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Garena, a Singapore-based internet company, recently made splashes in the news as the tech unicorn, one of the few in Southeast Asia, raised US $550 million in funding. The fresh batch of investors include Cathay Financial and GDP Venture, who are supporting Garena’s aggressive push into Indonesia. The company also announced plans to change its name to ‘Sea’ Ltd., an acronym for Southeast Asia.

If the new name is anything to go by, it seems Garena is making big plays within the region this year – namely with its mobile-first ecommerce platform, Shopee.

The mobile shopping app reported more than 5 million downloads in Thailand since its official launch two years ago, and 25 million downloads in total across seven markets; Thailand, Singapore, Indonesia, Vietnam, Malaysia, the Philippines and Taiwan.

In an email interview, representatives from Shopee Thailand shared exclusively with eIQ that the platform achieved 43% MoM growth across Asia last year and reported over 3 billion in annualized GMV to date.

The company’s healthy growth can be attributed to the rise of mobile adoption in the region. Bain estimates 85% and 79% of online shopping happens on mobile outside of major metro areas in Thailand and Indonesia, respectively.

But with other strong mobile-first contenders and e-marketplaces in the field, notably Singapore’s Carousell, the company needed to innovate.

A shift towards B2C

Blackmores’ official brand store on Shopee TH

A glance at Shopee’s homepage indicates that the marketplace is onboarding brands such as phone maker Vivo and Blackmores, in addition to facilitating its normal C2C transactions. This move places the C2C-B2C platform in the same playing field with marketplace heavyweights such as Lazada and Korea’s 11Street that made its Thailand debut at the end of 2016.

“Shopee Thailand is currently focused on the expansion of our market segments, including having more corporate brands on the platform in order to strengthen our portfolio,” says Terence Pang, COO at Shopee.

With an already strong consumer base in Thailand, Shopee is heading down a path naturally explored by other C2C players:

  • Indonesia’s Tokopedia initially started as a C2C platform, but recently integrated official brand shops from P&G onto its platform.
  • Alibaba’s Taobao marketplace is a C2C platform but sprung out Tmall as a B2C subsidiary of the marketplace.

One reason that may explain the C2C-B2C pivot is financial change. Ironically, as C2C marketplaces grow in membership and transactions, the model essentially hits a dead end.

An example can be made from European car sharing platform, BlaBlaCar. As a C2C business, it relied on customer interactions to drive revenue but pivoted to B2C in 2015 after the founder realized that by facilitating transactions between customers, it essentially demoted the platform into a lesser role.

“We [now] manage not only the interaction but also the transaction,” said Nicolas Brusson, founder of BlaBlaCar.

Does this mean that C2C models are all essentially poised to adopt the B2C model?

Well, why not? An already existing user base can only grow with more product variety and marketing dollars provided by the brands while the marketplace itself is poised to earn commission.

But what companies should watch out for is having two stark businesses coexist on the same platform. Some marketplaces can be at risk of alienating businesses and established brands due to the fear of being placed next to hastily taken images of home appliances from an inexperienced merchant but Shopee has successfully separated the two.

 Characteristics of a strong C2C-B2C hybrid

“We are working to bring more personalization for Shopee users through product recommendations based on browsing history and also optimizing our chat feature so consumers have direct contact with sellers,” says Terence.

Shopee’s efforts to optimize its product features does not come as a surprise as Thai consumers highly enjoy chatting on social platforms and also connecting with sellers.

A study conducted by Forrester revealed that 44% of consumers surveyed said that having questions answered live while in the middle of an online purchase is one of the most important features of a website.

A communications platform also eases concerns about fraud and heightens trust during online transactions.

Personalized suggestions can benefit the marketplace itself because it provides a solution to the long-tail problem; more exposure to obscure items that are not very popular and do not drive revenue.

Recommending long-tail items to shoppers can provide higher return on investment for slower moving inventory.

By showing customers what they may enjoy, but might not necessarily discover on their own, marketplaces are able to heighten the entire shopping experience.

These tactics are already being used across the globe by tech titans such as Amazon and Netflix and it all seems to be working for Shopee Thailand as the company is experiencing over 1 million orders a month.

What does the future look like for Garena (Sea)/Shopee?

Sea is doubling down on the region and has publicly expressed intention to seize a larger chunk of the Indonesian market. Recent reports suggest the company is already performing in the top leagues.

The region’s largest market makes up 40-50% of Shopee’s transaction volume and the country experiences 200,000 daily transactions for physical goods, according to CEO Chris Feng.

