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Seasoned entrepreneurs from multiple ecommerce companies at Echelon Thailand 2017 discussed how ecommerce in Southeast Asia has developed so far and where it is heading.

On the panel: Orami Group CEO Jeremy Fichet, Box24 CEO & founder Nithipont Bond Thaiyanurak, honestbee Thailand country manager Bounthay Khammanyvong and Pomelo co-founder & CFO Casey Liang revealed some of the trends that they expect will influence the region’s ecommerce businesses in the next few years.

Here are the key takeaways:

1. Customers are getting more demanding and sophisticated

The tide is slowly turning from a few years ago when customers were more accepting if their order was late or inaccurate as ecommerce was so new.

“As we’ve honed our skills and elements of ecommerce, customers are now freaking out if anything is slightly off or wrong. Customers are becoming more and more demanding,” says Bounthay.

Customers are also getting more sophisticated with technology as other channels such as social media has improved product discovery. Companies can choose to ship to anywhere in the world to reach a global market.

“People are finding our products a lot faster and they’re willing to purchase from anywhere in the world,” says Casey.

2. Ecommerce players are gaining strength

The line between online and offline players has been blurred in the past few years as brick-and-mortar retailers are exploring digital channels and pure ecommerce players are looking to build an offline presence.

“Pure online players have more flexibility to expand their growth offline through different partnerships. If we look at the top 10 retailers in the US, Amazon is likely #2 or #3. In China, #1 and #2 will be Alibaba and JD.com,” says Jeremy.

“I’m pretty sure that in Southeast Asia, half the top 10 retailers will be ecommerce pure players in 5-10 years,” he continues.

3. Reaching for an optimal omni-channel mix

Pomelo’s Casey noted that a channel strategy comes down to selling a product and the shopping experience customers go through to reach that point. Sometimes, online doesn’t always work.

“Purchasing media is pretty much online, purchasing travel also makes sense online but when you look at physical products like fashion that is very tangible, people want to try it on and feel it.”

“There are benefits being online that you don’t get shopping offline. If you want to find a silver dress with pleats, you can go to the mall and spend hours looking around for it or you can lay in bed and easily find exactly what you’re looking for on your phone. Obviously, when you want to try it on and see how it fits, then offline comes in. We [Pomelo] are still trying to figure out what is the optimal hybrid strategy, ” says Casey.

The company recently opened its first pop shop to allow its customers to ‘experience’ its fashion pieces offline in Singapore.

4. Convenience ecommerce – the next big thing?

“I believe convenience ecommerce will be the next big wave. What we see in the market is businesses asking how can we add value to people’s lives? And one of the key things how to do it is by helping them save time – helping them focus on the important things like family, rather than running errands,” says Bounthay.

Read more #EchelonTH2017 coverage by eIQ with Dr. Alex Lin from SGInnovate here.

Observe a supermarket. It’s normal to see shoppers carry out heavy bags of dog food and pet care essentials but the habit of buying pet food online remains a rarity. Probably because there is only a scarce number of brands in Thailand that offer an attractive selection of pet products online. This is interesting seeing as a growing economy such as Thailand’s experienced pet food sales of $736.7 million in 2015 and alone claims 44% of Southeast Asia’s pet care market.

And global spending is only expected to grow, especially in developing regions such as Southeast Asia, thanks to urbanization, popularity of the internet and increase in pet-product information availability. The pet food sector grew by 4% to $70 billion globally in 2015, and more of that spending is happening online as an estimated 38% of total pet food sales occurred online in China during 2015.

As the region follows closely in the footsteps of the superpower, it shows a huge opportunity for the growth of online pet related sales in Southeast Asia.

At the Petfood Forum Asia conference last year, Mariko Takemura, lead analyst for Euromonitor International, shared that Thailand reached $737 million in overall pet care sales and continued its five-year CAGR of 13.7%. There is clearly a demand for pet related goods in the country, so who is creating it?

Thailand’s pet owner demographic

60% of pets, both cats and dogs, in Southeast Asia still eat homemade pet food or leftover scraps because of the low penetration of commercial pet brands. According to Harprem Doowa, founder of PetLoft, one of the first companies in Thailand to offer pet products online, the behavior of giving pets homemade food is a sign of a developing economy but as the spending power of the population and the ‘humanization’ of pets increase, pet owners will look to providing their pets with more vet-recommended products.

“In Singapore, we typically see pet owners who demand quality and unique products and services for their pets. These owners consider their pets to be members of their family and they are really into organic or human-grade food for them,” says Jennifer Lee, the events manager for Pets Asia expo in Singapore.

