While president-elect Donald Trump is working hard to stop China from becoming a global superpower, China hasn’t slowed its digital hegemony in Southeast Asia – China meaning Alibaba of course. After calling out Southeast Asia as being on the cusp of an ecommerce golden age in our 2015 trends edition, Jack Ma and his team swooped in four months later and picked up Lazada, the region’s leading ecommerce marketplace, for a crisp $1 billion.
The Lazada-Alibaba deal, Alibaba’s largest overseas acquisition to date, is a pivotal event for Southeast Asia as its implications span the entire commerce value chain from digital advertising, logistics, finance, insurance to even healthcare.
A look back at 2016
Even without the Lazada deal, this year still proved eventful for ecommerce in the region: Fast-fashion fizzled out and Rocket Internet’s Zalora ending up selling for peanuts to Thai retail conglomerate Central Group.
Singpost’s headaches continued after the sudden removal of its Group CEO Wolfgang Baier in 2015, the company also lost its COO, CFO and the group’s chairman stepped down amidst a corporate governance scandal. These events pushed back the company’s deal with Alibaba a third time and wasn’t closed until October.
Across the region, asset-heavy B2C ecommerce suffered. Singapore homegrown RedMart was acquired by Lazada after it couldn’t bleed anymore money and Ascend Group’s iTruemart shut down in the Philippines only a few months after boasting to become the first Thai regional ecommerce player by 2017.
Japan’s ecommerce juggernaut Rakuten withdrew from Southeast Asia and sold its Thailand business back to the original founder. Moxy moved away from traditional mass ecommerce while merging with Indonesia’s Bilna to become Orami, a female-focused content and commerce play that raised funding from Facebook co-founder Eduardo Saverin.
Borrowing Jack Ma’s terminology, if 2016 was the appetizer, then 2017 will be the main course for ecommerce in Southeast Asia. With a $238 billion grand prize and Amazon poised to enter Singapore in Q1, it’s already shaping up to be an interesting year.
1. The giant finally awakens: Alibaba becomes more active post-Lazada acquisition
Arguably the biggest ecommerce milestone in Southeast Asia this year was Alibaba’s $1 billion acquisition of Lazada but not much action has taken place at surface level since the deal. That is slowly changing already and Alibaba will soon introduce its entire ecommerce ecosystem to Southeast Asia in the coming year. It consists of Ant Financial, Cainiao and the Taobao Partner (TP) program just to name a few.
Launched in China seven years ago, the TP program aims to enroll suppliers to provide ecommerce related services to Taobao’s merchants. TPs such as Baozun and Lili & Beauty offered store operations and fulfillment services that enabled Taobao and Tmall to grow into two of the biggest ecommerce platforms in China.
The imminent launch of a similar program in Southeast Asia (ahem, Lazada Partners?) will create ample opportunities for an entire ecosystem ranging from digital agencies to delivery companies. Full-service ecommerce enablers such as aCommerce and SP eCommerce are well-positioned to further grow the $238 billion Southeast Asian ecommerce opportunity.
2. Last-mile logistics will get commoditized, accelerated by Alibaba’s Cainiao Network
Logistics is often considered the biggest bottleneck to ecommerce growth in Southeast Asia and has therefore resulted in plenty of venture capital funding spawning an army of last-mile and on-demand delivery startups such as Ninja Van, Ascend Group’s Sendit and Skootar. Even cab and bike hailing apps like Go-Jek and Grab have tapped into delivery services as an additional revenue stream. All this has added pressure to incumbents like Kerry Logistics, DHL and JNE who are only scratching the surface in the fast-paced ecommerce logistics space.
This nascent, fragmented and hyper-competitive ecosystem is similar to that of China a decade ago and what spurred Alibaba to launch Cainiao Network, an open platform that aggregates all last-mile vendors. This asset-light approach addressed Alibaba’s weakest link—logistics—and enables the company to leverage its massive demand to control the conversation.
