Managing the Complexities of Asian e-Commerce

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cleverbridge general manager of Japan, Yosuke Ito, and SOURCENEXT CEO and founder, Noriyuki Matsuda, share their experiences around the complexities of Asian e-commerce. Get the latest market data, …

cleverbridge general manager of Japan, Yosuke Ito, and SOURCENEXT CEO and founder, Noriyuki Matsuda, share their experiences around the complexities of Asian e-commerce. Get the latest market data, discuss pros and cons of different go-to-market business models, and strategies for success in the Asia-Pacific region.

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  • 1. Managing the Complexities of Asian e-Commerce
  • 2. cleverbridge Full-service, cloud-based e-commerce provider for software & SaaS companies • Founded 2005 • 200+ employees • Offices:  Cologne  Chicago  Tokyo
  • 3. Speakers Doug Caviness Head of SaaS Solutions, cleverbridge  20 years of experience in technology & software industries  Responsible for cleverbridge’s e-commerce solutions for B2B & B2C SaaS / cloud providers & other digital product companies with subscription billing
  • 4. Speakers Yosuke Ito General Manager, cleverbridge Tokyo  25 years of experience in B2B & B2C software business in Japan as well as U.S. for Japanese  Industry experience spans financial, security, utilities & gaming  Extensive e-commerce & localization expertise
  • 5. Speakers Noriyuki Matsuda President & CEO SOURCENEXT  Experience in Japan’s technology industry spans mobile, retail and online  Helps companies enter the Japanese business market  SOURCENEXT (4344:Tokyo) manages the planning, development & distribution of software products
  • 6. Asia-Pacific e-Commerce A Growing Opportunity
  • 7. IT Global Market Share(business and government) APAC: • 23% of Global IT Market • 9% annual growthSource: Forrester Research Inc. In $billions
  • 8. Forecasted Online Revenues by Category Computer hardware and softwareSource: Forrester Research Inc.
  • 9. Primary Markets • South Korea, India, Australia, China and Japan • Country-by-country highlights:  Market share  Online revenue  Population  Internet accessibility  SaaS adoption
  • 10. South Korea • $25 billion IT market • 2011 online revenue of $16.8B ($22B by 2016) • 50 million population • 94% have broadband internet access (42M users) 5% of APAC • SaaS adoption is slowly 6% growth progressing; planning & implementation stages
  • 11. India • $34 billion IT market • 2011 online revenue of $1.6B ($8.8B by 2016) • 1.2 billion population • 9% have broadband 7% of APAC 14% growth internet access (80M users) • SaaS market will be largest segment of cloud services, reaching $115 million revenue in 2012
  • 12. Pricing and Piracy – Challenges in EmergingMarkets Country Conversion Software Per Capita Rate Piracy Rate GDP USA 42% 19% $48,665 Japan 39% 21% $45,659 China 9% 77% $4,833 India 9% 63% $1,382 7% of APAC USA price: $49.99 India price: $18.72 (USD equivalent) India Discount: 62.6% off USA price *Screenshot taken in India on Sept 20, 2012. Exchange rate was $1:RS 53.37 Sources: -Conversion Rates are sample data from the cleverbridge platform -2011 Piracy Rates: Business Software Alliance “2011 Global Piracy Study” -2011 GDP Stats: IMF.org
  • 13. Australia • $48 billion IT market • 2011 online revenue of $23B ($35.4B by 2016) • 23 million population 10% of APAC 70 7.9% growth • 90% have internet access (19M users) • SaaS/cloud adoption is the highest in APAC; 36% of organizations use cloud-based services, up from 22% in 2010
  • 14. China • $98 billion IT market • 2011 online revenue of $165B ($356B by 2016) • 1.4 billion population • 34% or 513M users 21% of APAC have internet access 12.9% growth • SaaS adoption is slow; has large potential to grow for basic business applications
  • 15. Piracy in China Remains a Major Issue Piracy of PC software Country Pirated Value Legal Sales Piracy Rate USA $9,773 $41,664 19% China $8,902 $2,659 77% India $2,930 $1,721 63% Japan $1,875 $7,054 21% South Korea $815 $1,223 40% 7% of APAC Australia $763 $2,554 23% PC buyers in China spend an avg. of $542 for a new PC (excluding monitor), but buy just $8.89 of legal software to run it -- less than ¼ of the amount spent per PC in the other “BRIC” countries, and only 7% of what is spent in the USA. Source: 2011 Piracy Rates: “2011 BSA Global Software Piracy Study”
  • 16. Focus on Japan
  • 17. Japan• $195 billion IT market• 2011 online revenue of $64B ($97.6B by 2016)• 128 million population• 80% have broadband 7% of APAC internet access (102M users)• Online marketplaces dominate 21% of APAC 3.6% growth• SaaS adoption is rapid (esp. B2B)
  • 18. Why Focus on Japan?• China is tomorrow; Japan is today• 2nd largest IT market in the world• Largest and most mature APAC market• SaaS adoption is growing faster than all other APAC tech markets combined• cleverbridge Tokyo – specific insight with local office & experienced general manager
  • 19. Go-to-Market Models
  • 20. Selecting a Go-to-Market Model
