Retail News CRM

Author: Mei Ling Tan

  • Exporting the key to Asian SME growth

    Exporting the key to Asian SME growth

    If you’re an Asian SME and a retailer and you are not pursuing an export strategy – you’re missing out, according to a study completed by FedEx.

    Small- to medium-size enterprises throughout Asia Pacific that export to overseas markets are twice as likely to be experiencing growth of 11 per cent or more than SMEs who are focused solely on their home market.

    That’s the conclusion of a new global research study commissioned by FedEx Express, the world’s largest express transportation company.  In the survey that includes six key markets in the region –China, Hong Kong, Japan, Singapore, South Korea and Taiwan – 22 per cent of exporting SMEs reported that they were growing rapidly, compared to just 11 per cent of SMEs that sell only in their home market.

    The independent study, entitled Global opportunities: Examining Import and Export Trends Among Small Businesses, reveals the considerable revenue opportunities on offer to SMEs that export.  In Apac, SMEs reported that exports generate an average of US$1.8 million in revenue each year – the highest of the four global regions in the study.  In certain Apac markets, this figure was far higher: Taiwanese SMEs generate an average of US$2.8 million in revenue per year from exports, the highest level of export-driven revenue in the study, while Hong Kong SMEs came in second place, generating an average of almost US$2.6 million.

    “Small businesses are a critically important part of the Asia Pacific economy, and this study shows how they are able to thrive when they grasp the opportunity to sell to markets beyond their own borders,” said Karen Reddington, president, FedEx Express Asia Pacific.

    “However, while many Asia Pacific SMEs see the potential of exporting, they are not confident in their ability to translate that potential into business success as they feel they lack the necessary advice and support. This should serve as a wake-up call to all stakeholders. Helping SMEs to succeed in overseas markets can only be good for the entire region,” she said.

    Despite this significant opportunity, many SMEs are still hesitant about targeting overseas markets.  Currently, only 36 per cent of Apac SMEs are exporting, despite a much higher proportion (77 per cent) recognising that there is a whole world of customers out there.

    One of the reasons for this seems to be a lack of advice and support. Only 10 per cent of Apac SMEs believe they already have sufficient support to succeed in international markets – the lowest level among the four global regions in the study.

    Logistics plays a vital role in tackling this confidence gap. SMEs in Singapore and Taiwan ranked logistics providers as their top source of expertise on exporting, and SMEs in five out of six Apac markets rank logistics providers among their top sources. A reliable logistics service provider plays an important role in connecting SMEs with overseas opportunities and shaping the experience that SMEs provide to their customers.

    Despite the perceived barriers, SMEs are optimistic about the prospect of exporting in the future. Some 52 per cent of Apac SMEs anticipate they will be doing so by 2020, an increase of 16 per cent on the current level. They are even more positive when it comes to international business growth: 61 per cent anticipate greater revenue from overseas business in five years’ time, compared to just 45 per cent that predict this for their domestic business.

    The study was conducted by market research consultancy Harris Interactive on behalf of FedEx Express to provide insights into global import and export behavior among SMEs and the challenges they face. Completed in September, the results are based on interviews with 6891 senior executives from 13 markets across four regions, including 3315 from Apac.

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  • Lotte dreams big with World Tower Duty Free store

    Lotte dreams big with World Tower Duty Free store

    Lotte Duty Free has announced a plan to make its World Tower Duty Free store into a landmark of North East Asia.

    Lotte will invest over 1 trillion won to make the location an international tourist spot that will exceed the popularity of its headquarters in Sogong-dong.

    Lotte Duty Free revealed at a press conference that it will be investing an additional 1.2 trillion won (US$874.97 million) over the next five years to expand the size of its duty free store, creating a one and only ‘Tourism and Shopping Complex Duty Free Store’ in the world.

    With the changes, Lotte has estimated that by 2020, it will have an accumulated 5 trillion won revenue in foreign currency, an added value of 4.8 trillion won, and direct and indirect employment of 27,000 people. The accumulated number of foreign visitors during this period is expected to be 28 million.

    Based on these numbers, Lotte plans to make its World Tower duty free shop the No.1 store in the world, as well as an international landmark.

    Lotte has suggested the creation of a ‘Gangnam Tourism Belt’ to reach its goals. By building a large-scale musical fountain, the company is hoping to make the site into a tourist hot spot like the Marina Bay Sands hotel in Singapore, or the Burj Khalifa in Dubai.

    Lotte Dury Free

    By promoting its duty-free store along with the highest observatory, a vineyard classic hall, an aquarium, a multiplex and Lotte World Adventure, Lotte is hoping to make World Tower the largest tourism hub south of the Han river.

    In order to attract more foreign visitors, Lotte plans to operate a city tour bus that connects Gangnam and other parts of the city, creating a Gangnam culture belt.

    Lotte Duty Free also announced that it has signed an agreement with municipal authorities in Songpa-gu, Gangnam-gu and Seocho-gu to cooperate in revitalising tourism in Gangnam.