Over 70% of business for third-party logistics (3PLs) in China now come from ecommerce of which Alibaba drives the vast majority. This allows them to set industry standards and increase price competition among last-mile providers, essentially turning the latter into a race-to-the-bottom, commodity play.
Alibaba has already begun bringing in Alipay and Ant Financial and with Southeast Asia’s logistics ecosystem following China’s trajectory, the introduction of Cainiao Network is only a matter of time.
Cainiao Network is Alibaba’s missing piece of the puzzle to control the entire ecommerce value chain – Cainiao Network Business Model
3. The battle for “first-mile”: New threats to Google and Facebook
Few people realize that ecommerce giants like Alibaba and Amazon aren’t only a threat to their direct competitors such as JD and Wal-Mart but also to the likes of Baidu and Google.
With product searches increasingly moving off search engines and directly on to ecommerce sites, Alibaba and Amazon are shaking up internet advertising. In the US, 55% of people now start product searches on Amazon, up from 44% in 2015. This is a big deal because product searches are one of the most lucrative search keyword categories commanding high cost-per-clicks.
In China, the rivalry between Alibaba and Baidu has led the former to block Baidu’s search engine spiders from crawling and indexing Alibaba’s pages since 2009, effectively preventing users from going to Baidu to search for products.
Expect this battle for “first-mile” to kick off in 2017 in Southeast Asia when Alibaba migrates Lazada over to its Tmall platform and introduces Alimama, its proprietary self-service ad platform similar to Google Adwords.
Merchants on Lazada will have access to a variety of PPC (Pay-Per-Click), CPM (Cost-Per-Thousand Impressions) and CPS (Cost-Per-Sale) based advertising such as Tmall’s P4P “Express Train” PPC search ads. These ads command an impressive 25% of China’s total online search traditionally dominated by Baidu. To give an idea of Alibaba’s progress in search advertising, Google China’s search ad market share peaked at 30% before throwing in the towel and exiting the Chinese market.
Alibaba’s ad business is more than just search. In addition to Alimama, it also operates an affiliate platform called Taobao Affiliate Network, a display ad network called TANX (Taobao Ad Network and Exchange) as well as a Data Management Platform that rivals Oracle’s Bluekai and Adobe’s Audience Manager.
Media companies better brace themselves for new competition and digital agencies should start learning how to buy and optimize media on the Lazada platform in 2017.
4. Alipay’s entrance into Southeast Asia will drive consolidations in the online payments sector
The new year will mark the beginning of consolidation in the payments space in Southeast Asia. Cash-on-delivery (COD) dominance—75% of ecommerce transactions in the region—has inspired a plethora of startups like Omise and DOKU and established telcos and banks to build the next PayPal.
But most of these initiatives don’t address the core of the issue—lack of credit card penetration and a large population of unbanked in Southeast Asia. For example, LINE Pay, the Apple Pay-esque solution from one of Southeast Asia’s most popular messaging apps, only works with credit cards. While great from a PR perspective, these initiatives have yet to shift consumers away from COD.
Majority of fintech ‘solutions’ have been created to do “technology for technology’s sake”— building a faster car when what is really lacking are more roads.
Lacking what’s most important—scalable distribution channels—we expect these payment companies to struggle throughout 2017. With Lazada, Alibaba pulled off the ultimate trojan horse strategy to bring in Alipay and Ant Financial into the region. The marketplace offers a massive user base and distribution channel that most Southeast Asian payment startups envy.
5. “Ecommerce 1.0” to “Ecommerce 2.0”
As previously predicted, Rocket Internet’s Zalora had to sell its Thailand and Vietnam businesses for chump change to local retailer Central Group. This same year, Cdiscount Thailand, part of French retail conglomerate Groupe Casino, was sold for $31.5 million to TCC, a local Thai company that also owns popular beer brand Chang.
