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Wind down from a busy Friday by catching up with the key ecommerce headlines here.

1. Indonesia’s HaloDoc Raises $13 million in Series A, from Singaporean private equity firm Clermont and NSI Ventures

The app is available for Android and iOS and offers a full range of services: online consultation, medicine delivery, on-demand lab tests, a hospital and doctor directory, as well as an appointment scheduler. There’s no web version of it, just the app. Read the rest of the story here.

 

2. New Amazon data from Wall Street should terrify all retail stores in the US

 According to a note published on Thursday by financial firm PiperJaffray, Amazon now has a warehouse or delivery station within 20 miles of 44% of the US population. Read the rest of the story here.

 

3. Rocket Internet’s Home24’s valuation fall sparks concerns of downgrades in other Rocket firms

The volatile shares of Rocket Internet dropped on Thursday after the German e-commerce investor slashed the valuation of its Home24 online furniture business by more than half in a funding round. Read the rest of the story here.

 

4. Maybank partners with Samsung Pay to strengthen presence across Singapore

The launch of Samsung Pay in Singapore follows the bank’s introduction of its mobile wallet in Malaysia last month, and will be followed by the progressive roll‐out of other digital initiatives across the region. Read the rest of the story here.

 

5. Alipay takes part in $460 million stake in Yum China, To Implement Alipay in KFC and Pizza Hut

This collaboration will see Yum China move into a new chapter of world class mobile payment services for tens of millions of customers across its brands. Read the rest of the story here.

Indonesia’s Indosat Ooredoo has launched a new mobile payment service for retailers, reports Retail News Asia.

The platform titled D-Pay is a collaborative project with GoSwift International and Indonesian banking chain BNI.

D-Pay will allow merchants to use their existing mobile devices as multifunctional payment platforms, accepts Visa, MasterCard or JCB credit and debit cards, as well as eWallet services.

D-Pay services for retailers come bundled with data, voice and SMS allocations from the operator.

“In addition to our current products – electronic wallet, bill payments, ecommerce payments, domestic and international money transfer and branchless banking, D-Pay will help reduce cash collection and logistics costs for our ecommerce partners, which will in turn benefit customers with lower prices and assured deliveries,” said Prashat Gokarn, Indosat Oolerdoo’s Chief Officer New Business And Innovation

The service is tailored for ecommerce companies, as well as SME retailers in need of alternative payment methods but unable to easily afford standard banking solutions.

This service simplifies things by allowing merchants who do not have access to traditional point of sale services to still accept card payments. This initiative should be particularly popular with smaller merchants who want to penetrate a wide range of customers without investing heavily in banking infrastructure.

A version of this appeared in Retail News Asia on August 7. Read the full version here.

Cross border vs local ecommerce fulfillment strategies in Southeast Asia

The pros and cons of localized ecommerce versus cross-border ecommerce approaches to logistics in Southeast Asia. Source: aCommerce Data 2016

A major global sports brand recently decided to switch its ecommerce logistics strategy in Southeast Asia from a regional cross-border one to a localized one. The brand had been fulfilling its Indonesian orders via a cross-border hub in Singapore since the early 2010s.

How did that scenario work out? Well, the absence of a website in a local language, painful payment experience and sluggish delivery ended up undermining the company’s highly anticipated growth potential. They realized that in order to become succesful in Southeast Asia’s largest market, they would need to fully commit to a localized strategy. Bain & Company’s Southeast Asia Digital Consumer Survey supports the difficulty of a non-localized strategy – the figure below shows that global players consistently scored lower in customer satisfaction than regional and local players on the Net Promoter Score.

Local and regional players seem to have a customer experience advantage over global players. Source: Bain & Company 2016

It may seem the moral of this brand story is that a localized strategy trumps a cross-border one from a business perspective but you’re mistaken. It ultimately depends on a set of factors unique to each business and the eIQ team has taken a moment to depict some of the scenarios for when one ecommerce fulfillment strategy is more appropriate over the other.