In Thailand, this trend is also becoming a norm. The increase in pet-ownership and humanization of pets has led owners to turn to premium products to focus on the holistic well being of their pets, rather than feed them leftovers. And they’re able to afford it – Thailand’s middle class is expected to surge as GDP is predicted to grow by 3.2% this year and single-person households are on the rise.

“In developing regions like Southeast Asia, the pet product market is still an emerging market and the pet food business is growing rapidly,” says Neil Wang, global partner and president for Greater China at Frost & Sullivan. “In line with the region’s economic growth, an increasing number of people consider animals as family members and are willing to make purchases for them.”

But Thais won’t spend carelessly. Research from “Winning the zero moment of truth in Southeast Asia” showcases how nowadays, consumers, especially the prices conscious ones in the region, will research and compare prices before purchasing everyday use products. This extends to pet food as well as almost one third of respondents have compared and contrasted different pet food brands on the internet.

On demand delivery startup Lalamove also revealed that one of the most popular products purchased off its platform in Thailand is pet food.

Capturing the opportunity online

Research from L2 states that pet care in the United States, worth $760 million, has the highest ecommerce penetration among the home care sector. Amazon.com and Chewy.com, both originally pure play ecommerce companies, were revealed to hold the most market share of pet food online. Why? Because they saw the potential and started selling online early. Retailers and brands in Southeast Asia can use this insight as a benchmark to capture the region’s million dollar pet potential online.

The bulkiness of pet food packages, large range of products and regularity in consumption make the product an extremely viable candidate for ecommerce. Packaged Facts, a US market research company, conducted a survey that revealed about one-third of dog owners and cat owners like the idea of home delivery for pet food because it’s an “essential product consumed at a steady rate.”

Through an online platform, brands can offer delivery, a wide product selection and even package deals, product bundles, subscriptions or a variation of discount strategies to further incentivize shoppers.

Thai pet owners unfortunately do not really have these options available to them. Aside from pet specific online marketplaces such as Petpro.co.th and dogilike.com, there is still a lack of reputable products online even though the demand exists. Only recently, Lazada Thailand reported 600% growth rate in its pet product category, mostly made up of third-party merchants.

Even well known global premium pet food brands such as Alpo, Royal Canin and Purina can be found through select online marketplaces such as Orami.co.th and Lazada.co.thThe absence of brands, especially in the mid-priced range, with their own site to promote pet information and offer a new selection of products leaves the online space wide open for new entry by someone new.

No pet related brand has launched a brand.com

Brand should look at adopting the direct-to-consumer model for the following reasons:

  • Full control of a branded platform to use in capturing the attention of information-seeking pet owners with educational, SEO-optimized copy with smart content-marketing.
  • Less competition with similar pet brands in a marketplace or the pet aisle of a supermarket.
  • Direct access to consumer data used to increase customer lifetime value in the long run and re-target them later in the marketing funnel.
  • Save costs by jumping over the middle man -a brand would have to pay 5% commission on a marketplace it sells on.

The American website of Purina by Nestle dedicates an entire landing page to outlining the nutritional value of all its products and its benefits for animals – all to attract attention and persuade the browser to buy.

“A pet food brand with enough SKUs would have a good chance at infiltrating the middle class pet owner market,” – Harprem Doowa, co-founder of PetLoft.

Case study: Leveraging Pedigree’s offline popularity

Although competition is set to intensify between brands looking to capture the mid-range pet product market, Mars Thailand remains a market leader in the country. One of the best-performing brands under its portfolio is Pedigree.

The household name for pet food has maintained its popularity through a series of both online and offline strategies. The brand held a successful “Valentine’s Day” campaign through its community initiative, Pedigree Foundation, where it took to social media to spread awareness about donating to help stray dogs using the hashtag #ValentinesDay and solidified itself as a dog brand that cares.

The PedigreeUS Twitter account alone has over 18,000 followers and its various other country specific accounts have over 1,000. An online following such as Pedigrees could easily be utilized to send traffic to a shoppable landing page.  

Pedigree’s #ValentinesDay online campaign

Pedigree products at aCommerce Thailand’s warehouse

By only having online visibility on marketplaces, Pedigree does not have access to customer data, no control over grey market distribution and lacks control over content and personalization.

It becomes more difficult to sell online when the brand is up against competitors for the same customers on the marketplace.

Timing is everything.

Thailand’s pet industry is wide open for brands, both old and new, to enter and grab market share. And more and more global companies and VCs are figuring this out. 