Alibaba’s presence and the rumored Amazon launch in Singapore in Q1 2017 closes the window of opportunity for “Ecommerce 1.0” plays—those that peddle other people’s products to a mass audience. Even MatahariMall, the “anti-Lazada” ecommerce initiative launched by Indonesian conglomerate Lippo Group, has re-positioned itself as an online-to-offline ecommerce play rather than a direct competitor to Lazada.
As we enter 2017, the opportunity in ecommerce will increasingly shift from “Ecommerce 1.0” towards “Ecommerce 2.0” where firms will base their competitive advantage not on traditional economies of scale but on a mix of what Bonobos’ founder Andy Dunn calls proprietary pricing, selection, experience, and merchandise.
Whereas Ecommerce 1.0 is a game of brute force and strength, Ecommerce 2.0 exploits 1.0 loopholes in many creative ways to avoid the zero-sum game against the likes of behemoths like Alibaba and Amazon.
It’s encouraging to see companies in Southeast Asia already moving towards Ecommerce 2.0. Pomelo Fashion, an online-only, direct-to-consumer fashion brand, focuses on building its own brand and vertically integrating its supply chain by manufacturing its own apparel.
In Indonesia, another startup has taken a cue from the Facebook and Instagram seller playbook, and put it on steroids. Sale Stock, a fast-fashion startup based in Jakarta, has taken a similar path to Pomelo Fashion with its own unique, experiential angle.
With an increasing amount of Sale Stock orders coming from chat sessions on its mobile website, the company has invested in and launched the region’s first ecommerce chatbot to process mobile chat orders on Facebook Messenger, built by former Google, Palantir, and NASA engineers.
6. Expect more casualties from a potential Alibaba and Amazon face-off
2016 was a big year for consolidations in the Southeast Asian ecommerce space:
- Zalora Thailand and Vietnam sold for scraps to Thai retail conglomerate Central Group
- Cdiscount was picked up by Thai tycoon Charoen Sirivadhanabhakdi’s TCC Group
- Female-focused ecommerce player Moxy re-emerged as Orami after merging with Indonesia’s Bilna
- Japan’s Rakuten shut down its Indonesia, Malaysia and Singapore marketplaces as well as returning its Thailand business to its original founder
- Singapore-based online grocer RedMart sold for less than it raised to Lazada on the heels of a rumored Amazon entry into the market with AmazonFresh
And they will continue throughout 2017, especially in the hyper-competitive “Ecommerce 1.0” space. One of the big victims could be Thailand-based Ascend Group, which owns a portfolio of ecommerce and fintech assets such as Wemall (B2C) and WeLoveShopping (C2C). There have already been signs.
Its Philippines entity, launched in late 2015, shutdown this year. And with the company’s focus on fintech—it sold a 20% stake in Ascend Money to Ant Financial this year—Ascend may pull out of retail ecommerce for good come 2017.
7. Brands skip the marketplace bait-and-switch and go direct-to-consumer or multi-channel
There are many benefits for brands to sell on the likes of Lazada, MatahariMall and 11street—relatively quick setup and access to “free” traffic generated by the host marketplace. And that’s why 2016 saw many brands like L’Oreal and Unilever setting up shop on these platforms.
However, brands are gradually discovering that the cons outweigh the pros. Marketplaces collect huge amounts of data that pinpoint exactly which product categories and brands sell well, at what time and which location, and to whom. Amazon has leveraged this valuable information to introduce its own private labels to compete with its merchants.
In 2017, we will see brands getting smarter and leveraging a marketplace presence as an initial and short-term strategy. The long-term strategy is to sell direct-to-consumer via their brand.com sites where they own all the customer data, control of brand image and can offer features like subscription commerce.
Others might adopt a multi-channel approach instead and use marketplaces to sell lower-end and lower price point products while reserving the brand.com channel for a more premium experience.
