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Here’s what you should know.

1. Pinterest users can now jump to other products within an image

The company today said it’s launching a new feature that allows users to find and jump to additional products within a photo they’re currently viewing. So, for example, if a search for a jacket brings up an image of someone wearing that jacket, Pinterest will also identify other products like the jeans and shoes they’re wearing.

If Pinterest can continue to build those new advertising products and decrease the amount of effort it takes to get to a new product, it’ll be able to make a better sell to its marketing partners.

Read the rest of the story here

 

2. Southeast Asian startups saw $2.2 billion funding dip in 2016

Fewer deals in 2016 were predictably accompanied by a drop in overall funding. If we take away the outliers of major rounds by Grab and Go-jek — Grab raised $750 million and Go-jek nabbed over $550 million — startups raised $2.2 billion less than they did in 2015.

Source: e27

Overall, there were fewer deals inked between 2015 and 2016, a trend which e27 believe will continue into 2017. However, the amount of money raised remained relatively stagnant, meaning getting money may be harder, but the cheque should be larger.

Read the rest of the story here.

 

3. Recommended Reading: How traditional retail brands are going online in Southeast Asia

More traditional retailers in emerging countries like the Philippines, Indonesia, and Thailand are transforming into multi-channel retailers.

“Understanding unit economics and having the efficiency in terms of fulfillment and deliveries is critical for you to gain profitability; otherwise you accumulate a lot of loss when you’re taking in customers and losing them.” Said Binoo Joseph, technology head of digital ventures at Tesco Retail.

Read the rest of the story here.

1.8 billion out of 7 billion people worldwide are millennials, individuals aged 18-34 whose spending power is expected to reach 6 trillion USD by 2020. 72% of them shop and research for options online before making a purchase in store and 81% of them are mothers, typically in their early 20s and 30s, pursuing careers, building families and homes of their own.

Are brands or retailers really servicing this growing ‘mom’ demographic? For parents, there is a whole new arena of purchase considerations before the babies are even born. The infant formula market size in Asia alone is the largest globally and amounted to 30.35 billion USD in 2015.

This year, the global baby care market is presumed to hit 66.8 billion USD in sales. In Southeast Asian countries such as Indonesia and Thailand, sales for baby and child-specific products are expected to reach 280 million USD and 141 million USD by 2020, respectively.

Nowadays, with mothers juggling full time jobs and doing majority of the household chores, efficiency and convenience become top priorities. Where can Southeast Asian mothers look to ease their workload? Online would be a good place. 

ecommerceIQ ECOMScape shows that the current online selection contains only a few players focusing on typically called the ‘mom & baby’ vertical in Southeast Asia. Why is that? Is it because a demand doesn’t exist?

The Demand for Baby Products Online

The Baby & Kids fair is held twice a year in Thailand and attracts over 500 manufacturers offering discounts up to 80%. Similarly in Indonesia, the annual Maternity and Baby-expo welcomed over 400 brands and 36,000 attendees in 2016 looking for steep discounts.

But even on sale, baby care necessities such as a car seat and stroller can rack up a bill of 800 USD, not even including the cost needed to buy an accessory to connect the two items. A marketing manager in Singapore stated that she spends approximately 600 SGD every month on her almost two year old child.

New parents in the US spend around 12,000 USD in only the first year on diapers, formula milk, toys, clothing, strollers, toiletries among other baby care products. Price comparison is vital to save on large costs and today’s young parents have a resource their parents may not have, the internet.

Alessandro Piscini, CEO of Lazada Thailand, shared that during the online marketplace’s largest sale, Lazada 12.12 campaign, one of the top three selling items in Thailand was Enfagrow, a global baby milk brand that sold over 3,700 units in three days.

And out of the top three best performing brands, two belonged to the ‘baby diapers’ category being Mamypoko and Babylove.

A quick Google search will reveal that women are discussing on popular ‘mommy’ forums such as Mom Tricks, how purchasing in bulk online can cut the cost of diapers by 20% thanks to regular campaigns and discount codes.

In Southeast Asia, 19% of consumers have already purchased diapers online and 17% have purchased baby food online. And the demand for baby products will only increase. The largest buying group is in households with children aged 0-5 and Malaysia, Laos, Cambodia and the Philippines ranked in the top 100 for highest global birth rates in 2016.

