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Here’s what you should know today:

1. Alibaba invests $300M in fresh produce market

Through its B2C subsidiary Tmall, Alibaba has invested $300 million in China-based ecommerce for fresh food Yiguo.com.

Yiguo delivers perishable goods to more than 200 cities in China, offering most of its customers same day or second-day home delivery. It also cooperates with Tmall Supermarket by carrying out daily operations of its fresh produce offerings.

The investment will be used to further develop Yiguo subsidiary ExFresh, China’s largest cold-chain logistics platform, to expand its delivery reach while allowing its Tmall Supermarket division to work more closely with Yiguo.

The expansion expected to enable them process 500,000 daily orders by the end of this year, and up to 5 million orders by 2020.

Read the full story here.

2. Courts targets 15% of revenue from online over the next decade

Courts Asia is setting aside $10 million to revamp seven out of its 15 outlets in Singapore after a stable financial results.

The company also has in the pipeline to enhanced in-store experiences and online offerings. Courts Singapore is planning to launch a new website by the end of the year.

The retailer is in a good position to move into omnichannel sales and has set a goal for online revenue to reach 15% over the next decade, up from between two and three percent now.

Read the full story here.

3. Indonesia: Ecommerce tax must be deducted in payment gateway

Amid the discussion for the ecommerce income tax bill, Center for Indonesia Taxation Analysis (CITA) executive director Yustinus Prastowo said the government could not collect taxes for ecommerce activities based on the transactions that had been made because not all transactions ended with payment.

“We should apply the Korean system, where the authority collects the taxes in the payment gateway because ecommerce transactions are paid through online systems,” Yustinus said at a seminar on taxation in Jakarta on Thursday.

Currently, Under Director General of Taxation Regulation No. SE-62/PJ/2013, the government collects income tax and value added tax (VAT) from four kinds of ecommerce: online marketplace, classified ads, daily deals and online retail.

Read the full story here

 

Popping up everywhere in product advertising, content marketing and online web stores is video. Companies like Buzzfeed and Dove were among the first to witness the effects of viral marketing through short popular three minute movie clips but it’s no longer businesses with large budgets that are taking advantage of a growing audience preference for moving visuals.

Samsung Galaxy S8 video ad that automatically plays upon page load. Source: TheStreet

Tools like Facebook ad format Collection and Facebook Live focus on video content to boost retail sales given that video posts have a 135% greater organic reach than photo posts. An Adidas’ campaign promoting various apparel items resulted in a 1.8X decrease in cost-per-conversion, according to the brand.  

SMEs in Thailand running an online auction through Facebook Live to sell products, usually clothing and accessories.

Based on majority of statistics floating around the web, data points to a healthy customer engagement with “video storytelling”.

According to Cisco, video is projected to claim more than 80% of all web traffic by 2019 and Forrester estimates that a video included in an email campaign will garner a 200-300% increase in click through rate.

Versus a still image, video content is more emotionally compelling and reinforces the messaging behind a brand and its product.

Watching a video is simple enough, but do they directly impact consumer behavior?

A recent whitepaper by Nielsen, “Cross Platform Report 2017”, conducted a survey to find out how Indonesians react after interacting with online video ads.

Respondents between the ages 21 – 49 were most likely to connect with a brand – call, go to store, purchase online – after watching an online video advertisement. Those over 50 years old were less likely to be affected by video content.

 

Source: Nielsen Cross Platform report 2017

But all that’s video is not gold

The message isn’t that every brand manager should grab a camcorder and throw their marketing budget into producing a product video.

Findings from market research firm in the US L2 Inc shares a cautious message,

“Brands invest heavily in video on a variety of platforms, including TV, YouTube, and social media. However, videos on the homepage can have a negative effect on site engagement metrics.

L2 found that the 56% of brands with video on the homepage actually saw shorter site visit times, fewer average pages per visit, and higher bounce rates than brands without video on their homepage.”

It may be too soon to judge whether video is the best method to achieve higher direct retail sales but companies such as ViSenze are creating technology that enables contextual advertising within a video.

On the other hand, video has been and remains one of the most effective ways to improve brand awareness and educate consumers. Just think of the heart-tugging Amazon Mother’s Day videos.

When ecommerce first boomed in Indonesia around 2014, Albert Lucius saw many companies racing to serve the top 20% of the urban population while ignoring the rest.

“What about the people unfamiliar with the internet, let alone shopping online? And what about those living in rural areas?” Lucius mused. “Ecommerce players at that time were doing almost nothing to educate this demographic.”

Seeing this gap, Lucius teamed up with a fellow schoolmate from the University of Berkeley’s Haas School of Business, Agung Nugroho, to build Kudo – the online to offline (O2O) technology platform that connects online merchants with offline customers and was acquired by Grab in April. TechCrunch estimated the deal is worth $80 – $100 million but no confirmation has been made by either party.

