as independent players but so far, none of them have quite caught on.

Thailand Ecommerce Landscape

Despite various mobile wallet providers, cash is still the most preferred payment method.

The large unbanked population and low trust in the security of personal financial details does not make the task of Thais adopting digital payments any easier. And though there has been a surge in fintech players, none really address the core issue. For example, LINE Pay accounts can only be linked with a credit card in Thailand, where just  3.7% use one to make payments. Mobile wallets and banks offering a top-up through either ATMs or special kiosks, defeats the purpose of an mwallet. Good news is that there is an opportunity for a player to provide a convenient and easy digital payment solution for those without a bank account and/or credit and debit cards.

5. Fierce competition in logistics leads to price war

The ecommerce gold rush across all Southeast Asia has facilitated growth of startups who hope to solve logistics problems like next-day delivery and live tracking, and Thailand is no exception. The success of ride-hailing apps Uber and Grab has encouraged several startups to offer on-demand delivery services.

Thailand Ecommerce Landscape

The success of ride-hailing apps has driven several start-ups to offer on-demand delivery.

There are numerous companies who provide 3PL services and ensure a smooth last mile delivery. This means companies engage in price wars and suffer lower margins, if any at all.  

The packed logistics market is beneficial for marketplaces and merchants as they have plenty of delivery service providers with whom to negotiate a lower price.

Thailand Ecommerce Landscape

Numerous companies offer 3PL services and ensure last mile delivery driving down delivery costs for the benefit of marketplaces.

Click here to download the full, high-resolution version of ECOMScape: Thailand and join the ecommerceIQ network for first look at the next ECOMScape in our series.

Check out also ECOMScape: Indonesia

Are we missing any players? Let us know on FacebookTwitterLinkedIn

Indonesia Ecommerce Landscape

Mapping Southeast Asia’s Dynamic But Fragmented Ecommerce Market

In order to ‘win a market’, some online publications will say: ‘define your brand’, define your competitive advantage, ensure product-market fit, create a customer database, and/or market to the world. And while your business should encompass all these strategies, the very first step any company, old or new, should take is to identify the key players already in the field.

Southeast Asia has become a hotspot for saturation thanks to booming growth – the online sector is expected to reach more than $87 billion by 2025 and many global players such as Alibaba and Amazon are scrambling to get their own slice of ecommerce pie.

However, what new entrants often overlook or find out too late when entering the region is its fragmented nature. Every country brings with it a different set of strengths and challenges.

For any player looking to grab Southeast Asia market share, the key to unlocking its potential is knowledge. Different players exist in several market segments, and some dominate certain niche segments all hoping to solve problems or capture an untapped opportunity but the ecommerce bottlenecks vary across borders.

The ECOMScape Series by ecommerceIQ aims to bring you a complete picture of the ecommerce ecosystem in individual Southeast Asian countries from the businesses selling, to the specialists providing their online solutions, all the way to the end customer. We hope it will help you navigate the competitive space. Let’s start first with the region’s biggest and most promising market, Indonesia.

Indonesia Ecommerce Landscape: 6 Key Takeaways from Current Market Conditions

The country is on track to become one of the biggest markets in Asia with the potential to comprise 52% of Southeast Asia’s entire ecommerce value by 2025.

Despite the country’s attractive $46 billion ecommerce valuation that keeps foreign investors and companies pouring in, local players are not intimidated by the influx of global ones. What else can we tell from the bird’s eye view of Indonesia’s ecommerce ecosystem?

1. Local players are dominating the market, especially in niche sectors

Indonesian run companies are seen selling in every sector of ecommerce in Indonesia, especially C2C, Lifestyle & Travel and smaller niches that fall under the ‘Other’ category. These include marketplaces like Cipika, Qlapa, and KuKa that sell local and handcrafted products and Limakilo, a marketplace targeted at farmers.

Indonesia Ecommerce Landscape

‘Others’ category under B2C sector is filled with niche players.

