From going mobile-first to using messaging for e-commerce and more, the CEO of venture firm Ardent Capital shares insights in his keynote address
People don’t usually look to fulfilment and logistics as the moneymaker idea in e-commerce. That’s one reason why Ardent Capital-backed and operated startup aCommerce has managed to snag more than 160 clients in just two years.
Logistics and delivery might not be sexy — it’s no Facebook or Uber — but it’s something that is necessary for every e-commerce. “Someone needs to put that (product) into a box, someone needs to put that into the back of a truck or a motorbike,” says Adrian Vanzyl, CEO, Ardent Capital – a venture firm that has injected substantial amounts into e-commerce companies.
Vanzyl, who is a keynote speaker at Echelon Central Asia in Almaty, Kazakhstan, also gave the audience a quick guide into Southeast Asia’s e-commerce scene.
Here is a quick summary:
1. It’s still early
Southeast Asia is still a young region, with massive opportunities to be tapped. “Less than one per cent of retail [is being conducted online],” says Vanzyl.
2. Go mobile-first
If you do not build for mobile, someone else will swoop in and grab whatever market share you’ve built up by providing a mobile-first solution. “Someone else will kill your business,” says Vanzyl.
After all, Southeast Asia has a mobile phone penetration rate of more than 100 per cent, and a generally high smartphone penetration rate across the region. That said, there is still lots of room for growth, adds the venture capitalist.
3. Social is the foundation
“You cannot have a life without being on Facebook and LINE messenger,” says Vanzyl, adding, “and I say that only partially in jest.”
Southeast Asia is an incredibly hyper-social region. If we look at LINE’s user base alone, the Japanese chat app company’s top markets are Japan, Thailand, Indonesia and Taiwan, two of which are countries in Southeast Asia (the other two are based in Northeast Asia).
In Thailand, employees use LINE as their default work chat app. In Singapore, University students use Facebook groups to discuss different topics with their professor and school mates. Indonesian consumers are welcoming Instagram as a way to peddle goods online.
4. Demographic shift: Millennials lead
Across Southeast Asia and the world, Millennials — people reaching young adulthood around the year 2000, according to the Oxford Dictionary of English — are leading the markets in terms of free and paid consumption of online and mobile services.
Half of the people in Vietnam are under 25, says Vanzyl. He adds, “If you want to build a community for moms, that’s a no-brainer.”
However, that’s not to say that businesses should neglect the other markets because those demographics are equally as important as the Millennial crowd.
5. Buying online
In Malaysia, the top three categories for consumers are travel services, vouchers and online coupons, and entertainment services like movie tickets. In Thailand, the sectors are not that different; the most popular category is electronics, followed by fashion and then, beauty products.
6. Urban vs rural
Out of 67.01 million Thais, 54 million are based in major cities. But most e-commerce companies in Thailand will tell you that 60 per cent of all transactions in Thailand happen outside Bangkok, the capital city. There has been an interesting shift in purchasing power.
A farmer’s wife who wants to purchase a flat screen TV is not going to travel to Bangkok just to purchase such an item; she will be buying the monitor online from a site like Lazada, says Vanzyl. “Rural is increasingly important,” he adds.
Companies tackling rural markets should think about payment mechanisms. “If you do not have cash as a payment mechanism, you’re going to lose half of your intended customers,” he says.
7. Challenges for incumbents
Newcomers in the market will be losing money every quarter, and will probably be okay with that. “A company like Lazada has a billion-dollar gross merchandise volume run rate,” says Vanzyl, “and traditional companies will not be able to compete just because they have a certain focus on making profits.”
If you work for a traditional retailer, someone is “coming to eat your lunch”, he ends.
Disclaimer: aCommerce is an Ardent Capital portfolio company. Ardent Capital is an investor in Optimatic Pte Ltd, the parent company of e27.
Join us before the end of 2015 at Echelon Central Asia! Held on Dec 2-3, Echelon Central Asia is a two-day conference held in Almaty, Kazakhstan, aimed to create a bridge between Central and South-East Asia.
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