As the region continues to thrive as an attractive retail ecosystem, Shopee’s expansion to a C2C/B2C marketplace will help it withstand the incoming tech titans and compete with the existing e-players for the attention of 650 million Southeast Asians.

Shopee Thailand team with Shopee University attendees, a workshop to help SMEs sell more efficiently on the platform.

One of Thailand’s most famous and oldest stationery stores, Somjai, first opened in Bangkok’s bustling old town, almost 60 years ago. Eight additional branches have followed across Thailand since its gain in popularity.

Somjai is often synonymous with high school kids as it caters to Thailand’s youthful demographic – it’s common to see a group of girls and boys in uniform hunched over trays of colored pens at any Somjai store.

Now run by the grandchildren of the original Somjai founders, Wittawin Vidthayanon, his sister Vippawanee Vidthayanon and her partner Noppanaree Puarattana-aroonkorn decided it was time for the reputable stationery chain to have an online presence.

Source: Somjai Online

Why? Simply because it was time for growth.

“During my studies in the US, I grew accustomed to using Amazon in my daily life. The added convenience and dependence made me feel that ecommerce was a natural simple progression for Somjai,” said co-founder Vippawanee to eIQ in an interview at a Somjai store.

Most companies today, especially those with a long-standing history and an extensive offline presence, understand that in today’s time and age, multi-channel is what consumers now expect.

So how did this traditional company with no prior online experience begin its digital journey?

Assessing stationery online

Thailand’s current stationery market is primarily dominated by the likes of OfficeMate and B2S, both owned and operated by Central Online, the online subsidiary of Central Group conglomerate in Thailand.

Although OfficeMate claimed 13% market share in 2015, the company leans more to B2B whereas Somjai has long carved out its own niche offline with youngsters and craftsmen, selling assortments of DIY crafts, multi-colored erases and drawing pencils, etc.

Online horizontal marketplaces such as Lazada and Central Online’s B2S also offer art supplies online, but it doesn’t trouble a company that has built a loyal audience over 60 years.

Starting from scratch

Before launching a full ecommerce site, Somjai decided to test demand using Facebook first.

Somjai also began to build its social media presence on Facebook, to target approximately 37 million Thais that are active users of the social networking site.

They realized that people enjoyed browsing for stationery online through messages and inquiries about online shopping on the Facebook page.  The page allowed users to simply browse through items from the comforts of their own space, 24/7.

For brands looking to expand their reach in Southeast Asia, it’s almost impossible to do so without social media. Thailand is especially reliant on social platforms like LINE and Facebook, making it unsurprising that approximately 50% of online shoppers end up buying things through these channels.

“Thai people really like to chat,” said Noppanaree, “We’ve found that although we don’t offer the same promotions on LINE@ as the website, some people prefer to buy from the chat platform simply because they’ve gotten to talk to us.”

However, 50% of online orders now still come from Somjai’s Facebook page.

The company’s brand.com was launched four months ago after Somjai’s management hired a full time web developer. By building the platform in-house, Vippawanee had control over the entire process as it was important that the company maintained its traditional and trusted image even online.

Launching and setting up the business online took only six months as Somjai already had an extensive amount of SKUs and familiarity with its core customer.

The company started off by sharing the same in-store inventory for both online and offline orders. Within the first few weeks, store assistants were picking-up and assembling orders from online customers, which caused problems almost instantly, as they also needed to tend to customers shopping in stores.

“We found out quite quickly that this process was not scalable. Our employees were overwhelmed and confused by the new system,” said Noppanaree. “We realized that a separate system had to be built for the company’s online operations.”

Tackling operational challenges

To avoid conflict between online and offline inventory and processes, the team decided to build a separate online inventory system to work at a newly acquired warehouse built to accommodate online order demand.

Tech isn’t something new to the duo. Prior to this, Somjai had a centralized SKU tracker that was able to see what products were available at any of their offline stores.

“We were already planning to upgrade our tech platform,” said Noppanaree. “The goal is to have more automation and less focus on manpower.”

After significant investment, the current system is now able to determine the top performing items at each store, as well as cross check to see which items may need re-stocking for demand forecasting. The new technology platform housed in the new warehouse is able to cater both offline and online operations, as the two have the same products and exists in tandem.

The duo cites 7-Eleven as their inspiration, in terms of operation efficiency.

The platform is able to do real time tracking for online orders that come through, which makes for a straightforward sortation process.

