Is The Internet Working For The Work-From-Home Trend?

Remote working for professional jobs has been practiced for decades but a surge in the practice can be observed in recent years, possibly from the influx of millennials into the workforce who demand for better flexibility and work-life balance. The rise of this work-from-home trend is enabled by the advancement in our digital infrastructure and internet access, especially with the emergence of the cloud and cloud computing.

While on the onset it may appear that employees are enjoying greater convenience by working from home, the underlying experience may occasionally be nothing short of frustrating. Applications such as SkypeSlackZoomGoogle Hangouts, and cloud computing which are highly utilized as an alternative means of communication among employees often encounter poor audio and visual quality during virtual meetings and video chats, causing repeated interruptions causing a less than seamless experience. The situation is further exacerbated by the recent spike of remote working arising from lockdowns issued by governments across the world due to the COVID-19 outbreak, leading to streaming services such as Netflix and YouTube to reduce the quality of their streams in Europe to reduce strain on broadband networks.

Compared to developed nations such as ChinaSouth Korea, and the United States that are in the forefront of 5G technology adoption, the Southeast Asian (SEA) region is clearly lagging behind in the game. According to a study conducted by management consulting firm A.T. Kearney, it is anticipated that SEA countries will only launch 5G by year 2025. A number of initiatives are put in place by these countries to address the infrastructure lag, but where are we exactly in terms of embracing the 5G wave?

As a start, the standards for awarding spectrums have to be harmonized. In SEA, the rights to spectrums are sold by the government via an auction system, hence the cost of licensing can be exorbitant due to intense bidding by market players. For instance, Singapore has released two spectrum licences and invited all four mobile operators in the country to submit their proposals for bidding, with a base price of one 100 MHz lot set at USD38 million. This initiative could act as a double-edged sword – telco companies would either compete for the limited rights to better serve their consumers, accelerating 5G adoption; or they would shy away from the technology due to the inflated costs. The government therefore should first loosen up the spectrum licenses or change the norm of spectrum allocations, or at least come up with a quick regime so that telco companies are incentivized to implement 5G and hence able to plan their investments accordingly.

Other than spectrum licenses, the other pillar that is fundamental to 5G adoption is the whole new infrastructure of masts, base stations and receivers that the technology requires. Sweden’s Ericsson, Korea’s Samsung and Finland’s Nokia are spearheading the race, while China’s Huawei undoubtedly is the sector leader that is offering its technology at a lower cost than the other players, made possible partly due to state support it receives from the Chinese government. SEA countries are garnering attention from both China and the United States as both countries understand the country that controls the 5G will get tremendous advantage in the global economy, military edge and political influence. As such, SEA countries should carefully select their partners for the development as it might involve geopolitics risk.

In a nutshell, the SEA region is indeed showing initiatives to boost 5G adoption. Nevertheless, governments should be cautious of the negative consequences that their initiatives might have despite their intention of embracing the 5G technology. In light of the outpouring of the number of employees working-from-home, we believe that more could be done in order to keep up with the demand for super-fast internet to support remote working environments.

 

        The article was originally published on Asia Tech Daily

There’s A Lot In Store For The D2C Play in Southeast Asia

Direct-to-consumer (D2C) brands have begun sprouting in Southeast Asia. The term “D2C” refers to companies manufacturing and shipping products straight to the consumer, skipping conventional stores and other traditional middlemen.

This allows savings on costs for distribution and benefitting the consumer through lower prices while maintaining end-to-end control, enabling them to make quick changes based on direct customer feedback.

While D2C brands might be new in the region, successful D2C companies have been around in the US for most of the 2010s. Many of these companies have evolved into household names in their respective industries – Warby Parker for glasses, Dollar Shave Club with razors, and Casper with mattresses.

The success of these companies can be nailed down to a few core characteristics – excellent branding and marketing, high quality products, affordable prices and convenience for the consumer.

Branding and marketing are essential given strong competition making it vital to stand out among the giants through innovative content and advertising. Dollar Shave Club for example created viral videos that propelled a cult following, despite only costing US$4,500 (RM19,462) and a day’s worth of shooting.

Warby Parker built a name for itself as the anti-Luxottica – high quality glasses at affordable prices by controlling their own supply chain and by going D2C, they can pass on savings to consumers.

The final characteristic, convenience, is illustrated by Casper. Casper ships the consumer’s mattress in a box instead of requiring you to go to a shop to test out mattresses. To ensure quality assurance, they offer a 100-day return guarantee. Return rate is under 5% where the dissatisfied products are donated to charity organizations in order to benefit local societies.

While we have seen greater benefits to consumers in terms of quality products at affordable prices, the question remains if the expensive customer acquisition costs through Facebook and Google ads through billions of venture funding justify the companies’ performances.

As D2C brands jostle for branding and market share, they resort to excessive marketing spending. As a result, their marketing expenditure increases disproportionate to their revenue. Casper in the first 9 months of 2019 made a loss of US$67 million on US$312 million in revenue with US$114 million in marketing, causing the unit economics to be negative as the lifetime value of a customer, is also relatively low given that mattresses have a 7-10 years purchase cycle.

[RM1 = US$0.23]

In contrast, despite the lack of venture funding, D2C brands in the region such as Oxwhite and Althea have mushroomed with slight variations. Uniquely to SEA, both brands adopt a pre-order model, sometimes taking months to deliver a product and requiring advance cash payments of products.

The similarity to Kickstarter is uncanny, as it funds the brand’s working capital. Despite the long lag time of goods delivery, we have seen both Oxwhite and Althea prospering in terms of sales as they enjoy strong brand loyalty – despite only entering its fifth year of operations, Althea has garnered almost 600,000 followers on its Facebook page, whilst Oxwhite has a strong following of 18,000 members in its private community forum where members actively engage with the founder on feedback and ideas for the brand’s future launches.

Strong sales volumes alongside significant decrease in customer acquisition costs for the companies’ products after 6-12 months of new products launches results in a profitable business unlike its American counterparts quickly in the early stages of the businesses.

The success of the pre-order model in SEA is simply attributable to consumer behaviour. Consumers in this region are more price sensitive, and therefore willing to wait in exchange for affordable quality products.

Another example is Signature Markets, despite taking typically 7-10 days of delivery, they have seen sales increase 20 times since 2016 with their revenue crossing the RM20 million mark in 2019 due to the strong brand and affordable pricing positioning.

[Disclosure: Signature Market and Althea are investee companies of RHL Ventures.]

Despite taking typically 7-10 days of delivery, Signature Markets has seen sales increase 20 times since 2016 with their revenue crossing the RM20 million mark in 2019.
Despite taking typically 7-10 days of delivery, Signature Markets has seen sales increase 20 times since 2016 with their revenue crossing the RM20 million mark in 2019.

Despite being a snacks business, the Signature Markets example perhaps points to the fact that e-commerce consumers in SEA are historically less pampered with the consistency of receiving their online orders within 1-2 days as compared to their US counterparts. As consumers become more sophisticated, we expect the service gap to narrow, as evident in the bricks and mortars space and the disruption from the D2C market.

Instant connectivity and access to customers have allowed D2C businesses to be nimble in terms of providing instant feedback and creating what the customers want and desire and at the same time cutting layers of costs from middlemen and distribution.

While the outlook for the D2C landscape appears to be positive, the real challenge will be for D2C companies in this region to grow sustainably and avoid the primary pitfall of spending uncontrollably on customer acquisition costs which may ultimately hinder their path towards profitability.

 

This article was originally published on Digital News Asia