  • 21. Complexities to Consider • Localization (language, web design, currency, payments) • Customer support • Quality assurance • Pricing & channel strategies
  • 22. Localization – Text Is Just the Beginning… Home page of Rakuten.co.jp, the “Amazon” of Japan
  • 23. Localization – Text Is Just the Beginning… Zoom-out of Home page of Rakuten.co.jp, the “Amazon” of Japan
  • 24. What e-Commerce Payment Methods areUsed by Japanese Consumers? 0% 10% 20% 30% 40% 50% 60% Credit Card 56% COD (incl. CCOD) 48% Konbini 34% ATM or Teller @bank 31% Internet Banking 14% Carrier Billing 11% Japan is a cash-oriented society Cash / Cheque 1%Source: The Ministry of Internal Affairs and Communications of Japan
  • 25. Great ExpectationsSource: Building Keystones
  • 26. Local Pricing Strategy –Charge Premium Prices $90 USD equiv.
  • 27. Go-to-Market Models • Direct via e-Commerce • Direct via e-Commerce Managed Services • Indirect via Publisher or VAR(s) • Sell via Joint Venture (JV) • Sell via wholly-owned Japanese entity • Hybrid of the above
  • 28. Sell Direct via e-Commerce Criteria: Generally need an estimated Japanese market opportunity of $1M+ annually to justify creating localized products Pros Cons • 100% control of brand • By itself, may not fully leverage • Low investment required market opportunity • Relatively easy entry • Requires dedicated team and resourcesMarket Examples:
  • 29. Sell Direct via e-Commerce Managed Services e-Commerce platform and transaction support, plus: • Localization service providers  Product localization  Web localization  Quality assurance – testing on several platforms • eMarketing services providers  Pricing strategies, SEO/SEM • Affiliates (Softonic Japan, etc.)Market Examples:
  • 30. Sell Indirect via Publishers / VARs Criteria: Typically > $500,000 gross revenue expectation per licensor for B2C Pros Cons • Easy entry with turnkey provider • Loss of some control of brand • Low investment required • Might not fully leverage full market • Leverage multiple sales potential for vendor willing to make channels (B2B, etc.) a large investment • Complete solution for customersMarket Examples:
  • 31. Publisher Example -- SOURCENEXT Cloud computing products in retail??? Yodobashi Akiba Evernote retail box display the largest retail store in Japan with around $1.5 billion sales with 100 million visitors per year
  • 32. Publisher Example – SOURCENEXT(continued) “Herd mentality” – consumption by consensus “Becky” In store promotion SOURCENEXT corporate spokesperson
  • 33. Sell via Joint Ventures Criteria: $10 million + over three years; B2B sales require an established local player Pros Cons • Relatively easy entry • Loss of some control of brand • Leverage the sales, marketing, • Complex and might require service, goodwill/credibility and significant investment assets of an established partner • Higher risk • Potentially lower investment requirement • Complete solution for customersMarket Examples:
  • 34. Sell via Wholly-Owned Japanese Entity Criteria: Typically $1-10 + million annual gross revenue expectation Pros Cons • 100% control of brand • Expensive to set up and maintain • Ability to fully leverage • Higher risk market opportunity • Complete solution for customersMarket Examples:
  • 35. Sell via Hybrid – Examples  Japanese entity for direct sales, support, and promotion  Sells into retail via SOURCENEXT and uses other partners for e-commerce  Japanese entity for direct sales, OEM, and via VARs  Use SoftBank BB for retail channel distribution
  • 36. Key Take Aways• APAC region cannot be ignored – simply too big and rapidly growing• Japan represents the lion share of the opportunity today• Each market is different and presents unique complexities• No one path for all companies
  • 37. Q&A
  • 38. Select Resources • Forrester Research  Asia Pacific Online Retail Forecast, 2010-2015  Asia Pacific Tech Market Outlook for 2012  Sizing the Cloud Markets in Asia Pacific, 2012 • Innopay  Online Payments 2012, Moving Beyond the Web • Business Software Alliance  Online Payments 2012, Moving Beyond the Web • Factbrowser.com/tags/ecommerce • Emarketer.com  Ecommerce Sales Topped 1 Trillion for the First Time in 2012 • Building Keystones (buildingkeystones.com)
  • 39. Thank You
  • 40. Additional Data
  • 41. Software Sales in APAC(business and government)Source: Forrester Research Inc.
  • 42. Japanese SaaS GrowthCompound Annual Growth Rate (CAGR): 57.24%Source: Forrester Research Inc.
  • 43. Cloud-Based SaaS Trends (B2B) 0% 10% 20% 30% 40% 50% 60% Server 35.2% File Sharing 34.7% Data Backup 17.3% Intranet Portal 29.8% Mail Server 48.1% Schedule Sharing 35.2% Project Management 3.0% Extranet 9.4% Sales Force Automation 13.2% R&D 1.4% Web 4.2% e-learning 6.2% Accounting/HR 20.4% Order Management 6.7% Purchasing Management 6.6% Logistics/Supply Chain Management 8.8% Payment 3.5% Authentication 2.2% Others 7.9%Source: The Ministry of Internal Affairs and Communications of Japan
  • 44. e-Commerce Market SizeSource: Building Keystones
  • 45. Language and LocalizationSource: Building Keystones