Localization: An Alternative Way to Start Companies in SEA
Back when I was in the Philippines, I used my 2-hour work commute to brainstorm badass startup ideas to uplift the Southeast Asia ecosystem. I listed 3-5 ideas each day and realized many were already existing elsewhere. So much for my innovative startup idea! I end up scratching them off.
Fast forward to my first year living in San Francisco, I was craving for some takeout one night but I didn’t want to go out. So my roommate told me to order from an app called Grubhub.
When I got my order, it reminded me of Foodpanda in the Philippines but instead of driving cars, drivers were riding motorbikes and bicycles.
Why? Foodpanda found that because of dense roads and terrible traffic, they could make faster deliveries as the motorbikes and bicycles wove through traffic compared to cars.
I realized how "Localization" was a strong strategy. Southeast Asia's most valuable companies are local versions of products from elsewhere, adapted to fit local needs like Tokopedia (Amazon) and Grab (Uber, Lyft).
What is localization?
This is the process of taking a product and tailoring to a specific locale/market. Keep in mind that localization is more than translation. It’s adapting your product physically, linguistically, and even culturally.
From: What Is Localization, and Why It Is Important to Grow a Global Business in 2019?, Lokalise
Localization isn't anything new. It's been around for a long time, even before tech.
For McDonald’s to grow globally, they had to cater to the local, cultural, and even religious tastes of different countries of the people.
A beef burger would never fly in a Hindu country. So they made vegetarian burgers.
And if you serve a piece of chicken without rice to Filipinos, they’re not going to be happy.
In Asia, HiAce is one of the most popular vehicles from Toyota. It’s a solid van that can be converted to an ambulance, taxi, and a crew van.
If it's such a good vehicle, why doesn't Toyota sell it in the US?
The engine is at the bottom of the car which leaves it with no hood. People from the US don’t like cars without hoods because it's bad for aerodynamics and is incompatible with long highways that have higher speed limits.
That’s why minivans with hoods are a preferred choice.
How does localization apply to the Southeast Asia tech scene?
Grab is one of the leading ride-hailing companies in Southeast Asia. The idea behind it is similar to Uber and Lyft but adds the motorbike service on top of their car service.
In Southeast Asia, motorcycles are a popular mode of transportation because they’re cheaper and faster as they allow people to cut through traffic.
The Philippine equivalent is Angkas, which offers all its services through motorbike drivers. It cut my 45-minute commutes to 20 minutes every day!
Ride-hailing payments are also localized. Grab offered cash as a payment method when they launched in countries like the Philippines, Indonesia, and Vietnam where "cash is king."
This gave them an early advantage over Uber who started with only credit cards and came to the cash game late.
Lastly, on top of points for ride benefits, Uber/Lyft partners with credit card companies to offer their users special promotions and perks.
For Grab, partnering with credit card companies isn’t ideal since not everyone has credit cards. Instead, they partner with merchants directly and users can redeem promos and discounts using their points. This also feeds back into their GrabPay product.
Video/Content-streaming is becoming more and more popular in Southeast Asia and one of its biggest leaders is iFlix, very comparable to Netflix.
iFlix focused on growing its catalog of local shows and dubbed international content to local languages. Southeast Asians love local TV shows — they see their favorite local artists and resonate strongly with the storylines.
They also optimized their mobile user experience as most of their target market watches shows through smartphones.
The "Instacarts" of Southeast Asia include HappyFresh and Honestbee (now defunct) but RedMart by Lazada (now a subsidiary of Alibaba) and Grab have led the charge in the region.
How was it localized?
Focus on local product offerings
Motorbike owners as an option for delivery drivers
Cash-on-delivery payment methods
Instacart could take on expansion to Southeast Asia. But regional players have an upper hand for two reasons:
A better edge in understanding the local dynamics and needs of the market.
Leading players like Grab and RedMart are "super-apps" that create strong brand loyalty. Their users are likely to use these apps for a variety of their needs instead of adopting a new app from another company.
Southeast Asia has a huge unbanked population (about 290 million). GrabPay, GoPay, GCash, and Paymaya are the big players in fintech, localized versions of PayPal, Google Pay, and Apple Pay. Personal investing where startups like Ajaib and Pluang from Indonesia created local versions of Robinhood.
Installment payments or the BPNL model (Buy Now, Pay Later) has also become a popular category especially as eCommerce is booming in the region. Companies like TendoPay and Empatkali (acquired by Afterpay) jumped in to help consumers by localizing tech-enabled installment payments popularized by Affirm in the US.
What other products can we localize in Southeast Asia?
Fintech - Financial Literacy
According to GoTradingAsia, Southeast Asia has the poorest financial literacy. 7 out of 10 adults in the region are unbanked and are also experiencing financial services for the first time, according to Iterative.
While fintech continues to grow rapidly, adoption may not grow proportionally. Many have no idea how other financial concepts like credit, insurance, and loans work.
More companies need to localize US personal finance products like Bankrate or NerdWallet to tackle this local problem paralleling how Seedly did it for Singapore.
Education - Income Share Agreement Model
The common motivation for someone in Southeast Asia to go to college is to get skills and credentials for employment. However, enrollment rates for tertiary education are low due to the lack of affordability.
More edtech companies can use the Income Share Agreement Model. Companies only get paid when their students get hired, serving as an affordable payment model.
Lambda School in the US teaches people software engineering and data science for 12 weeks and they take a 17% cut of a student's post-Lambda School salary that's above $50,000/year.
In the Philippines, Avion School localized Lambda School’s concept teaching Filipinos web development, taking a cut when salaries are above P30,000/month.
Southeast Asia is rapidly growing and we’re very excited about what’s going on in the region.
You don't have to find the most innovative idea in the world. There are many problems in the region that are waiting to be solved and we can learn from the mistakes and learnings of our international friends to find inspiration.