Some locally owned companies such as Shoot Your Dream and AkuLaku also better understand the country’s payment pain points and allow customers to buy products via installments through their website without a credit card.

Targeting a smaller consumer segment for local players is one way to empower local SMEs to go online. It also means less competition as foreign and big players usually try to compete over a more ‘mainstream’ audience such as Lazada, Elevenia and MatahariMall.

A reason for the success of Indonesian owned companies is due to familiarity of local trends and behavior. These companies, such as Bukalapak, customize marketing campaigns to match cultural preferences and identify better with the customer.

Indonesia Ecommerce Landscape

Bukalapak’s viral video campaign for Online Shopping Day 12-12 last year, starred their CEO creating a small-budget, home-made marketing initiative while ‘apologizing’ to the executives everywhere for distracting and decreasing their employees’ productivity with big discounts offered.

Among the top 20 websites in the archipelago under SimilarWeb’s ‘Shopping’ category, more than half are native Indonesian run companies.

Indonesia Ecommerce Landscape

Even OLX and iProperty, who have the advantage of vast resources to be at the top of their respective niches as seen in the ‘Classifieds’ section, were once local companies acquired by regional players.

2. Brand.com and the rise of omni-channel

Indonesia’s most popular ecommerce model is presently the marketplace like Tokopedia and Lazada. Even in the vertical sectors like Fashion & Apparel, Electronics & Gadgets and Local & Handcrafted products, the dominant choice is still a marketplace.

This model is popular to accommodate the growing interest of SMEs and brands that want to bring their business online but lack the capital or are unwilling to take a risk jumping online with both feet.

Indonesia Ecommerce Landscape

However, as the industry matures and brands realize the importance of having an online channel, more adopt a brand.com strategy to directly reach customers.

HP and Kiehl’s are some of the big brand names in their field that recognize the potential of going online. And it isn’t restricted only to brands because offline retailers are also joining the ecommerce bandwagon.

MatahariMall and MAPEmall are just two examples of retailers with deep pockets that recently joined the online space and it’s paying off. MAP, the parent company of MAPEmall, has stated 78% year on year profit growth in August and credit their online venture as one of the main drivers.

As more customers demand convenience to shop anywhere and at anytime, it is vital that retailers complement their offline networks with an online strategy to create an omni-channel experience.

3. B2B sector is slowly gaining momentum

B2C is not the only sector that has seen an increase in online adoption. The country’s biggest industrial retailer, Kawan Lama, is among the early players making the jump to ecommerce in this sector.

The company launched a shoppable website to cater to both a B2B and B2C audience after seeing steady traffic from consumers browsing its catalogs, indicating a change in customer behavior. Another big offline retailer that followed suit is Electronic City.

Indonesia Ecommerce Landscape

However, despite the push for B2B ecommerce in Indonesia with the establishment of Indonetwork, an online directory and marketplace for SMEs catering to B2B and B2C alike, the sector is still very scarce. Bizzy and Lippo-backed Mbiz are the only significant B2B marketplaces that launched in the past year.

Indonesia Ecommerce Landscape

4. Market research is urgently needed

Due to the infancy of the industry in Southeast Asia, there is only a handful of resources that exist to help businesses make informed decisions. Even established research firms like Nielsen are having difficulty obtaining enough market data to create a comprehensive report.

Indonesia Ecommerce Landscape

The lack of knowledge and insight affects the growth of ecommerce as executives are forced to make strategic decisions based on gut thus the reservation of conservative brands going online.

ecommerceIQ aims to bridge the gap of knowledge in Southeast Asia by providing market research to executives in the form of summits, reports, insights and data.

5. More payment options to tap into the unbanked

With more than half of the population in Indonesia still unbanked and credit card penetration at only 1.4%, payment has become one of the biggest bottlenecks to ecommerce growth in the country.