8. Hyper-competition will drive entrepreneurs and established firms to explore insurance, finance and healthcare
With ecommerce being hyper-competitive and capital heavy, entrepreneurs have started to look beyond physical retail for new opportunities. Following a similar trajectory as the US and China, startups in Southeast Asia will gradually move into insurance, finance and healthcare. The underlying concepts are the same—use the internet and technology to create marketplaces or go direct-to-consumer for non-physical products such as loans, life insurance and even data.
2016 saw new fintech startups such as EdirectInsure—with frank.co.th in Thailand and frankinsure.com.tw in Taiwan—trying to change the way car insurance is being sold as well as incumbents such as Asia Insurance offering Pokémon Go and mobile phone micro-insurance direct-to-consumer and exclusively online.
Alibaba’s acquisition of Lazada wasn’t so much about growing retail gross merchandise volume as it was about getting a scalable distribution channel for Alibaba’s other, higher-margin products. Jack Ma publicly alludes to it in his 2015 letter to shareholders:
“Alibaba group’s strategy is to build the infrastructure of commerce for the future. Ecommerce is only the first step. […] Around half of Alibaba Group’s workforce and our affiliated companies, including Ant Financial and Cainiao, are working on important areas of our ecosystem, including logistics, Internet finance, big data, cloud computing, mobile Internet, advertising and the so-called double H industries—Health and Happiness (the big data-based healthcare and digital entertainment businesses which will take 10 years to become data-driven).”
Expect a roll-out of Alipay and Ant Financial related services (banking, credit scoring, mutual funds, etc.) towards the end of 2017. In addition, we will see more incumbents such as traditional banks, insurers and healthcare businesses moving online.
9. Ignored but not forgotten, companies will focus on the last remaining vestige in Southeast Asia: Myanmar
Businesses will be exploring new markets geographically in Southeast Asia as large markets saturate making greenfield ones like Myanmar more appealing.
With 53 million people, Myanmar is the fifth largest country in Southeast Asia. The country is also very unique compared to its neighbours as the country was shut off from the world until 2011 and is currently leapfrogging straight into the mobile era. Unlike its cousins who are “mobile-first”, Myanmar is mostly “mobile-only”—an estimated 20% of the population is online, most of which happened in the last two years.
Rocket being Rocket went into Myanmar as early as 2012 launching classifieds sites like Work.com.mm and Ads.com.mm. Its first proper ecommerce venture in Myanmar called Shop.com.mm got its start in late 2014. With an average of 90,000 sessions per month for the last six months and flat growth, Shop.com.mm doesn’t exactly paint a positive picture of the ecommerce opportunity in Myanmar.
However, given that Myanmar has 10 million Facebook users in the country, perhaps marketing an ecommerce business the traditional way isn’t the right approach. With so much of Myanmar’s internet usage attributed to social channels, starting out on Facebook shops may be a better way to tap into what could be one of the most interesting future ecommerce markets in Southeast Asia.
(Source: Minzayar Oo / BuzzFeed News)
This has already been proven effective in Thailand where an estimated one-third to half of ecommerce transactions are happening on Facebook, Instagram and LINE. One would expect chat commerce to be even more pervasive in Myanmar.
“Facebook’s influence in Myanmar is hard to quantify, but its domination is so complete that people in Myanmar use “internet” and “Facebook” interchangeably.”—Sheera Frenkel in a BuzzFeed report on Myanmar.
10. On-demand in Southeast Asia will whittle down to a few industries where the model actually makes sense
Once hailed by pundits as the holy grail of ecommerce thanks to zero burden of costly physical assets, on-demand seems to be nearing its end in the US. Other than Uber itself, many Uber-for-X clones have shut down or are struggling such as Homejoy, SpoonRocket, DoorDash, and Postmates to name a few.
In Southeast Asia, things haven’t been much brighter for on-demand startups. Happy Fresh, a groceries on-demand service, recently shut down its Taipei and Manila offices while going through a round of layoffs. It also quietly replaced its former founder and CEO Markus Bihler with a new guy. In Thailand, Inspire Ventures-backed Tapsy, a personal services marketplace, also shut down only few months after launching.
