By Amit Thard, Head Of Ecommerce, Sea, Stanley Black & Decker, Inc.
Life offers few guarantees, but one thing is for sure, ecommerce in South East Asia WILL grow. Currently sitting at about $17 billion USD per year, retail ecommerce is expected to grow by five times, to $88 billion USD per year by 2025. Even more astounding is the fact that Indonesia’s ecommerce will grow nine times its current volume, to $46 Billion USD per year, or 52.2 percent of the overall ecommerce revenue in all of SEA. Countries like Singapore, Malaysia, Philippines, Thailand, and Vietnam are each expected to grow three to four times their current size in the same time.
Inspired by these numbers, manufacturing companies across most business sectors are venturing into ecommerce, only for many of them to find out how unprepared they are to navigate such a complex landscape. Often, they fall short on direction, strategy, tactics, logistics and talent, and become increasingly desperate to grow, without having any idea how to do it. Add to that, channel conflict, ecommerce logistics complications, evolving customer needs, data analysis, and the fast-changing business landscape, and it is enough to overwhelm the best of people.
Industry growth has outpaced a company’s ability to invest in ecommerce, and this has created a void. This void has given opportunity to the rise of a new type of agency, the Enabler. Also known as ecommerce agencies, e-logistics partners, and probably several other names. These agencies are essentially an outsourced ecommerce operations and logistics department. Their role is to help your company create and maintain an online presence in local marketplaces like Lazada, Shopee, JD, and Tokopedia, and to manage the end-to-end sales operations for your program.
Enablers work across two models. The first is a service model, where they provide all ecommerce operations for a fixed monthly fee and a small commission on sales, but the manufacturer must appoint a third-party logistics partner for delivery. The second is a distributor and service model, where the enabler provides all ecommerce services and also buys products from the manufacturers making them responsible for delivery.
Typically, these agencies have 20 to50 employees who cover various kinds of roles, including graphics design, online marketing, logistics, and customer support. Each employee may handle between two to five accounts. Interestingly, a large portion of this workforce has also worked for marketplaces like Lazada and Shopee, among others, at some point.
Advantages of working with enablers include:
• Low internal cost to engage an enabler
• They have a lot of operational knowledge
• Cross-functional teams to handle end-to-end operations
• Strong relationships with account managers at all major marketplaces like Lazada, Shopee, JD, and Tokopedia. This gives them access to all sorts of secret promotions and last-minute flash sales.
Or course, there are certain disadvantages too:
• Most enablers tend to be very tactical and prefer to do a one-size-fits-all approach, since they handle multiple brands. There is very little strategy coming from their side.
• Legally, they own your company flagship store. They sell in your name. This can get complicated if you’re trying to break relationships with your enabler.
• Limited access to your own store sell-out data. They are afraid that if you get access, you may use it to change things on the store or worse, block them out.
• There are very few regional enablers in SEA, so if you have a regional business, you may have to engage multiple enablers.
So, is working with enablers the new way forward? It depends.
Ideally, companies should have an in-house ecommerce team, investment in the right technology and a plan to grow strategically. But, creating and investing in this infrastructure takes time. Time, which you don’t have because the industry is growing fast. So, ideally, if a company is not ready or not sure on how to venture into ecommerce, they should consider using enablers until they are more certain of their direction and more confident of their ability to succeed. Either way, the one thing they cannot do is to wait, because this rate of growth may not be available to us until the next technological revolution, whenever or whatever that may be.