Telco companies in Indonesia are one of the key contributors that help build the ecommerce ecosystem by launching their own versions of mobile wallets, a popular payments method. And it’s not surprising, considering that each telco company has their own ecommerce website.

Other popular payments gateway include Adyen, a payments unicorn used by both Uber and most recently, Grab and aCommerce. The payment gateway offers both online and familiar offline options that locals trust, such as ATM transfers.

6. Diversifying delivery services

Infrastructure is often acknowledged as one of the top barriers for ecommerce in the region, especially Indonesia where lack of public transportation, tricky island geography and under-developed roads pose serious problems.  

Ride-hailing apps are expanding their offerings to include courier services to cater to growing demands. Gojek, for example, a traditional transportation startup has become the preferred delivery method for C2C merchants and buyers as it offers same-day delivery services and a built-in tracking system at an affordable price.

Indonesia Ecommerce Landscape

The third party logistics (3PL) category is also very saturated in Indonesia. Brands are provided with so many options that it becomes a time-consuming task to find one that suits the needs of their business and consumers. Multi-shipping tech from aCommerce or Alibaba’s Cainiao aim to save time by aggregating the best options based on the price and destination.

The potential of ecommerce in Indonesia has already tempted many players, both foreign and local, to enter the market. However, it’s still a long time before a clear winner emerges from the battlefield.

Click here to download the full, high-resolution version of ECOMScape: Indonesia and join the ecommerceIQ network for the next ECOMScape in our series.

***Are we missing an important player? Let us know! Reach us on FacebookTwitterLinkedIn

mitch-scale-up6

Custom aCommerce fulfillment centers in Indonesia

It doesn’t matter if your business has recently entered the ecommerce market as a globally known brand, as a startup with a cool new product or as a distributor for various brands, scaling ecommerce logistics operations will always be a challenge. Operations in this case means everything between placement of the order all the way to its delivery to the end customer.

There are typically three phases:ecommerceIQ, logistics, operations

Phase One: Start Up

In the first phase, the business usually has just started its ecommerce business-to-consumer (B2C) operations, has low sales volumes and no prediction about growth. At this stage, the focus most likely is on marketing of the product and getting funding. There is no time to worry about how to store, fulfill and deliver the product. If monthly orders remain 1,000 and under, it’s best to keep it simple and cost efficient with these initiatives:

Use an established service provider

Share your outsourced operations by working with a service provider who already has other clients to leverage on existing space, systems and/or people. Don’t overinvest.

Skip the middleman

Ship directly from the supplier to the end customer to avoid inventory holding and improve cash flow.

Turn your store into a ‘warehouse’

Avoid double inventory holding by implementing instore fulfillment. In this model, the store becomes a ‘warehouse’ to carry your inventory, which can be managed by a warehouse management system connected to each store’s point-of-sale (POS) system.

Once a sales item is available at a certain store, it can be reserved in the POS system and picked up and delivered conveniently to the end customer.

Incubate your B2C business

If there exists business-to-business (B2B) operations already, only ample space is needed to set up a B2C incubator area. As long as the B2B and B2C operations don’t interfere with each other, this model saves many resources. 

ecommerceIQ, logistics, operations

The illustration shows B2B operations with a separate incubator for B2C.

Phase Two: Smart Up

After sales volumes pick up and exceed 1,000 orders per month, it’s time to smarten up. The first phase is about getting orders to customers without high costs. The second phase focuses on scaling and understanding the cost drivers of the entire fulfillment operation.

With increasing volumes, investments in space, people and systems are necessary:

Choose the most appropriate systems 

Many warehouse or order management systems out there – especially the ones developed in-house – don’t support scaling to thousands of orders per day, instant bottleneck. Not every system is equally flexible in supporting different value added services during fulfillment, for example, bundling of multiple products to sell together. It makes more economic sense to switch to an enterprise product such as Manhattan or SAP.

