I returned home from Silicon Valley and built a failed startup
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Nobody has credit cards to buy anything online. Credit card alternatives haven't gained traction. People use cheap alternatives to Western Union to send money.
Nobody surfs the web except at internet cafes. And at internet cafes it's either FB or homework. Nobody aimlessly browses when they are dishing out money every hour.
Nobody uses apps. Even those with smart phones only use FB, Instagram, games and a handful of other messaging apps. Even if they did want to use apps, cheap smart phones are out of resources after installing FB and the rest of the above mentioned.
No matter the phone, everyone uses SMS.
The postal system is shady. I never order anything online. I don't even have a proper address. I don't know how the postal system is able to deliver anything.
There are exceptions to all of the above and these are likely your target market since they likely have money. But this is a small percentage.
And speaking of money. Nobody has that either.
I noticed the post mentions there are tons of Instagram shops. I have no experience with this, but the number of shops seems irrelevant to me. Anyone can start an Instagram shop, post pictures once in a while and largely be invisible. It seems that much more important would be the above logistical issues which would also be important in Indonesia.
I imagine people selling through Instagram are much like the street vendors. They see no problem with being the 4th guy within an hour trying to sell you the exact same things as the 3 guys ahead of him while you are trying to eat a meal and drink some beers. They just don't try very hard. But any money beyond whatever income they have is better than nothing.
A place like the Philippines is all about improvisation. I don't see how you could improve much on the Instagram / FB shop model. In the vast majority of cases, there is probably nothing there to improve because there is no activity. For those who do get it to work, it's probably good enough.
Yeah, that's what people in the US did before everyone had credit cards. Cash on delivery. Growing up, I remember hearing ads on TV that said "no COD" when that service was being phased out. More and more people were using credit cards.
You're right, many countries could use trusted couriers in order to spur local markets and economic growth.
Here in Taiwan you can have something sent to 7-11 or Family Mart and pay for it there. There are tons of these shops everywhere, and with the receipts lottery, the government guarantees it gets enough taxes even in a cash-based society. It's a pretty cool system and often feels funny how convenient 7-11s are here. In the US they're just a snack shop. Here you can have packages sent, do laundry, pay bills, ...
> You're right, many countries could use trusted
> couriers in order to spur local markets and
> economic growth.
They are used a lot in countries with dysfunctional banking systems. They aren't encrypted, they use the fact that you're sending a text from your phone to validate that it's you.
Sure. Any country that doesn't have the supporting infrastructure can be considered the next startup.
Cambodia doesn't have any public postal delivery workers, for example, so I think couriers or a system like Taiwan's with trusted shops could work well there and get more of an e-commerce market going.
There are some other hurdles there but I don't think it's insurmountable.
> Where is the SMS payment system equivalent? Have the courier bring the item, send the SMS payment, and when that is received the courier hands over the item.
Was that rhetorical? You seem to have answered your own question. Anyway, yeah, SMS systems exist, and a little more legwork is required to make them successful. WING is one I remember seeing advertised there. I'm not sure how much it was used but I don't remember hearing about people buying things online too often. Technology doesn't do its own PR, unfortunately =)
One of the annoying things about Cambodia is delivery of packages from outside the country is so expensive. I think only DHL and UPS deliver there, and for a small box it can be $100+ from the US. If a more competitive local delivery system were implemented first within Cambodia, then I imagine that cost could come down, marking more wins for the purchasing power of locals there.
The trick here is to take something which is is known to work and try to think about what changes would make that thing work where you are. In a country where everyone has a smartphone, you can look at things that you can do with a smartphone you couldn't do with a 'dumb' phone. In a country where there are extremely inefficient transport, mail, or payment systems, then working within what you can there can be a winner.
Totally.
> they seem to be "right place, right time" but sometimes it is simply that they are designed to mesh well with an existing infrastructure
Mmm there can be other elements such as "right person" and "right way to solve the problem". Sometimes the keys to success aren't easily condensed into soundbytes, so they aren't widely known. Air B&B wasn't the first home sharing website, but there were probably some ingredients in their secret sauce that fall under the HN definition of "execution". We don't know all of those ingredients, but they differentiated Air B&B from the pack.
So, I'd argue there is a right solution for Cambodia's e-commerce, and any problem really. It may not become a billion dollar company, but there is a way to make it profitable. There simply is not a model that's easily copyable from the US. Conditions are very different. There are definitely people working on this problem. Adoption rates appear slow to me. Time will tell when they're successful.
> The trick here is to take something which is is known to work and try to think about what changes would make that thing work where you are
Yeah we are in agreement.
FB and Microsoft's excitement about chatbots makes a lot more sense now.