“Sometimes it makes sense to adopt a regional ecommerce strategy but every company needs to decide whether and if it is time to go local.”
– Mitch Bittermann, Group Chief Logistics Officer at aCommerce

As global brands increasingly wake up to the Southeast Asian opportunity for ecommerce, what is too often overlooked is the market’s immature state and more specifically, the logistical challenges businesses must overcome such as lack of regional payment systems and a reliance on Cash on Delivery due to a highly unbanked population. 

There are two main approaches to entering Southeast Asia:

  1. Cross-border logistics: employing third parties and local partners to do the entire fulfillment process from abroad of one or two centralized hubs (often in Singapore for Southeast Asia) and/or
  2. Localized fulfillment: investing in the country’s local infrastructure, such as warehouses, staff and a delivery fleet and do the fulfillment nationally. Another option is outsourcing to a third-party service provider to do the localization for you, as Sales Stock, an ecommerce startup, did with aCommerce in Cawang

It’s important to consider all elements of both strategies because the cost of choosing the wrong strategy may negatively impact a brand’s reputation, decrease margins and ultimately put commerce operations to a halt. To leapfrog the learning curve, here is a snapshot of the main steps taken when choosing an ecommerce logistics strategy in Southeast Asia.

Step 1: Test the Local Markets Via Cross-Border Fulfillment

When a business is unsure of the demand for its product, a phased approach is an efficient way to test the waters without full commitment. It allows time for calculation of the business’s scalability. Starting with a cross-border approach means that the business wouldn’t need to invest heavily in inventory and a local team to run the operations. Because the product is shipped from overseas, the company will usually outsource the entire fulfillment process in the local country. Amazon’s current strategy in Southeast Asia is to adopt a cross-border model by connecting sellers overseas to buyers in local Southeast Asian countries, there is no need to engage in costly investment regarding fulfillment such as warehousing, handover and last mile logistics. 

Singapore is a good hub for cross-border due to its escape of typical regional challenges

Infrastructure in Singapore makes it very convenient for businesses to do cross-border ecommerce fulfillment resulting in many companies using the country as a jumping board to enter the ASEAN market. For example, Singapore’s ratio cross-border over total ecommerce is the highest in the region, reaching 55% according to a report by Payvision. It also depicts the island-city-state as particularly cross-border friendly – low customs tax close to 0%, mature infrastructure, with the busiest seaport by cargo tonnage behind Shanghai. It is important to note that Singapore is an exception and not representative of the development of the rest of the region. 

Cross-Border or Localized Ecommerce Fulfillment in Southeast Asia

Singapore has the lowest customs tax in ASEAN. Source: AT Kearney

In addition to Singapore, cross-border ecommerce is also big in Malaysia, which makes up 40% of the total ecommerce market in the country. This fact is why, according to Bain’s comparative analysis, global players scored best in these two countries.

quick guide to ecommerce logistics in Southeast Asia

Easy cross-border regulations in Singapore and Malaysia saw global players performing well in these countries compared to their neighbours.

Considerations & Limitations of Cross-Border

Doing cross-border requires at least four different parties:

  1. Linehaul carrier
  2. Airline
  3. Customs clearance agent
  4. Local delivery partner.

This means whenever a delivery is late, it will be difficult to attribute responsibility and fix the problem.

The same reasoning is applied to reverse logistics. Returning international orders is such a hassle that most people just forego it and absorb the cost of inconvenience. It is important to keep in mind that 92% of customers are very likely to shop again with an online or catalog retailer if the returns process is convenient. Conversely, 82% will not shop from a store that has a complex returns policy.

Before deciding on the best strategy for your business, here are some key facts to consider derived from the global sports brand case study:

  • Cash On Delivery (COD): is still the preferred payment method in Indonesia where credit card penetration is less than 15%. In some countries, COD can be anywhere from 50-70% total orders shipped. By not offering it, brands would lose out 50-70% of the total sales opportunity.
  • Complications for cross-border COD: Cross-border COD adds extra steps to cash flow from reconciliation to the bank and to the company HQ, which prolongs the entire process.
  • Transportation Lead Time: Being able to deliver within a short time frame improves customer satisfaction. Indonesia is made up of over 18,000 islands with poor road links in certain areas. For a large global brand, partnering up with a local logistics provider will help cut down transport and delivery times.
  • Duties and Taxes: Businesses should consider that an online shopper would pay an additional one-third of an item price in duties and taxes if ordering online to another ASEAN country  (see fig.18 above).