 

Limited Selection for Mothers Online in Southeast Asia

With high birth rates, rapid urbanization, increase in purchasing power and greater access to high speed internet, shouldn’t brands be clambering to go online to serve the mothers of the region?

Although the traditional global baby care market is very competitive, Johnson & Johnson dominates the majority of market share in Southeast Asia. These are the other leaders in their respective markets:

  • Thailand: Johnson & Johnson leads with 45% market share followed by Colgate-Palmolive
  • Indonesia: Megasari Makmur followed by PZ Cussons
  • Singapore: Johnson & Johnson leads with 56% market share followed by Pigeon SG
  • Malaysia: Johnson & Johnson leads with 60% market share
  • Vietnam: Johnson & Johnson
  • Philippines: Johnson & Johnson 55% market share

 

One of the reasons Johnson & Johnson does well is because it engages in extensive marketing activities ranging from television, print ads to offline promotional events. It launched the campaign ‘So Much More’ aimed at educating mothers on the benefits of using its products.

 

The Rise of Local Baby Brands

Even though there is a large selection of international brands in the region, private label products with natural or organic ingredients are seeing greater growth as they are perceived to be safer for babies.

By highlighting the organic ingredients in their products, Care, Babi Mild, Cussons Baby and D-nee-Mild have become some of Thailand’s most popular household names.

As parents become knowledgeable, they will seek new products, follow trends and read more product reviews. Rather than aggressive marketing, domestics brands can use online channels to reach out to their demographic in a personable way.

 

The Wailing Opportunity No One is Talking About

Ecommerce is not only about offering competitive pricing. Today, it’s about providing an online environment that can capture the attention of a browser who has three mobile notifications, one browser pop-up and two advertisements long enough to make a conversion.

It is the brand’s job to appeal to the customer.

Parents are busy. Online shopping offers extendable shopping hours and a larger product assortment.

Create an Online Strategy for a Baby-oriented Brand:

Reach your demographic through the right partner

  • Choose a popular marketplace catering to your brand’s target market, an example would be female oriented Orami in Indonesia or Thailand.
  • A marketplace presence should be seen as an initial short-term strategy before adopting a direct-to-consumer strategy via a brand.com site.

Be active on online forums, mom groups/blogs and social media

  • Moms with young children are new to the experience of raising kids and keen to digest as much information they can before making a purchase.
  • 89% of millennials trust recommendations from family and friends before making a purchase.
  • Influencers or ‘mommy bloggers’ are an affordable method to gain new customers and increase brand awareness. Ex. Hi-Q milk brand in Thailand 

Offer subscription commerce and/or bundle deals

  • Diapers are a staple item in a young family household. This makes it attractive for subscription services like Nescafe has done for its coffee – a monthly supply gets  delivered straight to your door. Brands that have already have a website such as MamyPoko are recommended to test this approach.
  • As diapers are bulky and expensive to ship, brands can bundle its sale with other products with higher profit margins such as beauty products and bottles to increase online profit.  Ex. diapers.com 

 

How Are The Global Players Doing It? 

Honest Company increased its value proposition through an online blog that covers eco-parenting,  nutrition and wellness. 

Pampers, the world’s top selling brand for baby diapers under P&G, pulled on heart strings and strengthened its own brand awareness through “A Parent is Born” – a 12-episode series chronicling one couple’s emotional journey through pregnancy.

Amazon recently launched a subscription service for toys exclusive to them. This secures a recurring stream of revenue for the company. The monthly fee guarantees a new box of educational toys to the house every month. 

 

Whirlpool, one of the leading players of home appliances globally, released a series of programs and podcasts about parenting, women, and children health leading to over 30,000 downloads per show and mainstream media coverage. Fisher-Price toy-maker engages with parents via its ‘Share the Joy’ campaign, where consumers are offered a $5 coupon for visiting the website and given an additional $5 incentive to share a video with friends.

All of these global brands are taking big strides to capture a demographic that will always need the same products because there is never a shortage of new parents, new mothers and babies that grow too quickly. Local brands, it’s your move.