When I walk into a bar here, I pay 45 pesos (approx $1 USD) and the waitress who hands me my beer might make 140 pesos for a 12 hour work day. She should make more in tips, but not always. Down the road, the major grocery store also pays its workers about the same. Minimum wage is supposed to be something like 350 pesos per day depending on industry (domestic helpers may not even make the 140 pesos because they are live-in and get food. But they work like slaves). Businesses get around minimum wage by employing for six month contracts, which is a probationary period.
Internet cafes charge around 15 - 20 pesos per hour. An all day mobile data connection (700MB cap) costs 50 pesos. The locals will get an SMS promo for around 20 pesos per day. Getting to work and back in my city costs 20 pesos minimum. We haven't got to rent and food yet. The math is grim.
You carry a cell phone as a shiny object to show off. You dress remarkably well with this small budget (probably a good reason to sell cheap but fashionable clothing). Somehow you may even be able to buy a scooter.
That's it. That's the economy.
NOTE: The big exception is the occasional splurge for those lucky enough to have relatives sending remittances.
The math is grim for the poorest people in any country.
> That's it. That's the economy.
The economy of one of the biggest consumer markets in Asia is people earning $3/day and blowing $2 of it on transport, SMS and internet?
Maybe I'm just hanging with the wrong crowd, but pretty much everyone (locals) I know has bare bones possessions. The head of the household has a T.V. and a fridge as an addition to my list. That's friends, family and neighborhood.
There is a lot of money coming in through remittances. Getting money coming in as a basic income (not work) doesn't seem to do much for the work ethic from my experience. Often these remittances are covering a large family with basic living expenses.
I don't have much more than anecdotal evidence, but the profile of a typical person here is way different than that of where I came from (US).
http://www.dumblittleman.com/2014/05/what-is-the-average-sal...
Otherwise, what might be (or once was) considered a solid middle wage job back in the U.S. is probably closer to what the call center manager is making.
The salary the worker was expecting was often written in the resume directly ("Expecting no less than 40,000 peso a month"). All of the figures were higher than what they would net, because of the overhead of the remote office in Manila that acted as local HR and a place to work).
Only one resume I looked at didn't have a photo insert on the front page. Only a few didn't mention religion and hobbies. These are asides. Salary was $400 US per month for programmers working full time (we paid $1200 including the "HR/seat/office fee" - we were to look at coworking spaces in the future).
All the staff travelled roughly 70-95 minutes each way - we offered remote (at-home) work if their conditions were ok, but most didn't have a decent computer, had no aircon, had noise issues and couldn't guarantee an unoccupied room for six hours per day at least, so the risk was too high, given that we were tipped off that any worker could eventually try to incorporate something else on the side [part-time remote job] and do both at once, appearing present on IM but half-assing two jobs). We decided that an office with a roaming/snooping manager was a necessity in our early testing stages.
From speaking with many people in that country, average wage is definitely lower than you might even think. Management is the way to earn better money over there in IT. Salaries, if they exist, for non-corporate staff are probably abysmal all over Manila. There will always be somebody willing to work for less, fresh out of university.
I had a buddy who was trying to build a start-up here running on the .Net stack. He was willing to pay $2K for the right person, but couldn't find anyone. The devs he did find he was paying around $1K for and he ended up letting them go through turnover and not replacing them (something would always come up where they would shoot themselves in the foot or just had to quit for whatever reason).
Blue collar labor jobs which may pay decent in the U.S. don't pay anything here. People expect labor and services to be super cheap.
All anecdotal though.
Otherwise, I don't know because I don't ask and I haven't been looking for a job.
Credit cards may or may not be relatively hard to get for most people, but anyone who wants a debit card can simply open a bank account, with an ID and maybe a few hundred pesos.
If you don't want to open a bank account, you can get a Smart Money card: http://smart.com.ph/Money/
If you don't want a Smart Money card, you can use Gcash: http://www.globe.com.ph/gcash
If you don't want Gcash you can use Paypal.
If you don't want Paypal you can pay cash on delivery.
> Nobody surfs the web except at internet cafes.
Surfing the web in internet cafes is about as dated as the term surfing the web; your proverbial "nobody" does it. Internet cafes are for gaming or getting stuff printed or photocopied.
"Everyone" has at least one mobile phone, often a smartphone, and that is how they 'surf the web', or at home, with an overpriced internet connection or pocket WiFi, or at "PisoNet" cabinets.
> Nobody aimlessly browses when they are dishing out money every hour.
Who anywhere aimlessly browses in an internet cafe? And "money" in this case is about 30 US cents (per hour).
> Even those with smart phones only use FB, Instagram, games and a handful of other messaging apps.
Isn't this most people, everywhere?