“Understanding and overcoming local country regulations are the keys to enabling ecommerce which can be difficult to manage from abroad.” – Mitch Bittermann

“ASEAN is one community, nonetheless, each country has its own flavors in terms of customer expectations, payment methods, transportation network, taxes, and regulations,” said Mitch Bittermann. “Understanding and overcoming local country regulations is the key to enabling ecommerce because it’s difficult to manage from abroad.”

Step 2: Tackle Logistics Challenges Locally to Get More Order Volume

Having a localized ecommerce fulfillment strategy in Southeast Asia means more control over the logistics process. Local investment in the fulfillment process includes better supervision of inventory management, handover, last mile delivery and reverse logistics.

For example, going local reduces the number of parties involved meaning easier identification of problem areas to enforce fast acting solutions. The less distance traveled to reach end customer will also lower costs.

Consider going local when you have major order volume or trying to get more order volume. Fulfilling major volume orders abroad might become more expensive in the long run.

Doing things locally could also increase your ability to attract more demand from the previous consumers who are not willing to pay for that extra mile delivery or wait more than a week to get their orders. In the case of the aforementioned global sports brand, they’re foreseeing the increase of orders to 1000 per month after a year of going local, 10 times from what they are currently doing right now regionally.

It saves time for the customer and improves payment experience

Saving time for customers means higher conversion rates and more sales. In the case of Indonesia, a brand can reduce shipping time from 5-8 business days to 1-2 days by going local. This has a significant impact knowing that 6% of cart abandonment rate is due to slow shipping. 

Cash on delivery remains the preferred payment option for online customers in Southeast Asia. Cash handling process is easier when the operation is located in a single country. For the sellers, it means faster cash reconciliation and greater transparency.

Considerations of a localized strategy

As the brand’s positioning becomes stronger in one country and the order volume rises, managing customer expectations from afar gets harder and could hinder businesses growth, as was the case with the anonymous global sport brand mentioned above. In the long run, the cost of operating with third parties might be more costly than to invest in local infrastructure.

But markets in Southeast Asia are very fragmented and can be complicated for outsiders to steer the way in. Each country has its own set of regulations of doing business for foreign brands and challenges that might be completely different from another country in the region. And this complication is what usually deters the businesses to take the initial jump and operate locally.

Choosing the right local partner is key in doing business in new unknown markets, especially Southeast Asia. Businesses can leverage their local expertise to find the best strategy to ease their way into the Southeast Asian market.

No “One Size Fits All” Approach

“Ultimately, the right approach would depend on the business model and scalability potential, there is no ‘one size fits all‘ approach to choosing the right logistics strategy.” –  Mitch Bittermann

BY ALEXANDRE HENRY & ANUTRA CHATIKAVANIJ 

Disagree or have recommendations? Tweet your feedback to @ecomIQ

Indonesian retail distributor company for medium-high brands, Mitra Adiperkasa (MAP), recorded profit growth of 78% to $3.5 million (46.3 billion IDR) from $1.9 million (26 billion IDR) in the same period last year. One of the reasons for this increase, as reported by Bisnis.com, is the company’s venture to ecommerce.

MAP, who has more than 150 brands under its management, launched its ecommerce site MAP eMall last year.

The company’s investment through ecommerce has created more productivity, efficiency and increased their profit margin – Corporate secretary of MAP, Fetty Kwartati

She also added that the achievement in the first semester of 2016 is also supported by strong consumer spending during the month of Ramadan. She claimed the increase in demand is also because the brand is getting more recognition.

According to Bloomberg, MAP profit until the end of the year is projected to reach $14.6 million (192.4 billion IDR), growing 415.36% from last year at $2.84 million (37.33 billion IDR). Revenue projection for MAP will reach $1.1 billion (14.19 trillion IDR), growing 10.59% year-on-year.

In the financial statements, the company state that their net income until June 2016 has reached $502.2 million (6.66 trillion IDR), up 9.18% from $464.2 (6.1 trillion IDR) YOY.

The company’s revenue mostly came from retail and wholesale sales worth $462 million (6.07 trillion IDR), an increase of 9.56% from the same period the year before $421.5 million (5.54 trillion IDR).