Go-Jek, Indonesia’s bike-hailing and now on-demand everything unicorn, suffered through an exodus of founders, with both its co-founder and VP of product leaving the company in October, triggering suspicions of internal turmoil.
While general sentiment for on-demand startups has taken a hit both globally and across Southeast Asia, in reality this is only the start of a natural process of weeding out all the “me-too” players in verticals where the on-demand model doesn’t make sense.
“The issue isn’t with the concept of something being available “on demand”. It’s whether a consumer or a business will pay a premium in order to have access to it immediately. Just because you make something available on demand, it doesn’t mean people will pay for it,” said Mathew Ward, co-founder and CEO of Helpster, the Bangkok-based company that matches employers with candidates seeking blue-collar jobs.
“Home services is one area that is ‘nice to have’ access to instantly, but not a ‘must have’. People won’t pay a premium for it and your unit economics don’t work, this is why we have seen so many of these fail. If you focus on things that have urgency such as transport or in Helpster’s case, access to qualified staff to fill an urgent staffing need, people will pay a premium and therefore you can build a business that actually works. The “on-demand” model isn’t broken – you just have to look for areas where speed of access is incredibly valuable. If you do, you can build a successful, thriving “on-demand” business.”
With Southeast Asia’s funding sentiment shifting in 2017 from growth at all costs towards sustainability and profitability, we expect to see on-demand startups thrive in verticals where the model works while other “me-too” ones fizzle out. The process will only be exasperated by the likes of Uber and Grab doubling down on Southeast Asia with their massive war chests.
11. Amazon to enter Southeast Asia (finally)
“Keep your friends close but your enemies closer.”—Michael Corleone in The Godfather Part II
BY SHEJI HO, CMO AT ACOMMERCE.
As the year closes, ecommerceIQ has reflected on what has been achieved, and therefore we are sharing with you our most read stories of the year.
ecommerceIQ’s goal for the next year remains the same, to continue serving Southeast Asia’s ecommerce industry and to provide insightful market research so professionals around the world can take action to capture the region’s growing opportunity. We hope you come back in 2017!
Indonesia is on track to become the biggest ecommerce market in Southeast Asia. The ecommerce boom has produced several start-up unicorns, such as the popular ride-hailing, food delivery and payments app Go-Jek, Indonesia’s most popular C2C marketplace Tokopedia and travel marketplace Traveloka. Yet, there are many more players in the ecommerce field in Indonesia, and that is what ecommerce landscape maps. This is our most read article of the year.
Ecommerce in Southeast Asia is still relatively young, with only 1% of total retail gross merchandise value being generated online compared to 7.1% and 15.9% in the US and China. However, the region is already widely being touted as the next frontier of ecommerce opportunity. As Southeast Asia’s ecommerce businesses have the opportunity to learn from the industry’s best, this article looks into how business models have evolved in the region and what’s to be expected next.
Little data exists on the current and projected size of the ecommerce market in Southeast Asia, which is still a nascent, fragmented industry. As several reputable organizations have taken a stab at assessing the size of the ecommerce in the region, this article dives to explain why the actual potential of the market could much bigger.
Southeast Asia is a hotbed for online trade as more than 480 million people in the region will be online by 2020 and there are high volumes of deliveries across the countries. Whilst it is a great time to be an e-tailer, the opportunity also comes with some challenges. DHL Ecommerce CEO Charles Brewer in this article explains what exactly Southeast Asian customers wants after they hit the ‘check-out’ button.
Thailand, while not the most populous nor richest of the Southeast Asian nations, is currently the fourth largest ecommerce market in the region. Thailand’s ecommerce landscape sets to provide a quick snapshot of the the country’s ecommerce players and identify industries which provide opportunities for new businesses.
“SPARK 40” is a compilation of the top ecommerce professionals who have contributed to shaping the industry in Southeast Asia. It’s not only about funding. These businesses are solving long-term problems and hoping to be the ‘spark’ needed to clear roadblocks that restrict ecommerce growth – whether that be serving the unbanked, evolving their business models to cater to customer demands or being the first to tackle a new sector.