Lucius acts as CEO, while Nugroho takes care of operations as COO and through its platform, Kudo wants to ensure all Indonesians are included in the online revolution and benefit from an economy that boasts a $157 billion potential.

Product-market fit: Tales of trial and error

Currently, the company is using individuals, mom and pop shops, and small store owners as Kudo agents to act as medium between online merchants and hard to reach customers.

Through these agents and a tech platform, the company enables the unbanked or those with low financial literacy to perform digital transactions. How?

  • The agent invests capital into their Kudo agent account, which can be as low as IDR 10,000 or $0.75
  • The customer views a list of products on the Kudo platform on mobile or a tablet provided by the agent
  • The customer chooses what they want to buy and pays the agent in cash
  • The agent makes a commission based on the product category sold (3%-20%) – the more they sell, the more they make

Although currently a well-functioning system, this was not how things were always done at Kudo. The company pivoted two times before finding a model that complemented Indonesians buying behavior.

kudo micro-entrepreneur indonesia

Kudo platform, facilitated through its agent, is bridging the gap between offline customers and online merchants.

 

Kudo is an acronym for ‘kios untuk dagang online’ or ‘kiosk for online trading’, and funnily enough, the business’s first model was literally a kiosk.

The company installed machines loaded with the Kudo platform in office complexes, shopping centers and convenience stores in Indonesian suburbs, as well as second-tier malls in the city, in hopes people would use it to place orders for various things such as food, tickets, and other goods.

They soon discovered that majority of citizens are wary about using unknown machines, afraid to break it seeing as they didn’t know how to operate it.

Kudo later redefined its business by creating a tablet-friendly platform and employed the help of sales promotion girls (SPG) to educate the people about its buying process. The second attempt worked well but hiring so much (wo)man power was not sustainable nor scalable.

The two broken models taught the founders a valuable lesson.

“Most Indonesians still need the element of trust in order for commerce to work. They need the personal and social touch in order to purchase something.”

Kudo’s agents of change

Through its present-day network of more than 500,000 agents across 500 cities and rural areas in Indonesia, offline customers once disconnected from the digital world now have access to products from Kudo partners like Lazada, BukaLapak, Berrybenka and Unilever to name a few.

The platform not only offers commerce but also facilitates bill-payments, phone credit top up, and purchase of financial products such as insurance.

The most popular transactions are top-ups that make up 30% of total transactions, followed by purchase of goods, especially cheap electronics, fashion, and bill payments.

kudo micro-entrepreneur indonesia

Kudo’s team explaining how the platform works to potential agent.

 

There are millions of customers that have used Kudo in Indonesia and the company credits its Kudo agents for partially solving three main roadblocks commonly encountered in emerging ecommerce markets like Indonesia – trust, payment, and logistics.

“Our agents are all familiar faces in the neighborhood, so even if initially the community does not understand nor trust the internet, they’re more willing to try out a new technology if it comes from someone they know,” explain Lucius.

From a logistics perspective, agents act as the drop-ship points for ecommerce players who can either have pick ups from their store or deliver straight to the customer. This highly reduces the chance of failed deliveries.

Kudo agents also decrease shipping costs for retailers when they order customer purchases in bulk.

“We know it’s not the most sophisticated system in the world and it’s not perfect, but it works for our market as it utilizes Kudo’s network of agents to solve a real logistics problem in Indonesia,” remarks Lucius.

Grooming a generation of micro-entrepreneurs

By taking a traditional route and using real people to educate and share new technology within communities, Kudo is not only speeding up the race to e-retail adoption but empowering individuals to dabble in “micro-entrepreneurship”.

“People only need a smartphone to become an agent and it doesn’t need to be an expensive one because our app works on every Android phone,” said Lucius.

There are two kinds of agents in Kudo’s network right now; store-owner agents and non-store agents, with the share of 40% store owners and 60% non-store agents or individuals. On average, the store owners agents could doubled their normal income through Kudo.

Building an inclusive economy with a giant

The company’s principle is and has always been to improve the lives of people.

Under its current model, Kudo aims to slowly convert more people to try online shopping by maturing the country’s payments literacy and understanding of ecommerce.

Its acquisition by Grab takes the company’s mission a step further as the Kudo platform will be integrated with Grab’s mobile payments platform, GrabPay and both companies are invested in a collaborative R&D lab in Kudo’s office called Kudoplex.

Kudo’s agents are also offering services like GrabPay credit top-ups and recruiting drivers for Grab to interconnect the two already-large networks into one expansive and all-encompassing payments infrastructure.