  • Wenceslao to test investor appetite in Philippines

    Wenceslao to test investor appetite in Philippines

    DM Wenceslao and Associates, a construction and real estate company, has launched pre-marketing for a $150 million to $200 million initial public offering that could turn out to be the Philippines largest flotation of the year.

    The deal is coming at a time when the Philippines Stock Exchange PSEi Index appears to have resumed its losing streak. The market initially turned downwards in April after hitting a year-to-date peak of 8,127.48 and enjoyed only a very brief respite in October when all global equity markets picked up again.

    On Monday, it fell 1.8% to close at 6,772.92.

    Year-to-date it is down 6.33%, with foreign investors net sellers every month since April.

    DM Wenceslao will test their appetite to return to the market since it hopes to place 70% of its IPO with international accounts, according to its registration statement.

    The company is hoping its high growth profile will also persuade them to accept a premium valuation compared to both the exchange’s average 16 times forecast 2016 p/e ratio and the property sector’s 18 times average.

    Valuation

    According to its most recent filing, the company plans to sell up to 429 million shares at a maximum price of Ps44 per share, potentially generating total proceeds of as much as Ps17.47 billion ($370 million).

    However, sources close to the deal said the pre-marketed range equates to a market capitalisation of about $1 billion. This is towards the bottom end of a Ps45 billion to Ps62 billion ($950 million to $1.31 billion) fair value range assigned by Citic CLSA, one of the IPO’s joint bookrunners.

    This range represents a 30% to 50% discount to net asset value and equates to a p/e ratio of 32 to 43 times forecast 2016 earnings of Ps1.438 billion.

    In 2014, the company reported earnings of Ps339 million. In 2015, they are forecast to triple to Ps1.14 billion.

    Gaming proxy

    DM Wenceslao is said to be pushing forwards with the deal despite the weak market conditions because it needs to raise fresh capital to fund the development of four of its 10 construction projects.

    Capital expenditure is expected to grow 187% to Ps2.4 billion in 2016 from Ps842 million this year, and by a further 180% to Ps6.8 billion in 2017, Citic CLSA estimates.

    In addition, the company’s net cash position deteriorated by 44% on a year-on-year basis to Ps1.2 billion in 2014.

    The company was founded 50 years ago as a pure construction company. However, it has recently been transformed into a real estate leasing company after the Philippines Reclamation Authority transferred 829,000 square metres of land as part of the Manila Bay area reclamation project.

    As a result of the land transfer, DM Wenceslao currently owns roughly 80% of Aseana City, a mixed-use development area partially overlapping Entertainment City, the Philippine’s fast expanding gaming hub.

    Over the next five years the company plans to lease 5,000 square kilometres of land per annum.

    In 2012, DM Wenceslao generated 71% of its revenues from construction projects and 28% via rental income. This has now turned on its head with property leasing accounting for 75% and construction 19%, a far more stable revenue mix that may appeal to investors.

    The company is expecting to generate higher growth than other Philippines property developers because of its proximity to Entertainment City, which is being developed as Asia’s Las Vegas-like gaming and entertainment complex.

    Currently, two casinos under Bloomberg Resorts and Belle Corp have started operations while Traveller International Hotel Group and Tiger Resorts’ casinos are set to open in 2017 and 2018 respectively.

    On the flip side, it will suffer from any downturn in the country’s gaming business, which is currently the key attraction for tourists to visit the area.

    DM Wenceslao is expected to commence the retail offering for its IPO on December 4 and list on December 17, according to the company’s filings to the Philippines stock exchange.

    So far this year, the largest IPO has been the Ps3.621 billion offering for Metro Retail Stores completed earlier this month, one cent below its marketed range of Ps4 to Ps4.80.

    BPI Capital, Citic CLSA, Deutsche Bank and Maybank are joint global coordinators and bookrunners for the new deal.

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  • China formula boom boosts a2 Milk

    China formula boom boosts a2 Milk

    China’s booming demand for baby formula had prompted dairy company a2 Milk Co to boost its earnings forecast for the 2016 financial year.

    The company, which operates in Australia and New Zealand, said the demand for its a2 Platinum infant formula was “growing exponentially”, with sales hitting $NZ38 million for the first for months of the new fiscal year, compared to a total take of $NZ42m for the entire 2015 financial year.

    Baby formula now accounts for around half of a2 Milk’s total group revenue, the company told shareholders at its annual general meeting today.

    The group expects total revenue of $NZ285m for the year, up from its previous forecast of $NZ267m, and raised earnings before interest, tax, depreciation and amortisation guidance to $NZ22, nearly double prior estimates.

    The bullish outlook comes amid headline grabbing reports of supermarket shelves being emptied of milk formula after customers — often Chinese tourists, migrants or students — remove stock by the pallet-load to sell online at home at inflated prices. The reports have caused an uproar among parents and consumer groups, who have called on the government to intervene.