The Philippines, although part of Southeast Asia’s growing ecommerce family, is quite the odd cousin. With over 10 million overseas Filipino workers and 3 million of them in the United States, Philippines’ online shopping behavior has been heavily influenced by the US, paving the way for innovative cross-border logistics businesses and digital payments solutions. While the ecommerce market in the Philippines currently is the second smallest in the region, it is expected to lift off and this article explores where the opportunities lie.
With 83% of its population connected to the internet, Singapore holds the title as the most mature ecommerce market in Southeast Asia. Despite its small population, Singapore accounted for 25% of Southeast Asia’s 2013 online retail value, larger than the region’s largest market, Indonesia that contributed 20%. Singapore’s ecommerce landscape provides a quick overview of the most developed ecommerce market in Southeast Asia.
Chat commerce or conversational commerce is the intersection of messaging apps and shopping and is already a very familiar concept in the West. Southeast Asia has largely mirrored the West and particularly China in development of its ecommerce maturity. Yet, current chatbot growth has been stuck at the ‘idea phase’ – a lot of chatter and buzz about its revolutionary importance but no product. This article tells the story of Sale Stock, the mobile first shopping platform widely popular among Indonesia’s young females, which has become SEA’s first company to launch a chatbot that can handle end-to-end transaction on Facebook’s Messenger Platform.
Amazon’s dominance and stock value will only keep increasing with the ongoing global structural shift from offline retail towards ecommerce. Ecommerce penetration in the US today is “only” 7.7%. As ecommerce is booming not only in US, but also in Southeast Asia, traditional, offline retailers are lift with few choices when it comes to ecommerce adoption. This article explores those options for regional businesses.
Here’s what you need to know.
1. Lazada’s 12.12 sale nets $40.5 million
Lazada Group’s Online Revolution, also known as 12.12, has again proven to be the biggest online shopping event in Southeast Asia, ringing up US$40.5 million in sales.
About 60% of the gross merchandise value (GMV) of the December 12 event came from mobile, with shoppers spending an average of 12 minutes on Lazada apps browsing deals from international and local brands and sellers.
Read the rest of the story here.
2. Asian postal services adapt to post-mail era
With traditional mail volumes dropping dramatically, ecommerce offers hope for national postal firms in Asia if they adapt quickly enough and do battle with giants like FedEx and DHL.
Asian postal firms “are doing some very innovative things to take advantage of ecommerce”, said Brody Buhler, global managing director for post and parcel at consultancy Accenture. Japan Post has partnered with convenience stores to provide 24-hour delivery, while Pos Malaysia is boosting its warehousing, logistics and other other capabilities in a bid to become a full-service ecommerce provider.
Read the rest of the story here.
3. Online retailer brings catwalk to Indonesia’s streets
MullenLowe Indonesia has launched a branding campaign for Sale Stock, an emerging e-commerce fashion platform. Themed “Fashion for the rest of us”, the campaign aims to democratize good quality fashion for cost-sensitive women.
A television and online campaign that is running on YouTube, Facebook, Line and Instagram is titled “Catwalk Nusantara” (‘Nusantara’ translates loosely to ‘the archipelago’ and is a way of referring to Indonesia). The campaign emphasizes the ease of shopping online at Sale Stock.
Read the rest of the story here.
Sale Stock has been making wakes in the industry this year. Most recently, it has launched the first chatbot in Southeast Asia. Read all about it here.
It is hardly a secret anymore – ecommerce in Southeast Asia is an enormous $238 billion opportunity that has been under the global radar in the recent years. It’s no longer about whether businesses should have an online presence, but instead how they can stay relevant to their audience in a quickly crowding space.
