Managing the Complexities of Asian e-Commerce

cleverbridge

Full-service, cloud-based e-commerce provider for software & SaaS companies

• Founded 2005

• 200+ employees

• Offices:

Cologne

Chicago

Tokyo

Speakers

Doug CavinessHead 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

Speakers

Yosuke ItoGeneral 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

Speakers

Noriyuki MatsudaPresident & CEOSOURCENEXT

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

Asia-Pacific e-CommerceA Growing Opportunity

IT Global Market Share(business and government)

In $billions

APAC: • 23% of Global

IT Market• 9% annual

growth

Source: Forrester Research Inc.

Forecasted Online Revenues by Category

Computer hardware and software

Source: Forrester Research Inc.

Primary Markets

• South Korea, India, Australia, China

and Japan

• Country-by-country highlights: Market share

Online revenue

Population

Internet accessibility

SaaS adoption

• $25 billion IT market• 2011 online revenue of

$16.8B ($22B by 2016)• 50 million population • 94% have broadband internet

access (42M users)• SaaS adoption is slowly

progressing; planning & implementation stages

South Korea

5% of APAC6% growth

• $34 billion IT market• 2011 online revenue of

$1.6B ($8.8B by 2016)• 1.2 billion population • 9% have broadband

internet access (80M users)• SaaS market will be largest

segment of cloud services, reaching $115 million revenue in 2012

India

7% of APAC14% growth

Pricing and Piracy – Challenges in Emerging Markets

7% of APAC

*Screenshot taken in India on Sept 20, 2012. Exchange rate was $1:RS 53.37

USA price: $49.99India price: $18.72 (USD equivalent)India Discount: 62.6% off USA price

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

Country Conversion Rate

Software Piracy Rate

Per Capita GDP

USA 42% 19% $48,665

Japan 39% 21% $45,659

China 9% 77% $4,833

India 9% 63% $1,382

• $48 billion IT market• 2011 online revenue

of $23B ($35.4B by 2016)• 23 million population • 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

Australia

10% of APAC70 7.9% growth

• $98 billion IT market • 2011 online revenue of

$165B ($356B by 2016)• 1.4 billion population • 34% or 513M users

have internet access • SaaS adoption is slow;

has large potential to grow for basic business applications

China

21% of APAC12.9% growth

Piracy in China Remains a Major Issue

7% of APAC

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%

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.

Piracy of PC software

Source: 2011 Piracy Rates: “2011 BSA Global Software Piracy Study”

Focus on Japan

• $195 billion IT market• 2011 online revenue of $64B

($97.6B by 2016)• 128 million population• 80% have broadband

internet access (102M users)• Online marketplaces dominate• SaaS adoption is rapid (esp. B2B)

Japan

7% of APAC

21% of APAC3.6% growth

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

Go-to-Market Models

Selecting a Go-to-Market Model

Complexities to Consider

• Localization (language, web design, currency, payments)

• Customer support• Quality assurance• Pricing & channel strategies

Localization – Text Is Just the Beginning…

Home page of Rakuten.co.jp, the “Amazon” of Japan

Localization – Text Is Just the Beginning…

Zoom-out of Home page of Rakuten.co.jp, the “Amazon” of Japan

What e-Commerce Payment Methods are Used by Japanese Consumers?

Cash / Cheque

Carrier Billing

Internet Banking

ATM or Teller @bank

Konbini

COD (incl. CCOD)

Credit Card

0% 1000% 2000% 3000% 4000% 5000% 6000%

120%

1070%

1440%

3120%

3390%

4760%

5570%

Source: The Ministry of Internal Affairs and Communications of Japan

Japan is a cash-oriented society

Great Expectations

Source: Building Keystones

$90 USD equiv.

Local Pricing Strategy – Charge Premium Prices

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

Sell Direct via e-Commerce

Pros Cons• 100% control of brand• Low investment required• Relatively easy entry

• By itself, may not fully leverage market opportunity

• Requires dedicated team and resources

Market Examples:

Criteria: Generally need an estimated Japanese market opportunity of $1M+ annually to justify

creating localized products

Sell Direct via e-Commerce Managed Services

Market Examples:

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.)

Sell Indirect via Publishers / VARs

Pros Cons• Easy entry with turnkey provider• Low investment required• Leverage multiple sales

channels (B2B, etc.)• Complete solution for customers

• Loss of some control of brand• Might not fully leverage full market

potential for vendor willing to make a large investment

Market Examples:

Criteria: Typically > $500,000 gross revenue expectation per licensor for B2C

Publisher Example -- SOURCENEXT

Cloud computing products in retail???

Yodobashi Akiba

the largest retail store in Japan with around $1.5 billion sales with 100

million visitors per year

Evernote retail box display

Publisher Example – SOURCENEXT (continued)

“Herd mentality” – consumption by consensus

“Becky”

SOURCENEXT corporate spokesperson

In store promotion

Sell via Joint Ventures

Pros Cons• Relatively easy entry• Leverage the sales, marketing,

service, goodwill/credibility and assets of an established partner

• Potentially lower investment requirement

• Complete solution for customers

• Loss of some control of brand• Complex and might require

significant investment• Higher risk

Market Examples:

Criteria: $10 million + over three years; B2B sales require an established local player

Sell via Wholly-Owned Japanese Entity

Pros Cons• 100% control of brand• Ability to fully leverage

market opportunity• Complete solution for customers

• Expensive to set up and maintain• Higher risk

Market Examples:

Criteria: Typically $1-10 + million annual gross revenue expectation

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

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

Q & A

• 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)

Select Resources

Thank You

Additional Data

Software Sales in APAC(business and government)

Source: Forrester Research Inc.

Japanese SaaS Growth

Compound Annual Growth Rate (CAGR): 57.24%

Source: Forrester Research Inc.

Cloud-Based SaaS Trends (B2B)

Others

Authentication

Payment

Logistics/Supply Chain Management

Purchasing Management

Order Management

Accounting/HR

e-learning

Web

R&D

Sales Force Automation

Extranet

Project Management

Schedule Sharing

Mail Server

Intranet Portal

Data Backup

File Sharing

Server

0% 10% 20% 30% 40% 50% 60%

7.9%

2.2%

3.5%

8.8%

6.6%

6.7%

20.4%

6.2%

4.2%

1.4%

13.2%

9.4%

3.0%

35.2%

48.1%

29.8%

17.3%

34.7%

35.2%

Source: The Ministry of Internal Affairs and Communications of Japan

e-Commerce Market Size

Source: Building Keystones

Language and Localization

Source: Building Keystones