    But a2 Milk said demand was growing amongst both Australian and Chinese customers. The group said the growing success of a2 Platinum products was based on the reputation of the a2 Milk brand in Australia, while positive perceptions around Australia and New Zealand’s “clean and green” sourcing, was also helping drive strong demand from China.

    The company said retail stock shortages were continuing despite production volumes increasing, while demand was continuing to exceed supply.

    The group said it was building branded flagship stores across selected e-commerce retailers to build and capitalise on the growing demand in China.

    “The a2 Milk Company is on the cusp of converting our recent investments into significant and meaningful business platforms, both in Australia and abroad, which will generate significant growing returns across the coming years.” chairman David Hearn said.

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  • Paris attacks seen causing short-term global markets drop

    Paris attacks seen causing short-term global markets drop

    Stocks in major markets are set for a short-term sell-off on Monday after suspected Islamist militants launched coordinated attacks across Paris that killed more than 130 people, but few strategists expect a prolonged economic impact or change in prevailing market directions.

    If anything, any initial damage to economic confidence, tourism and trade within Europe will likely reinforce the European Central Banks resolve to ease monetary policy further next month, they reckon. That will keep pressure on the euro exchange rate and support other European asset markets.

    French financial markets will be open as usual on Monday, stock and derivatives exchange Euronext said on Saturday.

    With many Parisian restaurants and shops shut on Saturday and Sunday, some local analysts expected any French equity reaction to be more visible than after Januarys attacks against the Charlie Hebdo satirical magazine and a Kosher supermarket.

    “Stocks that are angled towards consumer goods or tourism, notably the luxury industry with the Christmas season, could be affected,” said IG France analyst Alexandre Baradez.

    “The January (attacks) were different, they were more targeted. Here they were aiming at an entire population,” he added. “There may also be a purely psychological effect that pushes investors to stay on the sidelines until more clarity emerges.”

    Equity futures moved lower at the open on Sunday night in New York time, adding to losses posted as the attacks unfolded after markets closed on Friday. They soon pared some of those Sunday losses.

    The Nikkei stock index fell 0.8 percent after having fallen as much as 1.8 percent earlier in the Monday session.

    Mohamed El-Erian, chief economic adviser at Allianz, said: “With the horrible tragedy leading to some short-term restraint to French GDP, equity markets are likely to open lower with both government yields and the euro falling.”

    Concern about similar attacks beyond France and tensions surrounding a stepped-up Western military response to the actions of Islamic State point to some ripple effect around world markets.

    “These Paris terrorist attacks and the larger scale of this attack could have a meaningful negative impact on the travel and tourism sector,” said Robert T. Lutts, chief investment officer at Cabot Wealth Management in Salem, Massachusetts.

    France has the largest number of tourists in the world and the sector accounts for almost 7.5 percent of GDP.

    If increased national security causes trade friction, longer-term commercial effects also “bode ill for the euro,” said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.

    “France closed the borders. For how long and what degree will determine the effects,” he said. “The question is will other countries follow this policy, maybe as a political cover to impede immigration.”

    Outside France, few expect a jolt as significant as the hiatus after 2001s attacks that destroyed the World Trade Centre in New York City.

    In foreign exchange markets trading in Asia, the euro was slightly lower against the dollar and yen. Markets in the Middle East, which trade on Sunday, were hit hard, although part of that decline was due to recent falls in oil prices.

    Analysts trying to put the event in some historical context say prior events like this in Europe over the past 15 years tended not to have any durable market or economic effects.

    “As horrific as these events are – and this is truly awful – economic activity does tend to be pretty resilient,” said Howard Archer, chief UK and European economist at IHS Global Insight.

    He noted that the UK, Spain and France have all seen their economies “little damaged by terrorist atrocities in the past.”

    One sector that could see a boost: defense. The sector is already doing better than U.S. equities as a whole, and “the prospect of more military action in Syria may help this group in the week ahead,” said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.

    “While the attack was in Europe, stocks all around the world will see pressure on Monday,” he said. “The typical “risk off” trade is out of global stocks, and into global sovereign debt and the U.S. dollar.”

    Traditional safety plays into assets such as U.S. Treasury bonds would also go against the prevailing market trend of discounting an interest rate rise from the Federal Reserve next month. With few expecting the fallout from the attack to be big enough to affect Fed decision making, any Monday move will likely be short lived.

    The benchmark U.S. Treasury futures contract rose on Sunday to hit its highest since Nov. 6.

    U.S. 10-year Treasuries notes yielded 2.273 percent at Fridays close. The euro was 0.5 percent lower against the greenback at $1.0718.

    One reason for a possible volatile move into Treasuries is because the Fed rate hike anticipation has prompted heavy short positions in the 10-year Treasury. That could exacerbate any move into safe-have government debt.

    Analysts at Citi say just the initial shock of the attacks may challenge extremely leveraged plays – such as heavy short positions in the euro or oil futures. But there was little reason to view that unwind as anything other than temporary.

    “The market is heavily short euro and concerns are high any risk will trigger a short squeeze,” Citi analysts told clients.