One market that has time and time again stood out is Indonesia thanks to more accessibility to mobile devices, affordable data plans and a youthful demographic propelling social channels and social commerce to the leading activity on the internet. It is a clear goldmine for brands, retailers and investors alike to unlock over 250 million unrealized online shoppers.
So how are they going to do this? Well, Indonesia is a mobile-first country and its citizens update their social networking apps twice more frequently than games and fives times more than music/video apps according to a study by Baidu.
In the next three years, Indonesia is expected to have over 92 million smartphone users, up 67% from 2015. This will push many startups to skip desktop entirely and focus on smartphone friendly ecommerce products. New apps have been the popular way to reach customers, but large spending for development, maintenance, and marketing have restricted companies from finding long-term success. And what happens when app downloads start to slow down as currently happening in the US?
The rising global resistance to new apps
Almost 50% of smartphone users in the US did not install a new app last month while less than 25% of the ones who did returned to it after the first use. What’s even more shocking is a full 94% of revenue in the App Store comes from only 1% of all publishers, think Google and Facebook.
Mobile isn’t dead but the opportunity is shrinking. So what does this mean for businesses scrambling to capture the attention of the world’s fourth largest population who prefers to use on average only 6.7 apps?
You don’t chase customers, you find them where they already are.
For the first time, messaging apps have surpassed social networks and that’s where chat commerce comes into the story.
Chat commerce isn’t the future, it is the present.
Chat commerce or conversational commerce is the intersection of messaging apps and shopping and is already a very familiar concept in the West. Businesses understand the importance of being readily available to their customers, especially as a poor customer service experience will drive 89% of them to a competitor.
According to Facebook, more than 50 million companies operate on its platform and send more than 1 billion business messages every month.
But having properly trained customer service reps to support hundreds to millions of personal conversations in parallel is difficult to scale for any business. Solution? Chatbot.
A chatbot is an AI (artificial intelligence) feature of a chat or messaging platform that simulates a human conversation with the user in order to provide them with the information or service they’re looking for.
Brands overseas like Taco Bell have partnered with Slack to allow customers to order and pay through the team communications platform.
Think about Siri who has been helping Apple users carry out tasks since 2011 or Amazon Echo, an at-home device by Amazon, which encompasses a chatbot named Alexa to read aloud weather reports, set alarms and more importantly, help customers order new products from Amazon.
The API will support sending and receiving text and also images and interactive rich bubbles containing multiple calls-to-action.
A chatbot can clearly offer a business great benefits to get closer to customers in a medium they are already familiar with, so why has there been little activity in Southeast Asia?
Call all chatbots
Southeast Asia has largely mirrored the West and particularly China in development of its ecommerce maturity. Yet, current chatbot growth has been stuck at the ‘idea phase’ – a lot of chatter and buzz about its revolutionary importance but no product.
“The reason why companies in Southeast Asia haven’t created chatbots isn’t because they don’t think the opportunity is there, but they lack the resources and most fundamentally – AI talent to build it,” comments Lingga Madu, Sale Stock co-founder.
No company has released a true commercial-scale, transaction-enabled MVP, that is, until now.
Sale Stock case study: Facebook Messenger’s first chatbot in Southeast Asia
One lesser talked about company has already begun testing its chatbot with Facebook, Indonesia’s most popular social channel. Sale Stock, the mobile first shopping platform widely popular among Indonesia’s young females, has become SEA’s first company to launch a chatbot that can handle end-to-end transaction on Facebook’s Messenger Platform.
Meet Soraya AI, a relatable, cheery chatbot who handles 100% of queries coming to Sale Stock’s Facebook Page and the brainchild of Facebook, Google, Palantir, and NASA engineers recruited by Sale Stock around the world.
Soraya uses machine learning to shuffle through queries and decide whether to answer it autonomously or give recommendations to an agent instead.
Frequently asked questions such as “do you offer cash on delivery?” or “do you sell high heels?” are replied to almost instantly. In development since 2015, she can already handle 22% of all queries autonomously.
The beauty of machine learning is that the more information she receives, the smarter she becomes and the more accurate her answers will be.