Recently, Thai VC firm 500 TukTuks announced its investment in Singapore’s PerroPack, an online petcare ecosystem that includes Perrobox, an ecommerce subscription service for pets and PerroMart, an ecommerce platform for all things pets. It won’t be long before the same business models are implemented in Thailand.

As the Thai market begins to condense with the flood of global players and diversified consumer demand, more sectors become less attractive but the pet industry remains an empty bliss. Going online to find a necessity like pet food and pet care products will eventually become the norm as Southeast Asians grows increasingly familiar with the habit of ecommerce.

“The pet product market in Asia is becoming increasingly mature and diversified, and is likely to grow faster than the world average in the coming years, “ – Neil Wang, global partner and president for Greater China at Frost & Sullivan.

Any pet brands ready to graduate from the doggy paddle?

For online shoppers, 11.11 has become a shopping phenomenon. The biggest online sales event of the year in China is co-opted by ecommerce giant Alibaba, where discounts from participating sellers range from 25% – 70% off, and a record $5 billion of products were sold in under 90 minutes last year.  

The company, which owns online marketplaces Tmall and Taobao sold $14.3 billion worth of goods during the sales period last year, targeting 386 million annual active buyers – a number greater than the US’s general population.

According to Fortune, the campaign is quite accurately labelled “Black Friday on steroids”.

The combined earnings of Black Friday and Cyber Monday, North America’s famous sales period, amounted to $7.54 billion last year, and while impressive, only amounts to half of Alibaba’s earnings in the same sales period.

11.11 southeast asia

11.11 Cultural Backstory

Singles’ Day originated in Nanjing University in 1993 where groups of young single friends would get together and celebrate their unattached status by shopping. In 2009, Jack Ma, chairman of Alibaba Group, saw an untapped opportunity and created an online shopping event around young peoples’ behavior, framing it as a day of personal indulgence.

‘Singles’ day’ was made famous and monetized by Alibaba, turning the obscure day into an online shopping extravaganza on its online marketplaces and boosting business during China’s slack period between October’s Golden Week and Lunar New Year in January to February. It was also introduced around the time ecommerce exploded in China, leading to a 5,740% growth in Alibaba’s “Double 11” sales event between 2009 and 2013.

11.11 southeast asia

The company has since trademarked the term in December 2012, meaning that it can take legal action against media outlets that accept advertising from competitors who specifically use this term.

11.11 sales also reach hundreds of millions of Chinese shoppers beyond large cities such as Beijing and Shanghai, who rely on Alibaba’s Taobao and Tmall because they are without big shopping malls in their towns.

The event’s offline marketing impact also contributes to 11.11 success thanks to appearances from global celebrities such as Daniel Craig and Kevin Spacey for the launch event, which has been the company’s way of turning the shopping extravaganza into a sort of event to be celebrated.

For the first time since the launch of 11.11 campaign, Alibaba Group has announced that this year’s campaign will last for 24 days instead of 24 hours. It will also mark the first introduction of Alibaba’s virtual reality technology, Buy+ , which promises to transport shoppers to retail stores overseas through a VR headset. This year will also see the expansion of 11.11 to Hong Kong and Taiwan.

Alibaba’s 11.11 success means it comes as no surprise that Southeast Asia has followed in the footsteps of China. Despite it not being a day to celebrate single-hood, large online marketplaces have each adopted their own customized versions of Alibaba’s 11.11 campaign such as Lazada and Moxy (now known as Orami).

11.11 southeast asia

Online players are under pressure to perform and participate during this period as bigger brands and retailers begin offering better sales and greater discounts thanks to deeper pockets and larger number of merchants.

In Southeast Asia, marketplaces are using their big 11.11 spin-offs as a litmus test of how well they’re performing against competitors in local markets.

How Southeast Asia makes 11.11 their own

From hiring more manpower to ensuring that shoppers are well aware of the sales event, marketplaces push out social media strategies months before the actual sales event and calculate stock predictions to ensure the region’s largest sales event is a success. Here are how Southeast Asia’s biggest players successfully take advantage of the 11.11 buzz: 

Marketing blitz: Social personalization is key

As the largest ecommerce marketplace in the region, Lazada has adapted 11.11 by extending it with their very own 12.12 event on December 12th and coining it ‘The Online Revolution’, which started in 2012.

Lazada Thailand has seen a rise in their gross merchandise value (GMV), chalking up $40 million during 10th-12th of December 2015 and reflecting a gradual increase in participation from consumers.

Lazada Thailand saw a 300% increase in orders when compared to 2014.