The Economist Corporate Network launched its 2017 Asia Business Outlook Survey, “Navigating Asia’s risks and rewards” this week, in which over 200 Asia-based executives shared their expectations for the year ahead. As the overall economy impacts all businesses, including ecommerce, here are the most important highlights you should know:

1. Southeast Asia ranks first for revenue growth expectations in 2017

In Southeast Asia, overwhelming majority or 80.2% of executives this year predict revenues to increase. The mood is slightly more optimistic in the region compared to 2016 when 77.8% of executives were looking forward to higher revenues. Only 0.8% of respondents expect a revenue decline.

Source: The Economist Corporate Network

 

2. Yet, fewer executives than a year ago expect double-digit sales growth

As many as one in five executives in Southeast Asia are expecting their sales growth to exceed 10%. This is down from 31.9% of executives who expected bullish sales in 2016.

3. Most companies in Southeast Asia expect to make a profit

90% of executives who participated in The Economist Corporate Network’s survey said they expected to have a profit. This is slightly more than in 2016. Fewer also expect to have losses.

4. Conditions for basing regional operations have deteriorated in Bangkok, Kuala Lumpur and Jakarta

Bangkok, Kuala Lumpur and Jakarta along with Hong Kong, Beijing and Deli all registered 20% or more respondents indicating that conditions for basing regional operations have deteriorated. 

The political and policy uncertainty worries executives operating in Bangkok and Kuala Lumpur. While the infamous traffic due to lack of proper transport infrastructure is the main issue of worry for companies operating in Jakarta.

5. Attracting and keeping talent is tough in Southeast Asia

While professionals in Southeast Asia understand that talent is scarce, The Economist Corporate Network’s report shows a glimpse at how big turnover rates are. Half of the executives surveyed reported their company’s annual staff turnover to be between 6 to 15%.

 

You can download the full report from The Economist Corporate Network’s website or on our website’s reports section.

Here’s a market overview of Southeast Asia’s online space that everyone in the industry understands so far:

  • The ecommerce market is expected to be worth 238 billion USD by 2025.
  • The region is still relatively young with only 1% of total retail GMV being generated online compared to 7.1% and 15.9% in the US and China.
  • There is a fast growing young & digital savvy population of 158 million who spend approximately 19.4 hours online per week.
  • Southeast Asia is the only truly ‘mobile-first’ region.

southeast asia ecommerce

  • The region is only a decade behind China’s booming online ecosystem because of the following:

Lack of offline retail infrastructure outside tier 1 cities

Surging domestic consumption spurred by growth in GDP/capita

Major capital investment into ecommerce businesses

Cash on delivery as a dominant payment method

Lack of cross-border ecommerce due to high import duties and taxes

Hyper-competition

“No-Tail”ecosystem

So what do all of these numbers and comparisons mean? We take a deep dive into how these factors drive ecommerce forward in Southeast Asia and provide companies with a simple phased approach to consider before entering the market:

Almost Like China

The region is following China’s trajectory due to similar historical developments and ecosystem mentioned above. Southeast Asia is however more competitive due to it being an open market versus China’s closed one, making it easier for companies to enter.

Mobile Commerce

The leapfrog towards mobile is disrupting traditional desktop-first platforms and moving C2C ecommerce straight into mobile marketplaces such as Carousell and Garena-backed Shopee. The high smartphone penetration rate is also giving access to the rural and rapidly emerging consumer base as 85% and 79% of online shopping comes from outside of the major metro areas in Thailand and Indonesia. Thailands mobile growth exceeded developed countries like US and China within the first year 3G technology was launched with an average Thai user having 1.4 mobile phones.

Social Commerce

Browsing for items on social platforms and purchasing offline is a unique phenomenon in Southeast Asia where Lazada isn’t Thailand’s biggest ecommerce platform; Facebook and Instagram are.

 

An estimated one-third to half of total ecommerce GMV is happening on social platforms like Instagram, Facebook, and LINE in Thailand compared to 16% globally. Based on a survey done in Bangkok by ecommerceIQ, 48% of respondents indicated to have purchased something they found on  Facebook, Instagram, and/or LINE in the last three months. Page365, a startup that helps small retailers sell products via social media, estimated that social commerce is worth more than 500 million USD per year in Thailand alone.

