10 Facts you should know before starting business in Southeast Asia
Southeast Asia presents good opportunities for businesses seeking new markets to tap into, but it can be also tricky to navigate
This week, there was a gathering event in Taiwan. The topic was focused on business and cross-border e-commerce in Southeast Asia. The attendees could be roughly categorized into logistics providers, platform owners and product in charge. Most of them have more than five-year experience in running business there.
They were well versed in regulations, rules, operational know-how and even secrets — they shared these information freely, to remind others of the potential crisis ahead.
From my perspective, these discussions were relatively interesting and helpful. While, they do not present official statistics — or “solid knowledge” — they are, in a way, more useful and easily understandable. I believe that those ideas are worth sharing, so here they are:
1. Choose smaller cities to avoid potentially fierce competition
Based on the fact that new entrants often choose the largest cities to start their business or places entrenched with international companies, it could be harmful to businesses’ development in the preliminary stages if they are not backed up by huge sums of funding or powerful connections.
2. Online-shopping marketplaces are the stages for youths and young adults
As far as the young demographics in Southeast Asia is concerned, it’s a good idea to target young ladies and gentlemen by presenting apparels or electronics goods because those kind of products attract them.
3. A viable business model in developed countries could be applied in Southeast Asia
The business development and infrastructures in Southeast Asia significantly lag behind Taiwan. However, the SEA seems to follow the same path Taiwan once walked through. The infrastructure and policy of SEA reflect the exact situation in Taiwan ten years ago. Hence, for those who lack in understanding about e-commerce’s future, Taiwan could be a good case study before entering SEA.
4. Local connections are the top priority
For businesses seeking to expand into new markets, backup from the locals with strong connections could help with simplifying the costly registration procedures, and also, accelerate their ascend to the top position in the market. In other words, connections plays a crucial role and should never be neglected.
5. The best and efficient way to understand Southeast Asia is to do product analyses
Businesses should conduct their research on SEA market research well in advance. Although Southeast Asia has formed an economic union, there still exists cultural differences — and fragmented geographies. Both are hot potatoes and hard to deal with. Comprehensive research of the whole market in six countries could be overwhelming. So, instead, start with a simple product survey – it can help you rapidly understand each market, yielding more productive results.
6. Take Singapore as the first stop to enter SEA
According to the lectures shared by experienced SEA merchants, one should start his or her business in Singapore in order to cater to more people in SEA region.
Based on their experiences, brands that do not come from Western countries perform poorly because Southeast Asian people still believe that domestic products are inferior and thus, show more preference for Western products.
With Singapore having close and favourable connections to the West, setting up your office there would help facilitate the brand image in the eyes of customers.
7. Only creative business model can draw the attention of venture capitalist
Right now, the imitated business models (Tencent and Alibaba for instance) are already outdated. Venture capitalists aren’t excited about the business models which are too similar in appearance and essence to Tencent and Alibaba ones. It is the innovative ideas that are able to bring you to the meeting with venture capitalists.
8. Cross-border e-commerce players should focus on B2B
One of the senior merchants indicated, unexaggeratedly, that the risk in B2C e-commerce is beyond our imagination. You should only venture into B2C if you are extremely sure about the demands of the customers and have the right marketing strategies. Otherwise, you could burn through your money in a blink of an eye.
9. Cross-border e-commerce is not a means to make a fortune but a tool instead
Although cross-border e-commerce could become the mainstream in several years, one should look before you leap. Needless to say, the core of retailing is the product. A right and good product would help you attract countless customers to come in but a fake or wrong product could wreck your business dream. After all, it is the quality of the products that counts in the end.
10. The biggest challenge is infrastructureTake Indonesia for example, it is consists of a spread of thousands of islands, some far apart from the mainland, making some of the residents unreachable via traditional vehicles. Also the transportation is not convenient. Some even joked that only the adoption of drones can solve the problems. Aside from that, the payment is a serious problem as well. The cash transaction alone accounts for 89 per cent of total transaction across Southeast Asia because of the lack of reliable payment tool. The room for improvement is still huge.
Author: Edison Chen, Business Development Manager at Tagtoo