On June 23, 36Kr Chuhai and KrASIA successfully organized Globiz, a webinar aimed at shedding light on doing business in Southeast Asia (SEA). KrASIA invited a number of distinguished entrepreneurs and investors to share their experiences operating in SEA, as well as the challenges they face during their time in the region.
The following piece is a summary of insights shared by our distinguished speakers, as translated and adapted for public release.
Joe Bao, Microsoft
Vice President of China Strategy Officer & Greater China
Globalization topic is a very important topic in 2020. Due to the Covid-19 situation, businesses worldwide are seeking new ways of operation, and technologies and tools that can assist this transformation process are critical.
Regardless of industry, corporate customers have similar pain points: cross-border communication and collaboration, internal management optimization, policy deployment and execution, risk and compliance, as well as different cultural settings in SEA.
Microsoft has developed a series of products to address these pain points, such as Microsoft Azure, a cloud computing service, Windows+ Office 365, a modernized office desktop, Dynamics 365, a business applications platform, and Github, a software project hosting platform.
Microsoft has also launched the Microsoft Innovation Club, which is a digital platform aimed at helping innovative partners connect.
Helen Wong, Qiming Venture Partners
SEA is a huge market with a population of 650 million people, 480 million internet users, and a young population, with 70% of the population under the age of 40. In addition to this favorable demographic structure, rapid internet penetration and the healthy growth of the digital economy has made SEA a necessary investment for companies going overseas.
Over the past 10 years, SEA has witnessed to birth and growth of a number of e-commerce companies. For example, Qiming has invested in e-commerce company Fingo, as well as consumer finance company Akulaku. Today, social e-commerce has huge potential, as does online travel, car-hailing, and social media. In particular, the social media and entertainment industry is difficult to work in and is filled with global giants such as Google and Facebook.
For Chinese investors, it is necessary to consider the relative advantages of investing in Chinese companies going overseas to local companies in SEA. Since SEA is a relatively fragmented market, each country’s language, culture, and user habits are different. Therefore, each company needs to tailor itself to local conditions.
Alan Hellawell, Alpha JWC Ventures
Even in the current Covid-19 situation, the situation in SEA is stable. Companies and VCs may be more financially conservative in the short-term, but in the long term, the market outlook is optimistic. SEA is a market that generates dividends from its demographic, with significant early-stage potential. Chinese companies and VCs can, therefore, bring their previous experience to this market and establish partnerships with local VCs and companies.
Thomas Tsao, Gobi Partners
Co-founder and Partner
SEA is a relatively fragmented market, so both Chinese investors and companies need to realize that localization is crucial. When establishing locally, one needs to study the market deeply, and understand and respect local customs. In addition, cross-border companies need to understand how to decentralize power efficiently and improve overall synergies.
Ben Jiang, KrASIA
In 2017, the domestic venture capital market and internet market became very crowded. Therefore, a large number of Chinese VCs and entrepreneurs began to look for the next “blue ocean market” in SEA, India, Latin America, and other regions. 36Kr originally went overseas to report on Chinese VCs and companies, but later, extended its focus to local companies in SEA.
KrASIA is committed to bridging the information gap between domestic and foreign companies and VCs, and helping these stakeholders meet mutual understanding and match their resources with each other. KrASIA also helps to match China’s huge resources with the needs of overseas regional markets by using the contacts and resources accumulated to achieve inter-regional interoperability.
Rachmat Kaimuddin, Bukalapak
Indonesia is relatively digitally developed as many people own smartphones and use the Internet. However, Indonesian companies rarely use digital technology in their daily operations. Statistics show that only 16% of small and medium-sized enterprises (MSMEs) will use digital technology. Therefore, aside from internet penetration, the digitalization of online payment systems is also crucial. However, 66% of the Indonesian population does not have a bank account. In addition, both Indonesian sellers and consumers prefer to conduct offline face-to-face transactions in mom and pop shops (warungs) near their houses.