Businesses have the opportunity to leverage the high popularity of social networks in the region to push ecommerce forward. Online transactions can be done via chat-apps and social media to reach out to Southeast Asians that prefer making ecommerce purchases through channels they’re already familiar with rather than a traditional website.

Cross-Border

Disparate infrastructure and fickle government regulations make it hard for global brands to find a one-size-fits-all solution to enter the region.

High import duties are a barrier to cross-border ecommerce, which is why companies are recommended to operate locally or partner with a specialist with on-ground knowledge.

Singapore is an exception in Southeast Asia where cross-border businesses can thrive thanks to the high local demand for overseas goods and low custom duties.

Payments

The region’s consumers still rely heavily on cash on delivery (COD) with which 70% of online payments are made. Most C2C commerce happens via bank transfer as consumers are still reluctant to share their financial information online and less than 20% of the population (excluding Singapore) make online payments via debit or credit card.

Currently, there are no dominant payment platforms who have been able to create a solution that will replace COD in the region such as Alibaba’s alipay has been able to do in China.The region is making continuous efforts to raise awareness about e-payment to overcome this challenge not just with consumers but also businesses.

Knowing all of this, companies need to take a strategic approach if they are looking to leverage the next big opportunity for ecommerce in Southeast Asia. Sheji Ho, Group CMO of aCommerce shares a step by step phased approach that companies of any sector can follow.

A Step Approach to Enter Southeast Asia

1. Organic Demand from Overseas

If a company is getting organic inquiries about its business from Southeast Asia with no marketing push, it means they are receiving organic cross-border interest.Through those inquiries and additional research of the competitive landscape, the company should look into whether there is potential for its business to carve a niche and start in one country first as the fragmented market make it difficult to enter all markets at once.

The ECOMScape series details the current players in the following landscapes: Thailand, Malaysia, Indonesia, Singapore and the Philippines

2. Reaching The Local Consumer

Once demand has been identified, the company should begin testing ways to scale online initiatives to improve it.The best combination would be through local digital marketing and a local language website and landing page.

3. Local Entity & Fulfillment

Once businesses have proven that demand can scale, they are recommended to set up an entity nearby their target demographic for a more efficient local fulfillment and operations process, especially important for casodelivery cash reconciliation. If a company decides to operate outside its target market, the costs of high-custom duties would bleed them dry.

The only cases where it may succeed would be for  low custom duty markets within the region like Singapore and to a lesser extent Malaysia. But for companies based outside Southeast Asia, such as Taiwan, a local approach is required to tap into the growth markets like Thailand and Indonesia.

What Next?

In Southeast Asia, competition is welcome as it drives more innovation in the tech and ecommerce space. Although companies in the US such as Amazon have provided a glimpse of what business models could work, Southeast Asia is still an entirely new game that plays by its own set of rules.

Entrepreneurs aiming for this region cannot simply replicate the successful business models of the US.It may succeed in the short term but when the big players such as Amazon enter the market, they are going to wipe out competitors by offering a substantially better product as a result of technological, capital and human capital advantages.  

Looking towards China, the past decade of competition in the Chinese ecommerce space has resulted into arguably the most innovative market not just in retail but also in adjacent industries like finance and banking, with products such as Alipay Wallet and WeChat Pay.

In Thailand, the heavy competition between marketplaces like Lazada, Wemall and 11street will lead companies to avoid competing on economies of scale and price only and adopt a unique spin to its business model. We’ve noted a few well-known ecommerce players below and their progress since entering Southeast Asia.  

As ecommerce becomes more mainstream, the more traditional industries like banking, insurance and healthcare in Southeast Asia are also starting to adopt a digital strategy.

Competition will only increase as companies from across the globe look to leverage the urbanization and digitization of Southeast Asia. May the smartest, most swift ecommerce company win.  

BY RUCHIPHA THAKRAL BASED ON SHEJI HO, ACOMMERCE CMO’S PRSENTATION AT MOBILE MOVES COMMERCE EVENT IN TAIPEI.

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?

ecommerceIQ is proud to wrap up the end of a successful year with “SPARK 40” – 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, we want to celebrate their success. Investment is only a supplementary criterion.

And while the industry benefit from their milestones, they continue to remind us that there is still a lot to do. Here is ecommerceIQ’s 2016 #SPARK40 list: Download here. Read more