“In Thailand, we notice that successful marketing channels are very social,” says Baptiste Le Gal, CMO at Lazada Thailand. “Customer relations management is the key channel to reach out to customers with personalized offers that match their interests.”

The consumer trend has shifted slightly in Thailand. Baptiste noted that electronic goods used to reign as the top selling category, but now more lifestyle centric segments such as health&beauty and home&living are moving faster on the platform.

Thailand’s high mobile adoption is also contributing to how consumers shop on Lazada.

“Mobile transactions accounted for 70% of the 400,000 items ordered during Lazada’s online festival last year,” commented Baptiste.

The mobile first market means that Lazada is focusing on the mobile aspects of its channels, and ensuring that Lazada’s mobile app is optimized for the best customer experience during the campaign period. The marketplace has also launched an advert, ‘make your dreams come true‘ in Singapore, gearing shoppers up for the big event.

Zalora, Rocket Internet’s fashion portal, also follows the Rocket formula by offering sales up to 80% off for both 11.11 and 12.12. Zalora Indonesia’s marketing strategy promotes online campaigns from October until the grand finale of 12.12, starting with Zalora Great Sale currently ongoing now, which shoppers can treat as a warm up to the main event.

“In 2015, overall sales for 12.12 increased by 30 times more than an average day, with participating brands seeing a drastic increase in sales even after the campaign was over,” says Priyanto Lim, Head of Marketplace at Zalora Indonesia.

11.11 southeast asia

But slapping big discounts on jeans and jackets isn’t enough. Zalora Indonesia also holds online competitions, provides extra giveaways and uses celebrity endorsements on social media as part of the big push to generate buzz around the sales event. Essentially, every customer facing channel is jam-packed with purchase incentives and triggers to drive sales.

It appears that speculations of brands feeling pressured to participate and make deliberate cost cuts to compete with other merchants don’t hinder the impact of the campaigns.

“Contrary to what articles suggest, brands are very willing to partner with us as they benefit from the extra traffic,” Priyanto adds.

Female centric marketplace Orami is focusing on curating original ‘Singles’ Day’ themed content and community to drive traffic to the site and engage shoppers rather than launch a big promotional campaign.

“To drive social media engagement, Orami will also use Facebook as a tool to create engagement with users through online games related to Singles Day,” says Shannon Kalayanamitr, co-founder and CMO of Orami.

Targeting a mobile centric region

Shopee, Garena’s mobile shopping platform, released its own version of the mega sale for the first time this year, coining it 9.9 on September 9th. Benefiting from a fast accelerating mobile market in the region, the platform targeted Thailand’s mobile first shoppers by progressively releasing specially marked down products throughout the day to keep shoppers anxiously clutching their mobile phones.

Shopee’s website even publishes a discount schedule ahead of time so shoppers can set up an alarm for the product they’re eyeing, creating a ‘ready-set-go’ mentality for shoppers to encourage competitiveness and in turn, more shopping.

11.11 southeast asia

Niche service providers jumping on the bandwagon

11.11 has also inspired online service providers in Southeast Asia to cash in on the online flurry.

Groceries on demand service provider, HappyFresh Indonesia, offered up to 30% off its most popular products in its marketing campaign last year.

11.11 southeast asia

And a recent addition to the online grocery scene in Thailand, honestbee, is currently working with popular Thai supermarket chain Villa Market to tap into the ‘necessary goods’ sector that includes everyday items such as water, fresh food and meat. These items will all be a part of the delivery service’s big sale campaign.

When groceries go on sale, shoppers tend to ‘stock up‘, especially when purchasing online as the selection is wider.

“We look at the purchase patterns of our customers to see what kinds of items are popular among shoppers. For example, customers in residential areas often order large volumes of mineral water and fresh fruit so we have to anticipate that these orders may spike during our 11.11 campaign,” said Piyawat Laiphithak, Marketing Manager at honestbee, Thailand.

honestbee is also playing directly on China’s ‘Singles Day’ gimmick as they plan to give away snacks such as gummy bears and popcorn for shoppers.

11.11 Logistics: What happens behind the scenes?

The phrase “it takes a village to raise a child” is fitting here, if we swap the child for a large scale online campaign. How do ecommerce companies ensure optimal functioning during this hectic time?

For ecommerce solutions provider aCommerce, the company plans approximately two months ahead to accommodate the spike in orders for clients that participate in the sales event.

“We increase our manpower by three times through temporary contracts and run 24-hour operations during spike times such as 11.11 to ensure customer demands are tended to,” says Phensiri Sathianvongnusar, COO at aCommerce Thailand.