    “We dont think it will – and would sell into one if it appears.

    The attacks do not undermine the initial reasons for being short euro – or reduce the possibility of (ECB) action.”

    While news of the attacks hit after markets closed on Friday, S&P 500 Index futures were still trading and shed about 1 percent in light volume.

    “If this had happened during market trading hours there could have been a panic but markets had a weekend to digest all the information,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities in Tokyo.

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  • Worldpay processes over 1000 payments per second during China Singles Day

    Worldpay processes over 1000 payments per second during China Singles Day

    Worldpay processed on average over 9,000 transactions per minute globally during China Singles Day 2015 with        transactions peaking at 1,111 transactions per second during the day’s busiest sales period.

    The number of transactions Worldpay processed on Singles Day more than doubled between 2014 and 2015, rising 146%. The total value of Singles Day transactions rose 320% between 2014 and 2015.

    In the UK the total value of China Singles Day transactions made on cards in the UK grew 251% and the volume of transactions was up 307%.

    Shane Happach, chief commercial officer, Global e-commerce at Worldpay, said: “We’ve been tracking the rise of China Singles Day for a few years now, and it’s incredible to see just how quickly the event has risen to prominence. Alibaba just revealed that Singles Day was the biggest ecommerce day in history, and our global transaction figures only reinforce just how relevant this event has become for online shoppers everywhere. It will be interesting to see how this year’s BlackFriday sales stack up, particularly with many major retailers announcing they’re opting out.”

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  • Parkson to launch fashion brand LOL

    Parkson to launch fashion brand LOL

    Malaysian department store retailer Parkson Retail Asia is to launch a new fashion brand LOL, in partnership with a newly established company Super Apparel Supply, jointly owned by Chong Yan Kit and Lim Kin Ann.

    Together the two companies will establish a chain of retail stores branded LOL and selling fashion apparel and accessories, with Parkson owning 70 per cent of the business. Their venture will be established under an existing non-trading Parkson entity.

    Parkson says the JV will give it platform for selling men’s, women’s and children’s apparel, shoes and accessories ”to the mass market”.

    No other information has been released to date, including when and where the first stores will open or whether the brand will be launched outside Malaysia.

    Based on its name and the company’s wording, LOL appears to be a fast fashion or outlet concept, perhaps taking the fight back to Uniqlo which is expanding rapidly in Southeast Asia on a value offer.

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  • Iconsiam joins hands with TAT to create a splendid Loi Krathong Celebration Festival

    Iconsiam joins hands with TAT to create a splendid Loi Krathong Celebration Festival

    Iconsiam, an iconic new national landmark in Thailand and a symbol of national pride for the country in collaboration with Tourism Authority of Thailand (TAT) cordially invite both local and international travelers to celebrate one of the kingdom’s most impressive and popular annual events organized on the Chao Phraya river in  “the Delightful Colors of the River, Loi Krathong Festival 2015”. On this charming festival, there will be a spectacular display of illuminated boat processions with a length of more than 250 meters being lit up and launched into the Chao Phraya river where the main highlight will be ICONSIAM’s illuminated vessel under the theme of “Mahajanaka’s boat, the symbol of remarkable perseverance”, from “The Story of Mahajanaka” written by His Majesty King Bhumibol Adulyadej.  In addition, you will be amazed by many other memorable activities dedicated to Loi Krathong festival on the Chao Phraya river and at Nakrapirom Park from 20 – 25 November.

    Mrs. Chadatip Chutrakul, Executive of ICONSIAM, said, “With a strong determination to create a new sensational mega-development of Thailand on the bank of the Chao Phraya river, the River of Kings on which has carried Thailand’s greatest legends and most resplendent civilizations, to become the most compelling and must-see destination of Thailand drawing visitors from around the world and from around Thailand.  We then proudly support one of the most prestige cultural heritages and traditions of Thailand by joining hands with Tourism Authority of Thailand in organizing “the Delightful Colors of the River, Loi Krathong Festival 2015” to revitalise Bangkok’s world-renown Chao Phraya river and let it illuminate for the world to admire. We aim at bringing happiness, impression and confidence for those who join the event and also to the world through the country’s most spectacular and unique time-honored culture and tradition portrayed along the glorious Chao Phraya river.”

    07 Ship-Parade-06

    Highlights of the event will be divided into 2 periods, the 1st period starting from 20 – 22 November between 6.30 – 10.30 pm at ICONSIAM pier on the bank of the Chao Phraya river, ICONSIAM’s illuminated vessel being decorated with beautiful arrays of splendid lights under the theme of “Mahajanaka’s boat, the symbol of remarkable perseverance” will be on display for those who commute via waterway to enjoy at the first time. “Mahajanaka’s boat, the symbol of remarkable perseverance” is contained in “The Story of Mahajanaka” written by His Majesty King Bhumibol Adulyadej. Dhamma in this royal book is an encouragement for everyone to face problems with courage and perseverance in all circumstances like His Majesty the King said on the preface of this royal book “May you be blessed with pure perseverance, sharp wisdom, and complete physical health.”  National artist Mr. Chalermchai Kositpipat  gives the great honor to ICONSIAM by providing his masterpiece of the gracious illustrations drawn for the royal book Mahajanaka to decorate on this illuminated vessel with a length of more than 30 meters.  The ICONSIAM’s illuminated vessel will be elaborately adorned with beautiful arrays of magnificent lights and sounds together with decorative effect of brilliant fountains for the whole vessel to make it the most magnificent.