“We are very excited to work with Grab as we share the same mission to empower the unbanked to benefit from the rapid growth of digital economy,” closed Lucius. “There are a lot of good things to come.”

 

 

kudo micro-entrepreneur indonesia

Left to right: CEO Kudo Albert Lucius, CEO Grab Anthony Tan, and COO Kudo Agung Nugroho

Indonesia is an economy that relies heavily on domestic consumption. In 2014, Indonesia’s consumer spending was at 57% of GDP – significantly higher than its neighbors China, Malaysia and Thailand – all largely export-driven nations.

The largest growing contributors to this pot are Generation Y, the increasingly affluent millennials.

“The Millennials have incredible buying power,” said Visa Worldwide Indonesia president director Ellyana Fuad. “In the Asia Pacific, their disposable income is around $907 billion.”

JakPat, a popular opinion poll in Indonesia, recently released data revealing the spending habits of over 500 single 25 – 45 year old Indonesians to shed some light on what this bracket spends on.   

What is their average monthly income? How much of it is spent on meals? Fashion? Hanging out? And why do these differences exist?

Indonesian spending habits

The average income in a month of most respondents ranges from IDR 1 million ($75) to IDR 5 million ($375.60) while monthly ‘outcome’ ranges IDR 1 million to IDR 3 million ($220.36).

1 USD = 13,313 IDR

Their occupations most likely fall under these categories according to Salary Explorer.    

Indonesian Category Spending

Source: Salary Explorer

Deloitte research shows that once an Indonesian household’s income climbs above IDR 5 million a month, there is a large jump in the percentage of income put into savings and spent on luxury items for leisure activities.

Out of fashion, make-up, body treatments, sports, meals, and ‘hang out’ activities (coffee, bars, etc.), Indonesians unsurprisingly spend most of their income on mobile data and meals.

Indonesian Category Spending

Virtual items include: music downloads, apps, etc. Source: JakPat

Indonesian Category Spending

The spending breakdown of over 500 single Indonesian 25-45 year olds. Source: JakPat

For households making IDR 5 million to IDR 7.5 million, 20% of income is devoted to leisure activities, and increases to 26% when monthly income increases to IDR 7.5 million to IDR 10 million.

Stanley Song, Director, Consulting Monitor Deloitte, points out that businesses in Indonesia have to narrowly target sales to consumers.

What does this mean? Brands need to understand what their audience can afford.

For example, groceries on demand service honestbee has found success because they only work with partners that speak to their target demographic: the top 10% money makers in each market

“If a brand wants to succeed, the company’s product offering and their audience cannot be disjointed,” says Bounthay Khammanyvong, honestbee Thailand Country Manager.

What can Indonesians not afford?

The survey’s respondents’ average outcome in a month for credit cards ranges from less than IDR 500,000 to IDR 1.5 million. Interesting enough, 46% of all respondents don’t actually have any credit to pay.

Why?

“I hardly ever use it [credit card],” said an 28-year-old art director at an advertising agency. “I always keep it at a minimum. I hate having debts.”

About 52% of a Visa survey conducted a few years ago revealed that respondents choose debit cards rather than credit cards (15 percent) and prepaid cards (33 percent) to make purchases.

As the young Indonesian population grows, General manager of the Indonesia Credit Card Association (AKKI) Steve Marta, believes that Gen Y will recognize the importance of credit cards.

“Most people use debit cards for daily and routine spending. But they’ll also need credit cards for large and unpredictable expenses.”

We can expect that consumer spending in Indonesia will increase as the young population grows in affluence and financial maturity but companies shouldn’t mistaken this as overall spending across all categories.

Money will not necessarily be spent on luxury goods as more income is generated, instead, companies have a higher chance of success if their services/product offering caters to a specific demographic with a specific expenditure allowance.


Popular payment methods in Southeast Asia here.  

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Ramadan is heavily identified with shopping in Indonesia. A visit to malls during this month will reveal heavy discounts and promotions at every store. Midnight sales are especially abundant and held after people receive holiday bonuses to lure people to shop more.

The rise of e-retail options in the country has only made it easier for people to do their shopping whenever and wherever they are. Indonesia also passed the Halal Product Certification Bill in September 2014 that requires all products be halal-certified by 2019. Brands like Unilever and L’Oreal Indonesia have already begun to comply.

A case study conducted during Ramadan a few years ago shows that traffic to ecommerce websites peak at 4am as people woke up earlier during Ramadan to start their day.

What other behaviors are observed during Ramadan? aCommerce shares data from 11 ecommerce companies selling fashion and beauty products to understand shopper trends during Ramadan last year.  

