Diamonds in the Rough
Anita Devasahayam, 1-Apr-2001
In recent months, many local dotcom plays have tightened their money belts, trimmed headcount and re-strategised their mission statements. The wave of dashed dotcoms dreams sweeping through the US hastened the dotcom fallouts in Asia.
Suddenly it was no longer cool to be linked to the New Economy, noted a local dotcom player who refused to be named. “I could jinx myself,” he confessed.
Indeed the negative publicity coupled with layoffs and pay cuts surrounding local dotcoms have left believers in a tizzy over what next. Yet one observer pointed out that the Internet industry in Malaysia should not be seen as any different from any other business.
“The number of dotcoms going out of business here in Malaysia is probably the same in numbers as businesses in other industries (pubs, restaurants, garment retailers), so why all the fuss?” he asked. Mergers, acquisitions and curtain calls will continue to be the order of the day as the e-players consolidate in coming months. But there are some diamonds in the rough—local dotcom players who prefer to serve global markets then draw attention to themselves.
Such gems include Jobstreet (more on Jobstreet in next month’s issue), Watchesplanet.com, Asia Travel Mart and Royal Selangor International. (The latter two were recently awarded the Intelligent20 Award and was featured in the Jan/Feb 2001 issue of Intelligent Enterprise Asia.)
Watchesplanet.com took its first dip into the dotcom scene in 1998 when CEO Boxson Liow began toying with the idea of e-commerce. “I was looking at e-commerce sites in US and marvelled at what they were doing.”
After much thought and careful study of the B2C market, Liow picked watches-—a utility simple enough to sell online. Besides having many unique designs that customers can choose from, he rationalised that the maintenance of a B2C site selling watches would be low and less problematic. “I do not have to worry about after sales service. Most watches are recognised internationally and there is little need to explain how each works. And they are not difficult to pack.”
The fact that watches are duty free items and can be easily sourced in Malaysia made the choice more appealing. Liow finally set up Watchesplanet.com a year later with a capital of US$65,800.
Within a year, the company recovered its initial investment and broke even. It posted gross revenue of US$315,789. Sales last year shot up three-fold to US$1.1million and Liow has set his sights at repeating the feat with a US$2.1 million sales target for this year.
Liow attributed good sales to its competitive pricing which is between 20%–100% lower than that in US and Europe. Although buyers have to pay duty and import tax, the overall cost to buy the watch online is still substantially lower, he said, adding that taxes levied on watches for private use is lower.
The e-tailer offers over 5000 watches from 60 brands ranging from Gucci, Raymond Weil, Tissot, Swatch, Omega, Rolex, Calvin Klein to Tag Hauer. Shoppers have also been delighted to find discontinued designs which are not available in their home countries. Items on the Web site average between US$100 and US$2000.
He added that the Web strategy was straightforward as it targetted upper- and middle-class shoppers who are comfortable buying online. “These people are from the US, Canada, UK, Australia and Japan,” he said, adding that 75% of his customers were from North America.
Liow pointed out that shoppers on his site spent an average of US$500, an indication of the strength of their purchasing power. “We have students who spent between US$100 to US$200 on Swatch or Casio G-Shock watches too.”
The watches are checked by an in-house team before being packed and shipped to customers. Logistics partners such as FedEx and TNT allow shoppers to check the movement of the items online. “Our American customers are surprised that we can deliver in five days after they have placed the order. It takes the same amount of time for items to reach from one place to another within the US.” Given the runaway success, Liow is raring to expand his business. He is not depending on venture capital either to do that, preferring to pump back earnings made into the business.
About US$132,000 has been put aside to beef up the infrastructure, improve customer service and to promote the Web site. High on the agenda are plans to launch Japanese and Chinese language sites by Q3 of this year. “Our English Web site is limited to US, Canada and UK, which means we cannot reach the French, Japanese or Korean users.” He said that the company—comprising eight people—has not fully utilised its resources even though they have hit the jackpot. “Based on this model, we think we can sell other equally profitable personal accessories online.”
He disclosed that some customers have asked for other items such as writing materials and jewelry. Given the potential presented by generic products with high value, Liow is seriously considering expanding the offerings on his online store.
“Of our total expansion budget of about US$50,000 will be spent on a customer relationship management system to study the purchasing behaviour of our customers. Right now, much of what we gather is based on what we see and is not quantified.”
Being able to determine what makes a repeat customer would be invaluable when new products are introduced online, he added.
Apart from promoting the site through search engines, Liow intends to embark on an affiliate program with other merchants to cross sell his watches. Currently the site is tied up with online bookshop Amazon.com. “We plan to grow this sector of our business abroad to capitalise on the growing B2C sector.”
Liow, who used to work in a software house as a programmer, believes that running a B2C business out of Malaysia is viable. “The B2B market here is pretty small but the B2C sector is quite large. The online shopping culture here is not big but it is definitely growing. Besides, our costs is much lower compared to other parts of Asia.”
Getting high profile fanfare was not part of that equation, he said, adding that they preferred to concentrate on sharpening their business acumen.
“We treated our B2C venture as a serious business. This is our rice bowl. So we kept costs minimal. For instance, we don’t carry a lot of inventory except for popular designs and order an item once we have confirmed it at our end.”
As much as Liow is amazed and proud by success of his venture, he is only too aware of the need to diversify. “Our customers are happy—they are proud to post their comments online—and they want to buy other goods from us because they like our service.”
anita devasahayam can be reached at firstname.lastname@example.org