Soraya has already improved response time by 20 – 40 times and currently replies within 60 s. That has granted Sale Stock a response time badge on their official Facebook page.
Soraya has also been fed large amounts of past Sale Stock customer queries to enhance her intelligence. This combined with recent purchasing behavior and browsing history allow her to recommend consumers personalized products.
Buying the product is even more simple. Soraya asks for confirmation of the item, correct size and color, all within Messenger, and requests address and payment method. If it is a returning shopper, all previous payment information is saved so purchase is simply a click of yes.
“Soraya was created to meet the needs of our customers, many of whom are living outside major cities on limited social media data plans where chat is free but browsing is not. Some have never even been exposed to digital shopping carts but chatting is second nature,” – Jeffrey Yuwono, Sale Stock President.
Trust is also a major concern that holds many Indonesians back from trying ecommerce. By creating a personable chatbot on a familiar channel, brands hope customers will feel comfortable sharing their personal details.
What’s next for Sale Stock?
The company is already working to create viable chatbots for WhatsApp, LINE, BBM and SMS as they are the most popular messaging platforms their shoppers use. Sale Stock strongly believes in the Lean Startup methodology, “getting it out there as soon as possible to collect real, user feedback”.
“We’re still in the very early stage of our product and ironing out the bugs and adding features iteratively,” comments Madu.
All inquiries going to Sale Stock are monitored, independent of the channel source, on one platform created in house to control flow and fix any arising bugs.
The team hopes to fine-tune its technology to quite possibly launch SaaS in the future.
“The success of chat commerce depends on how well the machine can distinguish the details: context, intention, the slang, mix of dialects, and even the use of emojis so the customer never feels like they are chatting with a bot. The platform has to be robust enough to handle these typos and fringe use cases,” says Madu.
The future of chatbots
There has always been a fear of AI replacing tasks typically performed by humans, but customer support is a tricky area since personalization is at the core.
“As brand loyalty and exceptional customer service become the main priority for brands, companies simply cannot afford for bots to completely handle customer service and risk creating a negative experience. With that said, the live customer service representative will always have a place with the overall customer experience,” says Mayur Anadkat, Vice President of Product Marketing at call center software provider Five9.
The moment has not yet been reached when machine learning enables 100% accurate and instant replies to customers no matter the language, mix of dialect, slang or emojis – but it is in the foreseeable future. AI is here to enhance, not replace.
Not only will the rise of chatbots improve the reputations of brands but it will be expected of businesses by the next generation of shoppers. As Uber product manager Chris Messina put it, bots present a new, unpolluted opportunity to build lasting relationships with people.
Ultimately, the lack of friction is what makes the shopping experience a pleasant one and what will drive the A players to the head of the game.
By: Cynthia Luo
Aside from announcing the partnership, the companies also introduced two new features; credit card payment system and an AR-based ‘changing room’.
Sale Stock was also the first in Indonesia to implement a one-on-one chat feature to shop.
The partnership aims to leverage from Sale Stock customers’ preference to chat and shop. Line’s user profile (45% female) are seen as the perfect target audience to support this strategy. The shopping culture in Indonesia is characterized by three distinctive features:
- Heavy use of cash and bank transfer (only 1.4% of Indonesians own a credit card)
- Use of social media platforms such as Instagram and Facebook for SMEs as a channel to promote products
- The use of chat apps provides direct interaction with customers
In general, Southeast Asia is seeing a rise in the use of chatbots as a means for brands to interact closely with their audiences, as Southeast Asian customers are generally more comfortable communicating with customer service officers through messaging rather than self-browsing.
The AR-based ‘changing room’ function will be installed in various shopping mall across Jakarta. This function will allow users to try on available clothes on the Sale Stock platform, and purchase it directly from the machine installed at the mall.
Sale Stock is listed among the fastest growing ecommerce startups in Indonesia. The company provides imported, local and in-house fast fashion collections for women.