    The 2nd period starting from 23 – 25 November between 5.00 – 9.00 pm at Nakrapirom Park in Bangkok, under the moonlight on the full moon night of the 12th lunar month visitors will be brought back into the charming old Thai atmosphere where they will take part in a lot of interesting and fun-filled cultural activities while the Chao Phraya river will be shined with colorful krathong floating on the rippling waters. Throughout three nights, there will be an illuminated boat procession to light up the River of Kings with 6 illuminated vessels and additional impressive ICONSIAM’s illuminated vessel with a length of more than 250 meters, set to run from Bangkok Bridge to Rama VIII Bridge.  Moreover, visitors will experience Loi Krathong ceremony in ancient Thai style by releasing beautifully decorated krathong down the Chao Phraya river to express gratitude to the river goddess. Meanwhile, there will be several cultural activities related to Loi Krathong festival. In addition, on the night of 25 November at 6.00 pm onwards, the extravaganza colorful fireworks display and the krathong floating ceremony of Rattanakosin period scheduled to take place to make it a memorable night.

    Those who are interested in joining “the Delightful Colors of the River, Loi Krathong Festival 2015” will be able to appreciate the beauty of ICONSIAM’s illuminated vessel at ICONSIAM pier on the bank of the Chao Phraya river and also along the Chao Phraya river while participating in Loi Krathong celebration festival organized at Nakrapirom Park in Bangkok between 20 – 25 November. For more information, please call Public Relations Department of ICONSIAM at 02-658-1000 ext. 8202, 8230.

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  • New rules will ‘wipe out’ Chinese online payment agents

    New rules will ‘wipe out’ Chinese online payment agents

    New regulations proposed by the Chinese government will deliver an immediate boost to state-ownedChina UnionPay, potentially forcing its smaller Chinese online payment agents out of business.

    The ‘Method of Network Payment Service Management for Third-Party Payment Agents’, proposed in August 2015, is set to restrict consumers’ daily and annual spending on online purchases through private third-party payment agents such as Alipay and Tenpay. But the new law exempts China UnionPay, giving it a clear market advantage.

    According to Timetric, the new law will present serious challenges for small private third-party agents trying to get a foothold in the online retail market.

    Under the draft law, the transaction amount made through third-party payment agents will be determined on the level of security measures incorporated within the online platform. Furthermore, all private third-party payment agents will be forbidden from offering financial services such as deposits, loans, financing or currency exchange services to consumers.

    Chinese regulators say the law aims to protect consumer interest and privacy and clamp down on counterfeit products and poor customer service offered by online private third-party payment agents.

    But in practice it appears on the surface to be a tool to protect UnionPay’s market dominance in the short term and protect the government’s interests, rather than those of consumers.

    “If implemented, the new legislation is anticipated to wipe out smaller private third-party agents, due to the increased operational costs of implementing multiple security measures”, said Kartik Challa, an analyst at Timetric.

    In China, UnionPay (CUP) is the sole scheme provider of payment cards. According to central bank regulations, all banks and card issuers operating in the country are required to route their Yuan-based transactions through CUP’s electronic payment network. However, following a complaint filed by the US against China via the WTO with regards to discriminating against foreign companies in 2012, the WTO directed the Chinese government to open up its payment cards market to foreign operators. Consequently in October 2014, the Chinese government announced its decision to allow foreign companies to set up their own payment card clearing businesses, effective from June 1, 2015.

    Ultimately, says Challa, the move will open the way to stronger competition for CUP – but not in the short term.

    “This move by the Chinese government is anticipated to intensify competition in the Chinese payment cards market, and end CUP dominance as the country’s only authorised card clearing organisation. However, Visa and MasterCard have a long way to go before they can make a dent in CUP’s market share, as they need to build up infrastructure from scratch”, comments Challa.

    China is one of the largest and most mature eCommerce markets in the world, increasing at a CAGR of 56.99 per cent over the last four years, from US$68.7 billion in 2010 to $417.3 billion in 2014.

    Factors, such as the rapid adoption of smartphones, growing internet penetration as well as availability of secure online payment mechanisms and a growing preference for online shopping – especially among the rural population– contributed to this growth.

    Timetric is a provider of online data, analysis and advisory services on key financial and industry sectors. It provides integrated information services covering risk assessments, forecasts, industry analysis, market intelligence, news and commentary.a

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  • Groupon woes continue

    Groupon woes continue

    Groupon – which has exited three Asian markets this year – continues to struggle globally with ts flawed discounting model.