To address the above issues, Bukalapak launched both an online e-commerce platform, as well as Mitra Bukalapak, which aims to co-operate with warungs and help them integrate into the digital backbone. For example, Mitra Bukalapak can help them with the payment of electronic bills, mobile plans, and other services.
Covid-19 has also changed Indonesian consumer habits by prompting them to use online transactions more often. Daily sales of online groceries increased by 100%, while purchases have also increased for medical and healthcare products.
Han Pei Yi, Ninjavan
Head of Greater China
SEA has more than 20 thousand islands, with about 15 thousand in Indonesia and 8 thousand in the Philippines alone. Navigation and transport between islands are very difficult. Insufficient road and transportation infrastructure, as well as challenging natural environments (such as the Ring of Fire) make it very difficult for overseas logistics companies to enter into the SEA market.
In addition, 47% of the SEA population does not have a bank account, so SEA is a COD (Cash-on-Delivery) market, with delivery couriers needing to collect cash upon delivery. Therefore, many cross-border e-commerce sellers are worried about the risks associated with cash collection. In SEA, it is very important to choose a highly reliable logistics company to work with.
Sherry Dong, Realme
Marketing Director of Southeast Asia and South Asia
In the smartphone industry, Southeast Asia is a “red sea market”, with many brands of smartphones for consumers to pick from. Therefore, Chinese brands wishing to enter SEA need to have very clear brand positioning and differentiation.
Realme’s mobile phone products are mainly for trendsetting and trend-chasing young people. In order to capture the purchasing power of young people in SEA, trendiness is the standard we aspire to in mobile phone functionality, appearance, and marketing.
In addition, it is very important to provide consumers with a more convenient consumption experience. For example, during the Covid-19 pandemic, when offline retail stores are closed, online platforms can be used to sell products in order to make products more accessible.
Jackson Phang, Singapore Economic Development Board
Deputy Director of Greater China
The Covid-19 pandemic will have an inevitable impact on the global economy. However, new trends, such as bringing offline consumer habits online, the rise of health tech, and industrial automation will emerge. Many opportunities will arise from this situation and Singapore will aspire to assist companies wishing to invest in SEA as much as it can. During this period, Singapore has also reached its foreign direct investment (FDI) target for 2020 as early as April.
Michael Chen, BIPO
From the perspective of BIPO’s customers, some trends are as follows. Firstly, more industries are points of interest in SEA now. Initially, most overseas companies were manufacturing companies, but now, e-commerce, car-hailing, travel, fintech, gaming, and mobile payments industries are also seeing investment from China. Secondly, more countries are points of investment. Previously, more Chinese investors went to Europe and USA, but in recent years, they have begun to turn to SEA too. Singapore plays a very important role, as many Chinese companies going to SEA choose to establish themselves in Singapore first.
Li Junfeng, Shoplazza
There are a lot of challenges to doing business in SEA. Therefore, reverse thinking may be necessary. Traditional industries have historically moved their production and manufacturing to SEA to lower cost instead of making money [from the consumer market]. Similarly, new Chinese enterprises need to learn how to survive in SEA without making money for a certain period of time. At the moment, it is more important to reduce overall costs.
People in SEA have excellent global mindsets and language capabilities, and the cost of labor is relatively manageable. It is possible to rely on SEA locals to help companies expand their territory in global markets such as USA and Europe.
Ada Tang, Akulaku
Covid-19 is a big test for all financial institutions, regardless of whether they are located in SEA or overseas. Whether they have truly invested in risk management, technology, big data, and modeling in the past two to three years will come to light. In addition, whether they have actually done the necessary work of hedging in foreign exchange markets is important. If these foundations are not strong, it is easy to be washed out of the market in this crisis.
Stay tuned for the next instalment of Globiz 2020 Webinar, this time featuring big names from India’s tech scene you should know about. For the newest event updates, subscribe to our newsletter.