More people are online during Ramadan

To seize the building momentum, ecommerce companies allocate more budget for marketing activities to drive traffic to their website. Below is an example:

Ramadan Shopping Behavior

Example of promotional banner on the website for Ramadan 2016

Ramadan Shopping Behavior

Promotional banner for Ramadan 2016 on Facebook

Results from last year show there was a 52% increase of website visitors and 60% newly acquired users during the month of Ramadan compared to the previous month. Many companies often offer exclusive promotions only if a user signs up on the website.

Ramadan Shopping Behavior

People are more likely to shop online in Ramadan compared to the months before and after.

Indonesians shop for Eid during work

Compared to the 40 days before Ramadan, the number of sessions on most websites surged to 4 times higher on the weekdays as people browsed during the day – traffic was noticeably higher during work hours.

Ramadan Shopping BehaviorMeanwhile, sessions on weekends are relatively the same overall as Indonesians typically spend more time with friends and family.

During the last week of Ramadan, the traffic surges begin to slow down as Indonesians know some merchants will undergo a “blackout period” where no packages are delivered around the time of Eid in preparation for Eid Exodus.

More men shop online than women

Ramadan Shopping Behavior

Contrary to popular belief, men were found to spend a longer time browsing online than women. However, females were almost twice as likely than men to convert during a web session.

Both sexes have a similar basket size of IDR 230,000 or $17 per transaction.

On average, the amount of time people spent per session  was 3% lower than average to 4.4 minutes and traffic and sales from desktop still dominated over mobile.

Desktop generated 76% of total sales on Ramadan, while mobile only generated 22.3%.

As we’re currently in the midst of the holy month of Ramadan, ecommerce companies should be aware of shopping trends to maximize their marketing budgets and add more value to their shoppers to build customer loyalty.  

For example, promotion activities should be scheduled during the weekdays when shoppers are proven to be at their most active and more focus should be spent on capturing a wider male audience as current online options are still not as abundant.  

Happy Eid shopping!


Join eIQ Network for more insights here.

As email marketing is essential for businesses to continue growth and more than half of marketers in Southeast Asia are using some form of automation such as email triggering, it’s important to know what channels and platforms their customers in the region prefer.

A recent survey by JakPat, one of Indonesia’s open survey platforms, revealed that Gmail by Google is the leading email service in Indonesia used by 96% of respondents followed by Yahoo!Mail with 56% users.

The JakPat survey showed majority of 987 respondents use two or more email accounts, up to as many as five, but most respondents claim using Gmail the most. 9% of respondents use email domains given by the workplace or university, 8% use Outlook and 4% use iCloud email service.

Number of email accounts Indonesians use

Source: JakPat, Which and Why: E-mail Service and Web Browser of Choice, Jan 19, 2017, n=987 respondents who use email aged 16-39

The popularity of Gmail in Indonesia offers several benefits for ecommerce marketers. First, businesses can use Gmail ads to advertise to Gmail users at the top of their inboxes.

The interactive ads look like normal emails and have responsive designs, making it great for viewing ads on mobile phones.

 

The Gmail ads come in several formats – a single image or catalogue view – offering businesses options to be creative about the message they want to communicate to their consumers.

 

The inbox ads also offer a range of targeting options – affinity segments, topics, interests and targeting users who have received emails containing contextual keywords. It also allows targeting based on the domain of emails, including that of competitors’.

Secondly, Gmail made image loading safer a few years back meaning that images in emails are displayed by default and users are able to see the rich photos or promotions. Note, there is still an option for users to disable images for incoming messages.

Ecommerce software platforms such as Shopify also offer several integrations with Gmail, for example, adding a customizable contact form to your online store.

While JakPat wanted to know if email usage habits differ among students and employees, it found no significant difference.

Two thirds of respondents named creating a social media or ecommerce user account as one of the key purposes to use email, second only to corresponding.

Among other reasons named for email usage are knowing notifications from actively used social media (44%) and receiving shopping promotions (31%).

Some other behaviors to take note of:

  • 81% of respondents use a mobile phone to check a new email while only 19% use a computer and of those who check email on their phones, 86% do it via an application.
  • 81% of respondents who use email have allowed a notification and 31% open the inbox to check when a notification about a new email pops up.
  • Half of respondents check their email two and more times a day, 13% do it once a day.

The JakPat data on email usage frequency contradicts the findings from the latest Digital In 2017 report, according to which only 14% of respondents in Indonesia check their emails weekly. The significant differences might be explained by different survey methodologies, including demographics and geographical dispersion.

The overwhelming support for Gmail, which is used not only as a private email service, but also powers business correspondence most likely stands true.

Businesses and digital agencies should keep up to date with new Google features that will allow them to optimize their marketing efforts such as Gmail ads to best communicate with their Southeast Asian audience.

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