A version of this appeared in Bisnis.com on August 3. Read the full article in Bahasa here.

Poor market conditions and increasing innovation in the digital space is facilitating the growth of ecommerce, according to e27.

Consumers are being more economical amidst slow economic growth. A report by Deloitte in 2015 cited that in APAC, retail revenue growth slowed dramatically in 2014. 55.3% of the APAC companies surveyed in that period reported a lower net profit margin and 4.3% reported a negative net profit margin.

While sales have contracted, the impact would have been even worse if it wasn’t for ecommerce.

Of the top 140 most profitable retail companies worldwide, 7.6% of sales came from online channels and 33% of the companies don’t have an offline store.

Examples of most profitable online retail companies 

  • Amazon: Raked in more than $70 billion in revenue in 2014
  • JD.com: Sales jumped to 62% at $17.7 billion
  • The top 50 e-tailers in total saw a boost of 19.7% in profits in 2014.

Shift in consumer behavior

There are various factors that are contributing to the growing trend of online shopping, from a sharp increase in smartphone adoption, the rise of cross channel social media to competitive pricing. Over half of survey respondents said they have shopped online at least once since 2016, in a total retail survey published by PWC.

51% of online shoppers shop through social media channels in Thailand, Malaysia at 31% and China at 27%.

Shoppers in Asia Pacific are more social orientated, their spending habits are susceptible to what their peers think.

In Malaysia, 69% of consumers said that feedback and reviews influence their purchasing behavior.

Shopee case study: heading towards retail innovation

It may be too soon to say that the sun is setting on traditional brick and mortar retail, but radical innovation is crucial to retain customers. Figures have showed that the ecommerce sector provides the engine of seismic changes that the industry needs in this slowing economy.

An example of disruptive technology is Singapore based C2C ecommerce platform, Shopee, developed under internet platform service Garena.

Shoppee allows buyers to snap and upload screenshots of their items directly onto the platform and start selling instantly.

For more established SMEs, it has a ‘seller assistant’ function to help to organize inventory and track performance.

The platform also forms third party collaborations to enable logistics, such as a partnership with Singapore based startup, NinjaVan. The platform also recently launched Shopee University, an online program to teach sellers online marketing and photography skills.

Ecommerce does not just enable traditional businesses and SMEs to seek another channel for revenue, it is democratising commerce. By putting ditching the physical modus operandi, anyone with a smartphone or a computer can put an item for sale to potentially millions of customers in a matter of seconds.

A version of this appeared in e27 on July 13. Read the full version here.

Since Pokémon Go’s surge in popularity in the US following the app’s launch this month, many retailers are now looking to seize marketing opportunities while the app is still trending, reports Reuters.

The app looks like it may be set to challenge young internet companies that specialize in increasing foot traffic for small businesses, and may play a role in major brand marketing.

The game, which requires players to walk around real-life neighborhoods to hunt for virtual Pokémon characters on their smartphones, has more than 65 million users in the US after launching in the first week.

The game is already playing a part in boosting foot traffic for restaurants, coffee shops and small retailers.

A pizza bar in Long Island City in New York claims that its sales jumped 75% over the weekend, by activating a lure model feature that attracts virtual Pokémon characters to the store.

The store manager only paid $10 to have a dozen Pokémon characters placed at the location.

This level of instant effect could become a potential threat for companies like Living Social Inc. and Foursquare, and other companies which have revolutionized online marketing for smaller businesses.

People born in the 1980s and 90s  grew up with Pokémon. It’s approachable and reassuring and that’s why it’s gone from zero to millions of users in just a few days.

The app has a chance to disrupt others as there has not been a geo-location social platform that can lure in so many people at once. With Pokémon Go, it is bypassing a lot of the digital marketing channels that brick and mortar shops have been relying on for the past few years.

Pokémon Go users are spending more time in virtual reality than on Facebook, Instagram and Snapchat, according to SimilarWeb.

The thing with overnight hype is that it can eventually fizzle out. Retailers should capitalize the Pokémon Go trend before it becomes a phase that nostalgic adults claim they played for a month or so.

A version of this appeared in Reuters on July 13. Read the full version here.