A New Trend in International Business: E-Commerce Takes off

Among the products developed by such “southbound” Taiwanese businesses is a Red Dot, iF, and Good Design award winner: the iCHEF restaurant point-of-sale system.

Abigail Lim (center) is a recent entrant to the restaurant industry, and for her first branch she chose iCHEF as her POS system. Nick Yu (right) and the iCHEF team have provided her with impressively professional service.

Street food meets high-tech

Beyond its ethnic diversity, one of the most characteristic elements of Malaysian cuisine is “mamak,” traditional street-food stalls popular with nine-to-fivers.

In recent years, though, a new option has begun setting up in parking lots in business districts—food trucks. These trucks, part of the Mobile Food Trucks and Street Food Association (MSA), aim to provide another option for satisfying hungry office workers, and are the number­-one partnership target of Taiwan’s iCHEF.

iCHEF is an iPad-based point-of-sale (POS) system. POS systems are most commonly used in the restaurant and retail sectors, and among their primary functions is keeping track of inventory, sales, and customer purchasing behavior.

iCHEF’s expansion into Malaysia started in October 2016, when the company’s Southeast Asia business development director Nick Yu arrived in Kuala Lumpur. Prior to that, the iCHEF POS system had already been tested in the Hong Kong and Singaporean markets, with Kuala Lumpur their third overseas location.

Greater Kuala Lumpur boasts a population of some 7.2 million, roughly on par with Greater Tai­pei, and is home to a diverse and booming restaurant industry. With the population eating out around 20% of the time, the market is a tempting one.

Restaurants here are down-to-earth places, but Yu quickly found that Kuala Lumpur restaurateurs already had some familiarity with POS systems.

In 2015, the Malaysian government announced that restaurants would be subject to a 6% sales tax, which sparked a wave of interest in new POS systems. It also made iCHEF’s relatively late entry to the market a challenging one.

“Throughout our various markets, iCHEF’s advantage has always been that it has grown from a foundation in the restaurant industry, and is thus a particularly professional choice for that industry,” says Yu confidently. In the early days of iCHEF’s development, the engineers actually moved into a restaurant for a week to see for themselves how restaurants run and to understand the various processes so that they could tailor the system to them. iCHEF also provides a range of analytical reports, including daily operating reports, to help restaurateurs stay on top of what’s going on and make data-based adjustments to their marketing strategies.

Abigail Lim has only recently moved into the restaurant industry, becoming a member of the Australian franchise Patissez, and she chose iCHEF for her first branch. According to Lim, iCHEF not only covers every aspect of restaurant operations, but also sports an easy-to-use interface and modern design, making it a perfect fit with the style of her restaurant.

In order to quickly build recognition in the market despite their late entrance, iCHEF have partnered with the largest food truck alliance in Southeast Asia, MSA. MSA is a young network that aims to turn around Malaysians’ image of food trucks as dirty and unhygienic. By bringing new structure and standards to the food truck industry, MSA has helped them become a regular part of the Kuala Lumpur cityscape. This concept is very much in line with iCHEF’s own approach, and they soon became an official partner of MSA. After only a month, six food trucks were already using iCHEF, marking the company’s formal foray into the Malaysian market.

Nick Yu has handled this launch single­-handedly, and while it has proven to be a challenging market, he remains hopeful about the future: “The iPad market is expected to grow by about 1,000 restaurants a year, so we’re hoping to achieve a market share of around 30‡50% within the year.”

iCHEF’s partnership with the Mobile Food Trucks and Street Food Association was the first shot in their foray into the Malaysian market.

Calculating potential customers: Tagtoo

Online advertising has already evolved from passive to active. In the past, it was simply a matter of buying media space to get exposure for your products. Today it’s more about audience buys than media buys, with data on consumers’ online behavior collected and algorithmically analyzed to serve ads more accurately and create a higher conversion rate.

Tagtoo is at the forefront of such data collection and analysis. Founded a little over six years ago, Tag­too specializes in performance-based advertising sales. According to CEO and founder Teddy Yang, such advertising in Taiwan amounts to a market of about NT$500 million to NT$1 billion, and Tag­too expects to grow its sales to some NT$200 million, or around 30% of the market.

With the Taiwanese market a relatively small one, though, Yang eventually set his sights on the Southeast­-Asian market, starting expansion in 2015.

Born in Johor Bahru, Anson Soh studied in Taiwan after graduating from Malaysia’s Chinese Independent High School. Soh was hired by Tag­too straight out of college, taking on a three-year project to prepare for the company’s expansion into his homeland.

E-commerce providers in Malaysia were initially unfamiliar with the technologies and services Tag­too provide, meaning that Soh had to spend a good amount of time giving them detailed explanations of Tag­too’s operations and principles. Meanwhile he observed the different client types in the region. He found that ethnic Chinese were more cautious about spending their money, while Malays were a bit more free with theirs, making them better to do business with. Additionally, Soh found that many e-commerce companies seized on the opportunity to advertise around the start and end of each month, which is when Malays tend to receive their wages.

