2. 2
Agenda
Scope & Definitions
Overview
Landscape
Growth in Middle Class
Market Size and Forecast
Value Chain
Platform Architecture
Framework for Competitive Analysis
Regulations & Impact of Customs
Similarities & Differences Among ASEAN Countries
Appendix
3. 3
Scope
E-Commerce is defined as sale of multi-brand goods online to
consumers via PC or mobile and excludes services like travel,
insurance etc.
4. 4
E-Commerce Definitions
B2C
Store – storefront and fulfilment
Marketplace – storefront for SMEs/Merchants
Daily Deals/Private Sales
C2C
Storefront for individuals instead of SMEs/Merchants
Classifieds
5. 5
5 Key Factors Fuel E-Commerce in ASEAN
Rise of Middle Class
Greater mobile/Internet penetration
More supply of new e-Commerce players
Increasing logistic options
Alternative Payment Methods
Source: Singpost, Analysis
6. 6
Key Challenges Facing E-Commerce in ASEAN
Lack of robust ecosystem
Management of Customer expectations and Perception
High customer service needs for small purchases
Trust in online payments
Securing supply chain
Cross border commerce issues
Inconsistent duties
Logistics, taxes1, customs clearance, payment methods
Corruption
Lack of reliable, low cost logistics infrastructure
Local contracts, deals, localization for each ASEAN country
Fulfilment infrastructure not built to serve the scale of e-commerce scale
Foreign Ownership Regulations
Taxes in ASEAN can include import tax, excise tax, interior tax, VAT and other/ special duty; 90% tarriffs eliminated within ASEAN and between ASEAN and China but not the Western countries
Source: Singpost, Analysis
8. 8
ASEAN Shopping Website Traffic Comparison
Monthly hits in Millions
With ASEAN population 2X that of US, the monthly hits to shopping websites are < 10%
of those in the US, although the traditional hits are even lower at about 1% of those in
the US
9. 9
Rise of Middle Class1
Country Size of
Middle Class
(2004/5, M)
Middle Class
as % of
Population
Annual
Spend ($B)
Percentage
point
change in
middle class
as % of
population
Change in
Population
(M)
Change in
yearly
Expenditure
s ($M)
Thailand 56 86% 117 +17.6% +17 +55
Malaysia 22 89% 52 +5.6% +7 +22
Philippine
s
48 55% 80 +12% +24 +48
Vietnam 44 52% 63 +57% +49 +77
Indonesia 103 47% 67 +46% +114 +168
Source: ADB 1Middle Class = Daily Consumption Expenditure of US$ 2- 20
1990 - 2008
11. 11
Increasing supply of E-Commerce & Logistics Players
Sourcing
Company
Retail
Platform
(Marketing +
Distribution)
Logistics
(Warehouse
+ Delivery)
Consumer
Sourcing (33%)
Marketing (30%)
Distribution (20%)
Logistics (17%)
Manu-
facturer
Margin
$10 +$33 +$50 +$17 $110
Yamato
Emerging end-to-end e-
commerce platform players like
Acommerce, Velasaia, Singpost
Source: Interviews; Numbers will vary depending category of product
12. 12
E-Commerce Market Size (2013) & Potential
ASEAN E-Commerce at 0.2% of Retail Sales; China’s is 40X @ 8%; ASEAN like China in 2006-08
Source: WSJ; *E-commerce at 5% of retail
13. 13
E-Commerce Value Chain
Sellers Platform Warehouse Delivery Consumer
Owned/
3rd Party
(local, intl.)
B2C
Store/
Marketplace/
Hybrid
Drivers
Pricing
Inventory Mgmt.