    Operating on wafer thin margins in the first place, the company has taken a severe hit from currency exchange fluctuations in the third quarter.

    Globally, gross billings grew by six per cent when the exchange rate impact is excluded; similarly, global revenue increased by a more positive seven per cent on a constant currency basis.

    But after taking into effect the strengthened value of the US dollar against foreign currencies this year, Groupon saw its net losses grow by some $6.4 million to $27.6 million.

    As reported by Inside Retail Asia in September, the listed US eCommerce business has closed its doors in Thailand, the Philippines and Taiwan. Outside Asia it has already exited Greece and Turkey and will now close operations in Panama, Morocco, Puerto Rico and Uruguay.

    Neil Saunders, CEO of Conlumino, says the impact of currency fluctuations is worsened by the fact that the company operates off relatively low margins, especially outside of its North American heartland, and as such does not have much of a buffer against their deleterious effect.

    “The margin position is partly down to the multiple systems that Groupon operates across the globe which increase complexity and do not allow for economies of scale. While this is something the company has been remedying by moving to a common platform, we believe that the benefits have, so far, been fairly modest.”

    Saunders says margins are also held back by a further issue, arising from Groupon’s revenue mix.

    “At present, the company divides itself into three main segments: Local, Goods, and Travel. Local is concerned with deals from service providers like restaurants, events and activities. Goods is focused on consumer products like jewellery, electronics and apparel. And Travel is about holiday, flight and accommodation deals.

    “Recent growth in the more mature Local part of Groupon’s business has slowed considerably. Indeed, in Q3 growth was just under eight per cent. Comparatively, Travel and Goods have both seen strong growth, up 20 per cent and 18 per cent, respectively. This rebalancing of the revenue mix has diluted margins, mainly because Goods are far less profitable for the firm.”

    Saunders says gross profit as a percentage of gross billings for Goods is 13 per cent compared to 30 per cent in Local and 18 per cent in Travel.

    “To be fair, the margin performance of Goods has improved over the past year – but not by much. Over future quarters, we see the prospects for margin gains to be slight given that Groupon has to work harder on Goods deals in a market that remains very promotional.”

    Saunders believes there is little comfort ahead for Groupon in the fourth quarter.

    “Groupon is forecasting that revenues will come in at $865 million, at best. This is quite some way below the $883 million generated last year.

    “In our view, such anemic numbers do not paint a rosy picture for future profits. They also bode badly for the start of the new fiscal year – an issue the new CEO, Rich Williams, who is replacing Eric Lefkofsky who’s stepping into the role of chairman, will have to deal with,” Saunders concluded.

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  • Indonesia through the eyes of local startups

    Indonesia through the eyes of local startups

    11 and 12 November were two days of highly intensive activity at the Tech in Asia Jakarta 2015 held at Balai Kartini. From my sources at TIA, it was a whopping 4123 attendees, the largest turnout for a TIA event.

    The sheer crowd was a testament to Indonesia’s importance as a major South-East Asian consumer market. 142 of 184 startups hail from the host nation Indonesia at the Bootstrap Alley, the startup exhibition area.

    I have read many news sources about the Indonesian market, spoken to many people involved in Indonesian businesses, but my access to the local startup community has been limited, until now.

    tech in asia jakarta 2015 bootstrap alley featured image

    Intrigued to know Indonesia through the eyes of local startups, I told my investment team to spread out and take different alleys and speak to as many Indonesian startups as possible to learn more about the scene.

    At the end of the trip, we compared our notes and came up with some interesting observations. Due to the sensitivities of information being shared here, all names have been removed.

    New tech, same old way of business

    You would have expected a cultural shift of Indonesians adopting mobile technology as a new way of doing business, but the business scene is still dominated by very powerful and connected people who dictate the speed and direction of the technological adoption.

    “These powerful people have many companies under the guise of proxies and the company ownership structure is complex. Information is very scarce on who is the ultimate owner. Many of these companies own approved permits for various projects, which are awarded to them from their connections to the government. You have to work with these companies in order to gain access to a larger slice of the market,” says a startup founder working on an ecommerce platform selling a restricted good.

    For my business, I need to do four things to get it moving. Funding my operations is one. Next is to get access to a company which owns a permit to import these restricted goods. In this industry, there are only eight such companies holding permits. I have access to two.”

    “Supplies and funding,” I thought to myself. What else can there be? “Next, I have to be on very good terms with the police, to ensure they won’t cause trouble for me. There is no bribing, just ensure we are in communication and having good relations. Next is the mafia, to ensure they also won’t cause trouble for me,” he explains. What a balancing act he has to do. He didn’t mention about whether he needs to pay off the mafia though.

    He explains that Indonesia is a place where you have to identify first the right people in power and to connect with them to gain access to a certain market. He claims his market is niche, but I feel that he is hiding the real huge potential of the market. By having two of eight suppliers working with him, he is effectively addressing an estimated 25% market share of this vertical, assuming equal market share per supplier.