Unsurprisingly, finding talent to manage the tech and run the warehouse was one of the hardest things for the CEOs.

“We currently have a team of ten that solely handles online operations in the warehouse. At Somjai, we recognize if you have the right skill set, it doesn’t have to be ten years but even in a couple of years, you can become a manager,” Noppanaree comments. “Because we’ve never done it before, finding and training talent was hard as it’s still an area still lacking in Thailand.”

Reaching a nation

The investment in both technology and talent paid off. Currently, Somjai is experiencing 5% month on month growth since the launch of its online store, and the team is still unravelling new surprises about their own company.

“Since launching our online channel, the majority of traction has been from Bangkok” said Vippawanee. But we are seeing increased demand from other provinces in Thailand and plan to infiltrate more areas nationwide.”

To reach this new audience, the company decided to partner with Thai Post for last mile.

“Thai Post has specialized knowledge in nationwide delivery making it easier for us when we deliver to homes down south, where some areas lack proper addresses and directions,” said Noppanaree.

To increase brand awareness among customers nationwide, Somjai prioritizes offline marketing over online because majority of potential customers outside Bangkok are unfamiliar with the brand. Driving awareness through offline events and crafts workshops makes people more trusting of the brand.

“Thailand is not like Americans in the US. People don’t trust companies as much so we need to make a physical connection in order for them to trust us,” said Noppanaree.

Despite 70% of Thais choosing cash on delivery as their preferred method of payment, the  company doesn’t offer COD and instead only offers bank transfers and credit card as payment options.

“With our younger customers, we haven’t found that to be an obstacle,” said Noppanaree. “Bank transfers makes up approximately 80% of our transactions.”

Perhaps this is a sign of good things to come for payments in Thailand.

What’s next for Somjai?

They won’t be shutting down their offline stores anytime soon.

“It’s impossible to only generate revenue from online sales. We want customers to see our ecommerce platform as another window to buy our products,” said Noppanaree. “We think offline and online should grow together, it doesn’t have to be one or the other.”

Somjai’s third generation- Vippawanee Vidthayanon and Noppanaree Puarattana-aroonkorn

Google’s Brand Team for Consumer Apps has released a report on the definition of “Cool” for Generation Z in the United States. Unironically, Google has named the report “It’s Lit”.

Cool is what these Post-Millennials – teenagers aged 13-17 – are paying attention to, it’s what gets them excited and what determines which brands they choose to spend money on. This new generation has gained media attention because of their influence as truly digital natives with high degree of brand awareness. They are ultimately the next wave of shoppers.

Gen Z has the power to define which business has the capacity to do well and which will slowly fall into irrelevancy.

There are approximately 60 million Gen Z teenagers in the United States, more than 25.9% of the country’s population. Collectively, their purchasing power is at $44 billion annually and could reach $200 billion if we factor in their impact on household purchases.

As the influence of the United States can be witnessed throughout Southeast Asia from music taste and fashion trends to dining choices, businesses should be aware of what’s factored as ‘cool’ in the west because it will very likely make its way east.

Pink represents female choice. Blue represents male choice. Source: It’s Lit report.

So what do these teens find cool?

“Cool” in Google terms means to bring joy or happiness and stands out from everything else.

According to 13-17 year old boys, they find: technology, sports/outdoor activities and video games the coolest (no surprises here) and choose their activities based on friends and fads.

According to 13-17 year old girls, clothes/fashion/beauty, music and technology rank among the coolest activities because of the way it makes them feel.

Brands such as NYX is popular with younger girls as it is affordable, sold at mass stores such as Target and has a strong online presence, as they tap into the influence of bloggers and social media.

Out of the biggest brands circulating around today, Youtube was ranked as the ‘coolest’. Out of the top 10, six of them involve digestion of media i.e. Netflix, Xbox, Google, Playstation, GoPro and Chrome.

Source: It’s Lit report

The other brands on this list are consumer brands with a strong online presence. Doritos, for example, released the most viral advert during 2016’s Superbowl and Oreo has successfully reinvented its traditional ‘pantry’ brand to become “an agile, culturally prolific marketer”.

This was thanks to Oreo’s aggressive pushes online through its “Twist, Lick, Dunk” mobile app and cheek-in-tongue tweets that garnered a lot of attention among young people. The app became the the best performing branded game ever launched.

“We have a lot of mature brands and culture gives brands rebirth, it breathes life into the room,” says Dana Anderson, CMO of Mondelēz International, parent company of Oreo.

Social media use?