“Speed is an important thing in the Internet industry,” says Teddy Yang. As a result, when evaluating the Southeast-Asian market, Tag­too didn’t do too much in the way of preliminary analysis. Instead, “We went directly to the place to get exposure to local users and collect data for analysis,” Yang explains.

While at present the Internet and e-commerce environment in Southeast Asia is still maturing, it is commonly accepted that within three years it is set to take off, so it’s a matter of moving now or being late to the party. In addition to Malaysia, Tag­too has also begun expanding into the Indonesian and Thai markets, and within three to five years they expect their share of the SEA market to be around NT$500 million to NT$1 billion.

The Tagtoo team is a young one, and their hope in targeting the Southeast-Asian market is that within three to five years they will achieve annual sales of between NT$500 million and NT$1 billion. (photo by Chuang Kung-ju)

KKBOX: Islands in the stream

A leader in Taiwan’s music industry, ­KKBOX has enjoyed rapid and stable growth in recent years. In 2009 the company launched in Hong Kong, and in Southeast Asia in 2013. “We’ve been ambitious from the beginning,” says ­KKBOX SEA managing director Andrew Ho. “We never wanted to just hold fast in Taiwan, but instead were always trying to think up ways to take the leap overseas.”

The population of Southeast Asia is growing rapidly, with a large proportion of young people. In Malaysia, some 30% of the population are ethnic Chinese, which also gave ­KKBOX the advantage of a large population of people with a similar cultural and linguistic background to the Taiwanese. On top of that, as technology continues to develop, 3G and 4G smartphone connections and smartphone ownership are becoming more common, changing how people listen to music. Combining all this with Taiwan’s having long been a center for Chinese-language pop music, ­KKBOX was well placed to expand into the Malaysian market.

Streaming music in Taiwan went through a long rough period, gradually fostering a respect for musical copyright. The Malaysian market is in the middle of a similar process. “Malaysians have a powerful passion for music,” says Ho, “so when we promote good music, trial listens go up. However, in terms of getting them to pay for a subscription, it’s been a challenge, as they don’t have the same habit of paying for music that’s developed in Taiwan.” This remains a major issue the company is facing in its efforts to grow its market share in Malaysia.

Unable to directly transplant the Taiwanese model, ­KKBOX has tried a variety of different approaches, including increasing the number of Malay songs on the service and considering daily or weekly rentals of music to adjust to Malaysians’ reluctance to prepay. The company has also entered into partnerships with telecoms companies, bundling ­KKBOX services with phone subscriptions.

When asked about competitors, Ho gives a wry smile. “We might have moved into the Malaysian market fairly early, but there’s still plenty of competition.” From ­America’s Apple Music and Spotify to China’s Joox, each has its own strengths, but “even though we’ve got plenty of competitors, sometimes that’s actually a good thing, because it means everyone else is thinking about ways to fire up the market.” Ho is optimistic about the issue of competition. What’s more important, he believes, is knowing how to differentiate yourself in the market, like building deeper local connections and relationships of trust. ­KKBOX is more focused on the stable growth of the music industry, helping the market keep releasing good music and discovering good artists, and so giving audiences a more diverse range of music services.

The company seeks out local artists to organize concerts with, local companies to hold joint events with, and engineers to use “big data” algorithms to create personalized song recommendations. Working with information scientists, ­KKBOX is able to adjust its app’s interface to better fit with consumer demands, plan designed playlists of all kinds, and recommend listening behaviors based on current events and news. All of these help the company localize its efforts.

In recent years, the world’s attention has been gradually turning toward Southeast Asia. With long economic and cultural ties between Taiwan and Malaysia, the country has become one that Taiwanese entrepreneurs are eager to break into. Ho, who has worked in Southeast Asia for several years, recommends that such companies “make friends first, start looking for appropriate partners, and then make their move into the market.” While “making friends” might be time-consuming and labor-intensive, it’s a necessary investment, because once you’ve built that trust, everything else will start to fall into place. He further recommends that Taiwanese companies make the most of this point in time to get out and learn about the outside world. “Actually, getting out there isn’t that hard,” Ho says sincerely.

The booming, largely unexplored market of Malaysia offers plenty of possibilities for Taiwanese companies willing to take the initiative.

Anson Soh (right) explains to a client the principles behind performance-based advertising and how those principles are put to work. (photo by Chuang Kung-ju)

KKBOX’s Southeast Asia managing director Andrew Ho believes that sometimes having many competitors, as KKBOX has in the music streaming space, can be a good thing, because it means others also expect the market to heat up.

KKBOX is focused on encouraging stable development in the music industry, helping the industry produce good music, discovering new artists, and providing audiences with a diverse range of musical services.