CMS
Payment Options/
Currency
Marketing
Merchant Tools
Language
Customer Support
Owned/
3rd Party
(cost driver)
Model
Hub n Spoke
Overseas/
Local
Model
Normal Post
Courier
Self-pick up
Owned/
3rd Party
(cost driver) Overseas/
Local
Reverse
Logistics
(Driven by Size
Dependence/
Payment method)
Logistics
Warehousing: custom packaging, storage, picking & packing, returns, and next-day delivery;
Source: Interviews
14. 14
Platform Architecture
Product
Metadata
Descriptio
ns,
Pictures,
Reviews,
Ratings
Forecasting
tools for
better gross
margins;
Merchant
tools for
listing,
marketing,
pricing,
image/video
uploading ;
Engines:
Recommend
ation,
comparison
Routing
Algorithms
Online/
Offline
Payments
COD
Bank
Transfer
Credit/Debit
Cards
Prepaid Card
Features
Wishlist
Recommend
ations
Shipping
methods
Promotions
Order history
Online/
Mobile/
Hybrid
App
Web
Social Media
Forums
Classifieds
Messenger
groups
Omni
Channel1
1in-store pick-up/returns, store locator, online-offline availability, ship to store
CMS
Inventory/
Pricing/Tools/
Engines
Order Mgmt. Payment Shopping Cart Storefront
Source: Interviews + Analysis
15. 15
Framework for Competitive Analysis
Sourcing
Product
Assortment
Pricing
Logistics
Customer Service
Technology
Track record with brands to educate and convince them go online
Network with brands vs agents affects access to product range
Exclusive products
Products unavailable in local stores
Variety
Pricing in price sensitive markets
Proprietary pricing data built over time
Owned vs third party; Warehous ing & fulfilment capabilities for large number of fast
moving orders daily
First/Last mile delivery optimization
Same/Next day delivery capability
Delivery time
Return policies
Payment options
Delivery routing algorithms
Recommendation engines
Integration to supplier networks
Source: Interviews + Analysis
16. 16
Foreign Ownership Regulations for E-Commerce
Country Feasibility Method Remarks
Indonesia Not allowed but
workarounds
- Nominee
structure
- Separate out
pure online from
offline (logisitics)
Look at Alibaba and
Baidu incorporation
in Indonesia; JV
structures have not
worked well
(Rakuten, Ebay)
Vietnam Not allowed but
workarounds
- Nominee structure Similar to Indonesia
Thailand Allowed Board Of
Investment (BOI)
Philippines Allowed
Malaysia
Source: Interviews + Analysis
17. 17
Status of E-commerce law in ASEAN
Legislation is 2-5 years old in most countries
Source: A.T. Kearney
18. 18
Impact of Customs in ASEAN
Source: A.T. Kearney, Singpost
If purchased
from the US,
customs value
$90
19. 19
Status of Transport Networks in ASEAN
SG, MY & TH offer the best networks
Source: A.T. Kearney
20. 20
Country Differences
Country Logistics Spend Per
Transaction (US$)
Social Commerce Online Shoppers
using online
payments
Banked
Indonesia Lazada built own;
no nationwide
provider
$20 Instagram/Facebook
/Twitter
4% 20%
Vietnam Nationwide provider $20 2% 21%
Thailand Warehousing
strongest after SG
$50 Facebook/Line 11% 79%
Philippines Nation wide
provider bu
Smallest 3% 27%
Malaysia $60 5% 66%
Singapore Strongest in
warehousing; has 20
of top 25 third party
logistic companies
$60 50% 98%
Low banked levels and lack of
trust in online payments make
cash on delivery the most used
payment method in ASEAN
Source: A.T. Kearney + Interviews
21. 21
Country Similarities
Large percentage of e-commerce transactions from outside the capital cities
Thailand – 40% (Line)
Indonesia – 70% (Lazada)
Referrals from social networks like Facebook (Thailand) and Instagram (Indonesia)
No established large scale offline chains like Walmart/BestBuy etc.
Cash on Delivery
Source: Acommerce + Interviews
LINE flash sales by region, Thailand
23. 23
E-Commerce Market Size – ASEAN $7B, 2013
(much higher compared to WSJ report, which looks more reasonable considering regional
Lazada/Zalora GMV in 2013 of EUR 150M and assuming 20% SEA e-commerce market share)
Source: A.T. Kearney
24. 24
E-Commerce in ASEAN relative to other regions shows a huge
opportunity to grow - 5X over the next 5 years to $35B, < 50% of the
overall potential of $67-89B
Source: A.T. Kearney
52. 52
Lazada Financials – H1 2014
Electronics category has very low margins – 10% and so Lazada is beginning to diversify to
increase product categories
200% + Growth in
GMV, Orders &
Customers
Source: Rocket Internet Financials