> I don't even have a proper address.
Why not?
>I don't know how the postal system is able to deliver anything.
Don't most countries use courier services for delivering packages, rather than the standard postal service? So presumably products are delivered using the likes of LBC, Air21, DHL, UPS.
>And speaking of money. Nobody has that either.
And yet "everyone" has the usual brand name products and gadgets and packed shopping malls are everywhere.
My earlier statement still stands. You would still probably be targeting people who could get a credit card or a card from a bank account. Most of the rest is a difficult market to run an e-commerce platform funded by outside investors.
I completely understand this philosophy, but an attempt at building a two-sided market place is very likely going to require outside investors. This opinion that you need to be profitable from day one has been proven wrong repeatedly and while some 'unicorns' will fail or become less than worth $1bn, their achievements are still very real.
It is 100% OK to want to build a business, but entrepreneurs should be flexible enough to understand when it is appropriate to raise money, or make a product that does not generate profit up front.
For the record, I also attempted to create a two-sided market and I also failed. It was super painful and I hope you move on quickly with some really solid lessons learned.
It gets worse as I stated in the article that new startups in the same area are raising behemoth amount of funding. The funds were used to attract and subsidized sellers and buyers.
You were also trying to fix the wrong problem. Focusing on the user experience is the right call, but your mistake was saying "fuck this, the distributor model is so fucked we can't do it". Ok, if the supply chain of a specific industry is super-expensive, your business model should be to streamline it by going direct and undercutting everyone else (this is what Uber did).
You needed to build a new distribution model. It's fair to say "I'm a college student and don't have time to fix this big problem" -- which is fair, supply chain problems like this are usually best left to people with experience in them or at least a passion for solving them.
Which I also mentioned the way to solve it is to cut down the market size, so that only first hand suppliers are the ones majority selling
The real problem is when you have a bunch of producers trying to sell direct to customers and drop ship is that it's a very inconsistent consumer experience. If your selling point is a compelling customer experience, you need consistency in how packages are shipped and changes communicated. All of that leads to inventory, shipping, logistics, and something that looks much more like a traditional e-commerce store.
Once you lose control of the customer experience in this way, it can no longer be your competitive advantage. So you either need another competitive advantage, or you need to fold up shop.
You understand the goal of any business, especially an internet business, is to become a monopoly right?
Look at Amazon, Google, FB, etc. They only became profitable once they became monopolies, and thus could set their own prices based on whatever metrics they chose.
The reason startups take outside funding is so that they can become a monopoly in a given market, and then charge customers whatever they want.
Don't fall for the marketing hype. Startups don't save the world. Scientists, doctors and inventors do. Startups just make a few people very, very rich at the expense of their customers by selling them mostly crap they don't need or want, using psychological manipulation (i.e. marketing).
Once you understand that this isn't some noble quest, you can finally begin to understand how to play the game (of thrones).
This is laughably false for at least two of the examples (Amazon, Google) you've mentioned in your own post.
Millions of people use these services everyday to make their lives better. Thousands of employees work for good pay at these companies. Is it all scam? Of course not.
There are lots of examples of successful business out there who did not monopoly the market.
I'd also have to disagree that startups sell mostly crap they don't need or want. Uber & AirBnB definitely provides something valuable that most humans would appreciate of.
If you're talking about products such as Snapchat or Instagram, that's a different genre of product. It's a vitamin type of product not a pain killer.
> There are lots of examples of successful business out there who did not monopoly the market.
Such as? If you cannot eliminate competition within your given market, marginal profit will eventually be driven to zero. The internet amplifies this challenge because it is not geographically constrained (minimal transaction costs) and software amplifies this challenge because of zero marginal cost (creating massive economies of scale).
You can find more on this in the works of Michael Porter (http://amzn.com/0684841487, http://amzn.com/0684841460) and Peter Thiel (http://amzn.com/0804139296). Zero to One discusses how many seemingly successful non-monopolies are actually either monopolies pretending not to be one or non-monopolies that are not as successful as they portray themselves to be.
Taking startup investment begins to be impractical with something as simple as being older than 21 and thus, having external obligations, whether monetary or chronic. Anyone who is NOT your typical college kid willing to work 90 hours per week for $25k/yr usually can't get investors to look unless the business is already running and turning profit.
One day, it's my hope to open investment opportunities to the mature professionals that are capable of building our next generation of transformative software but are almost always overlooked merely because they've been doing something more prudent with their lives than pulling the lever on the startup slot machine.
So yeah, you have the same problem everywhere and not just indonesia. At the end of the day, all is fair in love, war and business.
You didn't support your position at all that SV startups do not compete based on better products. That's a very large claim to make without supporting it at all.