    Complimentary, not disruptive

    Another founder, who reads many articles on US entrepreneurs, says the US founders tend to claim their business model is disruptive and changes the way people work and live.

    “But here in Indonesia, remember that the economy is run by many powerful people. If you mention the word disruptive technologies, these people will regard you as a threat and go all out to block you. Rather, always say you are here to compliment their existing businesses and help them earn more money. Never go head-on with the incumbents. You might just get yourself ‘disrupted’,” he gives a shiver for dramatization.

    Mobile ecommerce is a huge size available for all

    Despite the dominant ecommerce players in Indonesia, the sheer market size makes it available to all, even the small-time businesses. An Indonesian investor who invests in hyper-local startups mentions:

    “Take Jakarta for example, there are many hyper-local ecommerce startups serving neighbourhoods. With the population density so high in the cities, many small-time startups are able to tap into these places and build their customer base and grow from there. It is not a nationwide expansion like the large players, but you can earn a decent living serving a small area. And don’t bother to build an ecommerce website. Everyone is on a smartphone. Going mobile is the easiest to start.”

    But for B2B businesses, it seems that web is still the way to go. I spoke with another startup that is an Alibaba me-too, focusing on very specific categories like fashion clothing. They connect wholesalers to distributors in Indonesia via their website.

    Despite being only in the market for a few months, they have already transacted a good number of B2B deals online. But given that the founder’s family is already in the trade, it might be their own existing orders going online that is creating the traction.

    Split-founder personalities

    Given space constraints, only 90 or so startups could exhibit on the first day, and the remainder presented on the second day. But it was an irony that the founders on day one came back on day two as founders of another startup!

    It is apparent in the Indonesian culture not to dabble in one startup but rather to try as many. “The opportunities are just so many that it would be stupid not to have multiple businesses,” quips a founder.

    He himself has four startups, working with various partners across the three cities of Jakarta, Bandung and Surabaya. “We have friends everywhere who have good connections for different businesses. We have our own connections and thus connecting all the dots from various cities to build a business together makes sense.”

    When I asked him how he manages his time, he smiles and says, “I wear different hats, just sometimes, I have to put on all hats. It is fun!”

    Ending thoughts

    As I took off from Soekarno-Hatta airport, I have been left with an impression that Indonesia’s tech startups are still basic in nature and not cutting edge. Founders have shared that the consumer market is still very much in its infancy stages and focused on bread and butter issues.

    However, there is no need for disruptive technologies yet as enabling technologies like transportation, ecommerce and communications need to be established first. Having strong existing cultural business norms of working with the bourgeoisie shows that running a big business requires a long-term plan.

    Further adding to the complication is the government’s many 87 regulations that prevent effective foreign investments and the creation of startups. But for those who are willing to slog it out, Indonesia’s huge population size is one attraction with its might and potential that entrepreneurs cannot ignore.

  • 11Street – RM11million giveaway for Year End, and new strategies for mobile and shocking deals

    11Street – RM11million giveaway for Year End, and new strategies for mobile and shocking deals

    11street (www.11street.my), one of the largest online marketplaces in Malaysia, revealed new strategic business plans for its mobile app and signature ‘Shocking Deals’ at ‘LOVE 11’ Day, its inaugural Korean – inspired celebration event at Lot 10 today.

    Among the key announcements Hoseok Kim, CEO of 11street, made at the press conference was:

    ·      Unveiling of their biggest giveaway of the year  – deals totalling to RM 11 million up for grabs for Malaysian shoppers. Starting from today until 31 December, shoppers can redeem daily offers of deals and coupons with up to 90% discounts.

    ·      Marking the 11th of each month as ‘LOVE 11’ Day for consumers to enjoy significant giveaways

    ·      One of their top business strategies include doubling its variety of product listings for its ‘Shocking Deals’ promotions to help consumers continue finding what they love at 11street

    ·      Another business focus would be on a stronger mobile app strategy for an enhanced shopping experience with more curated content with an improved user interface and user experience designs with additional personalized features. in line with this, 11street will be offering more mobile exclusive value deals and discounts.

    ·      Exclusive Premiere of Thematic TVC – will be available nationwide via free to air TV networks and 11street’s YouTube channel starting from November 16th.

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  • Uber to triple number of drivers, launch ‘UberPool’

    Uber to triple number of drivers, launch ‘UberPool’

    Uber is set to expand its pool of drivers and will launch “UberPool”, a carpooling service, in Bangkok next year.

    The private car company will increase the number of its drivers from 30,000 to 100,000 by next year as currently it can only serve around 85 percent of customers with an estimated wait time of 5.5 minutes. 

    Uber also plans to launch “UberPool”, a carpooling service on the Uber app that matches customers with fellow riders heading in the same directions to split costs, The Nation reported.

    About 2 million Bangkokians have taken an Uber ride since its launch last year. The company wants to cut its pick-up time to three minutes, said Chan Park, general manager for Southeast Asia.