Determine the needed space

Space will surely become an issue with higher order volumes since the amount of SKUs is increasing and the inventory is doubling or tripling. Extra space is always handy as there are recurring spikes in demand thanks to marketing initiatives and public holidays. aCommerce has seen cases where these spikes can be as high as eight times the daily volume. 

Outsourcing to a service provider with fulfillment centers provides support for short notice peaks in volume but there are things to look out for. For example, it is crucial that there are options for future expansion. Every potential corner in the warehouse should be racked up or if needed, there should exist a short term storage space close by.

But by utilizing another warehouse, the pick and processes will be much more complex and time consuming, so use only as an interim solution.

Hire the right people

Running scalable and efficient operations require strong leadership with experienced logistics managers. In many cases, companies simply hire blue collar workers and someone to oversee the warehouse and distribution operations on the side.

Because logistics costs can contribute 15 to 25% of total product costs, it is reasonable to hire someone who understands the logistics business, drives down the cost per order and at the same time maintains quality customer experience.

To accommodate spikes, you may consider hiring contract workers, which is especially easy in many Southeast Asian markets, but rates can be 60% higher per month compared to permanent warehouse staff.

In many cases, contract workers do not have any system and/or process knowledge risking reduction in productivity and quality. There is no secret permanent to contract staff ratio but if the latter represents more than 50% of your workforce, you should ensure systems are easy to use and there are plenty of quality checks before an order makes its way to the end customer.  

Phase Three: Scale Up

Only a few companies actually scale as high as 100,000 orders per month – this means almost 5,000 orders per day for a five day operation. If the pick, pack and ship of one order takes 12 mins, this would entail a workforce of 140!

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This doesn’t even include any overhead such as a supervisor, team leads, returns workers, quality control staff or managers.

If you are a Fitbit enthusiast, then reckon, if 60% of the total labor does picking only of 4,762 orders with an average of 1.5 units per order and 160 meters to and from the operations area, this would result in 13,000 meters per day or roughly 17,000 steps per day.

With an average of 240 workdays per year, this sums up to around 3,000 kilometers (2,000 miles) earning each picker the India Badge, which would thrill the American Heart Association.

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It also gets interesting from a space perspective. Let’s assume there are 2.5 million units for storage and presume each SKU has the same measurements allowing the same amount of SKUs to fit into one storage box.

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2.5 million units leads to a 9,000sqm warehouse without accounting for office space, canteen, packaging storage, returns, shipping and other operations. The third phase requires a sustainable warehousing and distribution model to accommodate the sheer size of manpower and space involved.

At such scale, even the smallest details can add up to impact the efficiency and costs significantly. Here’s what to watch out for:

Plan processes in the smallest details

It is absolutely essential to understand all processes in the warehouse to predict possible bottlenecks for future set ups. Imagine operators needed if a redundant step is repeated 4,762 times daily during processing.

Robots and other forms of pricey automation can be evaluated but requires justification in terms of efficiency and return on investment since salaries in most of Southeast Asian countries are still quite moderate.

Customize to maximize efficiency

Sometimes overlooked, the layout of the warehouse can add extra steps, time, and costs to order processing. For example, if the warehouse layout has mezzanine floors, order processing time can double due to longer walk ways.

In an ideal world, each country is full of 10,000sqm warehouses ready for move in, but unfortunately in Southeast Asia, warehouses are rarely fitted and planning of the space has to be done from scratch.

In Indonesia, aCommerce converted an old carpet manufacturing factory into a 7,000sqm world class warehouse fitted with four level mezzanine and semi automation for its client. Additionally, complete warehouse processes as well as running the operations were set up for the client in less than three months. You may want to consult professionals or outsource warehouse operations to ensure smooth scaling.

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Choose suitable last mile transportation

Build strategic partnerships with third party logistics (3PL) who offer guaranteed volumes or have a wide network in the country for quick delivery and Cash on Delivery (COD) options. The last mile delivery from the warehouse to the end customer should not be overlooked.