For Gen Z, social media is for consuming and connecting, not sharing.

The most popular social media platforms are Snapchat, Instagram and Facebook. And while this makes them potential marketing channels for brands, only Facebook has a streamline ad platform whereas Snapchat lacks the ability to accurately target certain audiences.

Source: It’s Lit report

New tools for brands range from Instagram stories to Facebook Live.

Being connected all the time means Gen Z consumers have a constant pulse on trends.

Below is a spectrum of brands ranked based on their prevalence in the minds of Gen Z out of 122 brands in total.

(Click to enlarge) Source: It’s Lit report

Tech companies with a ‘cool’ factor:

  • Facebook
  • Instagram
  • Samsung
  • Amazon
  • Apple
  • Snapchat

Who has lost a bit of ‘cool’ factor?

  • Line (this would be very different in Asia, where 69% of its 1 billion active users reside)
  • Zara
  • Uniqlo
  • Lululemon
  • Supreme

What can businesses learn from this?

Gen Z never knew the world without the internet. Teenagers around the world today value stimulation, instant gratification and information and this in turn, changes the way brands need to position themselves.

Gen Z consumers are familiar with finding information and tech products, which means that brands need to appeal to this new wave of consumers by attaching a strong message to its product instead of trying to promote a meaningless item.

There are good ways to do this – see Nike – and terrible ways to achieve this – think Pepsi’s PR disaster with Kendall Jenner.

Among the top 10 brands that Gen Z strongly identify with, all have been documented to make efforts to appeal to digitally dependent consumers through apps, viral ad campaigns and a strong social media voice.

Nike has released a stream of buzzy marketing collateral such as its “Pro-hijab campaign” and using high profile Asian celebrities to promote products (Kiss My Airs). Consulting firm Accenture found that more Americans are streaming shows through Playstation Vue and Netflix, making cable TV almost obsolete.

Southeast Asia’s young population is young, over 70% are under 40 years of age and experiencing a surge in spending power – set to contribute 34% to consumption growth by 2030, compared with the global figure of 25%.

A maturing consumer demographic, combined with flexibility to spend means that Southeast Asia’s Gen Z are ones brands have the opportunity to target early, especially knowing the trends overseas.

Google “It’s Lit’ report can be found here.

European fashion group Inditex, operator of global fast fashion chain Zara is making an aggressive global push this year through expansion of stores, following a 10% rise in full net-year earnings.

The group, which also owns fashion brands Pull&Bear and Bershka, plans to open 450-500 new offline stores in 2017 while closing approximately 150-200 of its smaller stores worldwide. Read more

Welcome back from the weekend. Here’s what you should know today.

1. Line Man introduces postal service for android in Thailand

The chat platform said the “Postal” function was built with SMEs in mind. The feature will offer nationwide, door-to-door parcel delivery service which is fast and affordable.

The service is a collaboration with Alpha, an ecommerce delivery service. The Postal feature will pick up parcels between 8am-10pm  and delivers them via two options including delivery by Alpha, which handles all deliveries, from pick up to destination.

The merchant will be able to save a reasonable amount of time, they can simply drop a pin on their phones to specify an address.

Read the rest of the story here.

 

2. Alibaba to launch distribution hub in Malaysia

Alibaba Group plans to set up a regional distribution hub in Malaysia to cater to its fast-growing business in Southeast Asia. The hub would be sited within KLIA Aeropolis, a 24,700-acre development led by airport operator Malaysia Airports Holdings Bhd.

Many people see Malaysia as an emerging hub next to Singapore. Malaysia may not be able to take all of Singapore’s business but it is a good choice logistically

According to sources, Alibaba executive chairman Jack Ma and Malaysian Prime Minister Najib Razak are expected to announce the plans at an event in Kuala Lumpur next week.

This would mark Alibaba’s first investment in Malaysia.

Read the rest of the story here.

 

3. Salim Group joins fight for Indonesian ecommerce share

Indonesia’s Salim Group is planning a major foray into ecommerce this year in partnership with South Korea’s Lotte Group. The 50-50 joint venture by the two conglomerates, will launch the iLotte online shopping platform as soon as July, injecting $88 million into the project initially.

The service will be geared primarily toward 20- and 30-something women and feature brandname cosmetics sold in South Korea

Drawing on a robust infrastructure built up over the course of years will let Salim achieve economies of scale for the ecommerce business

Salim Group’s infrastructure investment and know-how will benefit its foray into ecommerce.

Read the rest of the story here.