    The areas with the highest demand for Uber are Ratchaprasong Junction, Sathorn road, and Suhkumvit road. 

    For the cheaper UberX, the business has grown 12-fold since its launch six months ago. 

    “Thailand is a huge potential market. The firm’s business focus will be consumer-centric so that it will create business opportunities in Thailand. It also has plans to expand to big cities,” said Barry Levy, acting managing director of Uber Thailand. 

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  • American bistro TR Fire Grill coming to Indonesia and Malaysia

    American bistro TR Fire Grill coming to Indonesia and Malaysia

    TR Fire Grill, a chef-inspired American bistro, is making its way to Malaysia and Indonesia with its artisanal culinary experiences, its first venture out of the United States.

    Its franchisee for Malaysia and Indonesia, Grand Companions Sdn Bhd’s CEO, George Ang said the company planned to invest about RM2.2 million in each of the TR Fire Grill outlets.

    “By June or July 2016, we will have the first restaurant in Kuala Lumpur and it will be followed another two in Jakarta, Indonesia,” he told Bernama in a recent interview.

    He said for both Malaysia and Indonesia, TR Fire Grill would have pork-free menu.

    TR Fire Grill was launched in March 2015 by Romacorp, which owns another American casual dining chain restaurant brand, Tony Roma’s. Grand Companions is also the franchise partner of Romacorp for Tony Roma restaurants in Malaysia.

    On the expansion for Tony Roma’s restaurants in Malaysia, Ang said the company currently operates nine Tony Roma restaurants in Malaysia and planned to add four more with investments of RM2 million each.

    “One new outlet will be opened in Vivacity Megamall in Sarawak and an additional three outlets in Peninsular Malaysia in the next two to three years,” he added.

    Grand Companions, he said was able sustain the volume of patrons for its Tony Roma’s restaurants in Malaysia and expected to lock in sales of RM250 million by end-2015.

    Meanwhile, Romacorp president and CEO, Stephen K. Judge, said Malaysia was one of the key markets for the US-based group.

    He said the group is currently developing new brands to continuously cater to the fast-moving food and beverages market.

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  • Indian eCommerce growth fastest in Asia

    Indian eCommerce growth fastest in Asia

    The Indian eCommerce growth rate is now the highest in Asia – yet online still accounts for less than one per cent of total retail sales.

    Gene Alvarez, MD and VP at research house Gartner, told a symposium in Goa this week that India represents a US$7 billion market, growing at more than 40 per cent every year.

    “Currently B2C commerce leads the market in India, while B2B is limited to organisations that drive online sales while trying to cut costs in dealing with their partners and distributors.”

    More than 40 per cent of digital commerce transactions came from a mobile device in 2014, and that proportion is likely to exceed 50 per cent in 2015. Due to the low internet penetration in India, mobile has leapfrogged the PC, and consumers are using mobile as the primary channel for online shopping.

    “There is a lot of hype due to the high growth and high expectation of the market, and many companies are fast expanding to grab market share and increase visibility. However, the fierce competition is pushing up costs while the average order value remains low. Players need to execute on the basics to ensure the growth is sustainable,” said Alvarez.

    Gartner identified the top five things Indian digital commerce players should focus on to drive growth:

    • Customer Experience: This is the most important differentiator of a digital commerce service as price becomes transparent across sites. Providers that can design a compelling user interface, personalise landing pages, search results and product feeds based on the shopper’s behaviour, and effectively engage shoppers to make them loyalty customers, will win over those that cannot.
    • Product Range: Due to the nascent nature of India’s digital commerce market, product range and choices are still quite limited even on major marketplaces. Providers will need to expand the product ranges to make the service attractive to shoppers through organic growth and partnership. Focusing on a few categories, such as consumer electronics, fashion and grocery can also be the right strategy to deeply penetrate a product segment and become the go-to site for that category.
    • Delivery: This is a key challenge in India given the less developed logistic infrastructure and the lack of last-mile connectivity in remote areas. Providers will have to partner with multiple logistic providers to leverage their strengths in national, regional and local delivery, as well as with retail stores as pick-up stations to offer reasonable delivery speed and costs. They also need to consider putting in place reverse logistics for returns, which significantly impacts the customer experience.
    • Payment: Payment has a big impact on the conversion rate, and a frictionless payment process greatly helps increase digital commerce sales. India has relatively low credit card penetration, and most of digital commerce is done via cash on delivery. Despite regulatory challenges, digital commerce providers should work with payment providers to offer a frictionless payment experience.
    • Customer Service: Besides offering immediate help on site and via the contact center, and making processes and cost information transparent, digital commerce providers should think carefully about their return strategy. A generous return strategy encourages sales especially for categories such as fashion and consumer electronics.

    This week’s Gartner Symposium/ITxpo is a major gathering of CIOs and other senior IT executives. The event delivers independent and objective content with the authority of Gartner, a leading IT research and advisory organisation, and provides access to the latest solutions from key technology providers.

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