The temporary staff are hired through an agency and receive 2-3 days of training for their specific tasks prior to the sales event.

During the spike period, aCommerce also uses its multi-shipping platform to tap into over 20 courier networks to ensure that deliveries are made on time, for the best rate and no order gets dropped, as time and speed are the most crucial things during the campaign period.

11.11 southeast asia

“Inventory planning is crucial to campaigns such as 11.11 and 12.12, so we use historical data from previous years’ events to determine what types of products tend to be popular during big sales and avoid stock shortage,” adds Phensiri.

For brands that are not participating in the 11.11 campaign, they are part of the express line which ensures that their products still remain a priority during the campaign period.

A league of our own

Using China’s 11.11 as a backdrop, Southeast Asia’s online marketplaces are carving out their own versions of the mega-sale but they cannot simply replicate Alibaba to find success.

Southeast Asia can potentially leapfrog China with the region’s explosive mobile growth and gaining middle-class. Big campaigns such as 11.11 can only grow in success every year as more consumers move online. Mobile first platforms such as Shopee are already moving fast and capturing the surging mobile market in Southeast Asia, mirroring the rise of mobile shopping in China, where 72% of purchases during last year’s 11.11 came from mobile.

The positive reception and the duration of the campaigns is a testament to the region’s growing appetite for ecommerce, perhaps an indication that we are positively inching away from China’s shadow.

By Anutra Chatikavanij

Techsauce report on Thailand investments 2016

Thailand is becoming a hub for tech investors who have typically looked to Indonesia or Singapore for market entry, as detailed in Techsauce ‘Thai Tech Startup’ report. The co-founder Amarit Charoenphan comments,

Thailand’s solid infrastructure, business stability and low operating costs make it a perfect storm for startups.

Countries such as Indonesia often get a lot of investor attention because of the vast demographic and Internet penetration. However, it is still a very underdeveloped landscape with one of the lowest credit card penetration rates in ASEAN at 6%. Despite Thailand experiencing two government overthrows in the last six years, the country has experienced 29x growth in startup investment since 2011.

The number of startups have grown significantly as of June 2016

The number of startups have grown significantly as of June 2016

tech-sauce

Key highlights about Thailand’s investment landscape:

  • The number of Thai startups has risen 29 times over the past four years
  • Funds raised by Thailand based startups shot up to over $108 million from just $2.1 million in 2012
  • The biggest investment round by a startup in 2012 was $2 million. As of June 2016, that number reached $15 million, raised by B2C ecommerce site Orami (formerly Moxy)
  • There are 60+ Venture Capitals and Corporates currently investing in Thailand, compared to just 1 in 2012
  • $150 million estimated in M&A since 1998, but only $37 million disclosed. This includes Orami and OLX Kaidee
  • The rate of total disclosed funding has also risen considerably, from $1 million in 2011 to $108 million in 2016

techsauce

The full version of  “Thai Tech Startup Ecosystem Report Q2” can be found here.

Orami-Echelon

Source: e27

Ecommerce will be dominated by female consumer and it’s crucial for companies to fine-tune their marketing strategies if they wish to remain relevant and profitable says Melissa Senduk, Group Creative Director of female-centric ecommerce portal Orami.

In Southeast Asia, women contribute to 80% of all household purchases, out shop men by 20%, and spend 40% more time on online retailers presenting an untapped market of $2.4 trillion US.

“Today, it is the woman in the household who makes a lot of purchase decisions, and this goes beyond traditional categories such as groceries and personal care, and extends to cars, financial services, insurance services and bank products,” said Senduk.

How do you reach her?

Senduk advises ecommerce players not to think about the woman as just an individual, but also the people in her social and family circle as women leverage one another for advice when making purchasing decisions.

Brands also need to focus on the visuals and the UX. Increased smartphone and mobile ecommerce penetration have made it imperative for brands to design the user experience to be mobile-first, as opposed to desktop.

Research finding shows that 80% of women put their trust in blogs and 60% actually purchased the products after reading reviews.

Brands committed to social responsibility, or seek to inspire consumers, would be more appealing to her.

Female consumers are expecting more today

A one-size-fits-all approach no longer works for them. You need to carefully craft your branding and social media message; find out the language female consumers are using and what trends appeal to them.

While all millennial consumers generally are more demanding, the major difference that separates the male and female is women consumers see shopping as a form of entertainment, while men a necessity.

Women consumers are the gatekeepers of the households of today, so it is important for brands to inspire and share the values of women.

A version of this appeared in e27 on June 21. Read the full article here.