It can take up to four weeks to get the reconciled COD money back from the customer upon delivery in Indonesia as third party logistics providers tend to outsource part of their deliveries. If 100,000 orders per month at an average value of $20.00 are bought with COD as the delivery method by 60% of customers, somewhere floating around in the network is $1.2 million. Minimizing COD reconciliation time is crucial to any company’s cash flow and can be achieved by in-country hubs where daily COD money is deposited directly to the company’s bank account.

No matter whether you are in startup, smart up or scale up phase, your logistics staff should always keep the big picture in mind and decide what fits your purpose in each phase. If trying to ‘smart up’ or ‘scale up’, it’s best to seek a professional opinion as the operations process can make or break your business.

BY MITCH BITTERMANN, GROUP CLO aCommerce

Thailand Post plans to introduce four new services this year to support its move to a more digital postal organization, reports The Nation.

The four new services are:

    1. Prompt Post is designed to cut queuing time, is a pre-registration application in which people use a ready-to-send box before accessing post offices nationwide.It also has a pre-load application that allows customers to pre-register from their homes, automated post machines and automated deposit machines – the first one will be located at Suvarnabhumi airport.
    2. Messenger Post is an express delivery messenger and pick-up service for delivery nationwide. The service will allow postmen to collect products at home and at organizations.
    3. THP card is an e-money service applicabale for Thailand Post products and service fees.Thailand Post also plans to develop the THP card into an e-wallet for Thailand Post fee payments. It will also team up with Cambodia Post to provide a cross-border delivery service for Cambodian customers who make online purchases from Big C stores online.
    4. Cross-border delivery services

Satit Pittarat, Chairman of Thailand Post says “Thailand needs to adapt to the changing times by improving all its system, including services and investmen.t”

The enhancement would be developed under three key concepts, standardization, modernization and satisfaction to respond to the government’s “Thailand 4.0” initiative. Thailand Post has targeted revenue growth of 22.6% to 24 billion THB this year with a net profit of 3 billion THB.

Thailand Post also plans to renovate 1,300 of its counters by the end of this year.

A version of this appeared in The Nation on August 19. Read the full version here

Wolfgang Baier was the CEO of SingPost for 5 years. Source: Tech in Asia

Wolfgang Baier was the CEO of SingPost for 5 years. Source: Tech in Asia

Wolfgang Baier, SingPost’s former CEO, will assume the role of group CEO at beauty products distributor Luxasia Group, reports Tech in Asia. The founder, Patrick Chong, stepped down as CEO to assume the role of chairman. His son and daughter remain in management roles in the privately held company.

This move comes after his high profile resignation from SingPost, where he spent five years as CEO transforming the logistics company to an ecommerce logistics firm.

Luxasia Group’s future

Luxasia Group is a family run beauty products distributor that manages a portfolio of more than 120 international fragrance, cosmetics, skincare and professional salon brands such as Clarins, Estee Lauder, Ferragamo, Hermes and Shiseido. It has 11 offices in the region, and more than 2,000 full-time employees in Singapore according to Straits Times.

Luxasia manages a portfolio of more than 120 international fragrance, cosmetics, skincare and professional salon brands such as Clarins, Estee Lauder, Ferragamo, Hermes and Shiseido. It has 11 offices in the region, and more than 2,000 full-time employees in Singapore.

The company has stated that it is embarking on an omnichannel strategy. Given the rise of ecommerce in the region, it is entirely possible that Luxasia wants to focus on that particular strategy, moving the 30 year old brand into a more digital focused platform.

Baier played a key role in transforming SingPost from a postal company to an ecommerce logistics firm, which sheds light on why Luxasia has chosen him to assume the role after a year long search.

In 2015, Luxasia invested in a few internet startups linked to ecommerce, including mobile beauty services, an online Korean beauty company and last mile logistics firms.

A version of this appeared in Tech in Asia on August 17. Read the full version here