Taking on large amounts of venture capital has no inherent correlation such that the product must invert on quality to the amount being raised. If that were the case, Airbnb would be an entirely unusable product, as would Uber. So far those products have functioned extraordinarily well, such that a mass-audience of average users has easily adopted them at warp speed. Uber overtook the entire US taxi industry in three years, if their product wasn't good that would have been impossible.
> If you are a less funded startup, it is impossible to complete in such a scenario. In fact, you absolutely have to get lots of funding first, you have no choice.
You're criticizing Silicon Valley startups for supposedly relying on large amounts of money to compete, then proclaiming that you can't compete without getting tons of funding first. You're outright stating that you can't compete on quality of product alone, then you hold it against Silicon Valley in your theory that companies there refuse to set themselves up for failure by taking on a lot less venture capital.
If your plan is to create a sustainable small business, with a small number of employees and a reasonable but consistent rate of return, then you don't need a ton of capital.
The value proposition to the seller were clear, we wanted to give them more exposure outside of Instagram, make their store be discovered by style/trends.
The value proposition to the buyer is what I think is lacking. We tried to generate sort of a board as a form of style inspirations, but it seemed the market doesn't really care about the mix and match of outfits. I guess what i realized too late is developing country markets are prioritizing price over style way more than developed countries
I remember using ASOS 10 years ago and at that time most online retailers had poor returns policies. (Legally all must have a 14 day returns), but ASOS went further with free returns and even provided shipping labels and bags for returns with the original shipment.
I think my then girlfriend returned maybe 70% of everything ordered, it was just how it worked. You'd browse, impulse purchase then see how it looks and probably return it.
As a result they took almost all of her actual purchases. And because they provided shipping bags/labels/etc they no doubt reduced the turnaround time so they got stock back quicker and reduced the chance of lost or damaged stock they couldn't then sell on.
I don't know but I hope that most retailers have caught on and provide similar now.
Moved out of the US, and we do miss the convenience of that kind of shopping, and would love to use similar services, even with premium.
It also sounds like you don't really know the market in Indonesia and you're trying to replicate what you know about US/Silicon Valley market back home as-is and didn't achieve the result you were hoping for (I haven't seen anyone done that and be successful either).
I know an owner/co-founder of a startup in Indonesia and they have diverse channels.
Having said that, I wish you more success down the line.
> I really hate to say this, but I am quite disappointed with the startup scene in Indonesia. In Silicon Valley, you compete fairly with each other through creating better products and services. People highly respect good products and services. In Indonesia, you compete with each other through $$$. The one who has the most cash in their bank will most possibly win the competition.
All the hypergrowth startups are burning piles of cash with almost no sustainable way out.
If you were building a shopping platform, and getting loyalty, perhaps you should have just sold the items yourself. The experience would have been much better, for sure.
All of those companies have a clear value proposition for buyers (one place where you can get information instead of lots of scattered websites that might or might not be helpful). They also tend to have strategically strong customer acquisition channels that give them some degree of leverage with sellers (i.e. they can say, do what we want or else we'll stop passing buyers through to you).
Aggregation makes sense in markets where the buyer knows that they have to buy, but don't know what/which/where to buy, but seems to do worse in markets where purchasing is done on impulse.
What about eBay?
If you decide to start something and it's a two sided marketplace be ready for a rough time.
It sounds like you were facing a really tough competitive landscape. Throwing in the towel sounds like a wise thing to have done.
One thing I didn't totally get from the post is what exactly you were trying to improve about the shopping experience? It seems like there is a lot of room for improvement for both buyers and sellers. Could you have vetted sellers and/or tried to answer inane questions from buyers yourselves (acting like a web cache for popular requests), saving both parties the pain of waiting for a response? What if you offered some kind of reputation service? I'm sure you thought about this stuff, and I'm not saying any of this is easy. I just would be curious to hear more about how you thought through finding real, sticky product-market fit.
From the buyer perspective we have made a special one-on-on online coaching session, where they can ask us anything for feedbacks on how to improve their shops. We gave a lot of suggestions to them but most just didn't take any action afterwards.
We do have a reputation service. We verified each and every store by taking in their personal government ID. We show case their customer testimonials in their own shop page.
Two crucial thing that we can't play with, price and quality of product :) Which is two of the most important thing needed for someone to make a purchase.
If you want to have better odds next time, I'd advise you to read Zero to One. Think about what your secret is. What are you trying to do, what do you know about, that no one else knows? Then do that.
When you see lots of competitors, it's a pretty good bet you haven't found a secret.
"Fab" tried that. They were based in NYC, and blew through about $200M in venture capital before tanking. Did the author of this article know that? Did whomever funded him?