Why big data start-ups cannot ignore Asia

Posted in Company
By Kerry Liu on June 26, 2015

Shopping-Center-ChinaStart-ups often ignore Asia until much later on in their life cycle. I don’t necessarily agree with this strategy. When you are in an industry that is undefined and rapidly changing such as big data, the geography you target matters less than the industry or vertical. This article is our chance to share some real-life lessons from our experiences selling into China and the greater Asian region (Hong Kong, Taiwan, Singapore, mainland China, Japan).

First off, why Asia? Well at 3.8b people, the population is expected to rise to 4.6b by 2040. There are also 27 million new consumers created every year with a faster growing per capita income than anywhere in the world. The middle class stands at 525m individuals or 28% of the global middle class. Even in rural china, the disposable income has doubled in the last four years to 10,489 Yuan per resident.

VC’s are beginning to notice too, $2.8B and 218 deals were done in 2014 which put 2014 on the map for being the biggest VC investment year in Asian history.

So what does this mean for start-ups? To put it simply: Ignoring Asia is irresponsible to your business and just leaves more opportunity for the rest of us.

At Rubikloud, we have been very fortunate to have global investors from day one. Our first six major clients came from six different countries. One in Hong Kong and one in China. Our current sales pipeline has online and offline retailers from all around the world, including Singapore, China, Taiwan, and Hong Kong. I have also had the privilege of speaking at and attending big data and retail conferences in Hong Kong, Singapore, and Shanghai. We currently have a partnership in China that gives us access to 80,000 physical retailers across 600 million people (more on this partnership to come later this summer). I won’t pretend to be an expert in doing business in Asia – in fact I have a lot to learn. However, there are three key trends I have learned that relate to the application of big data for the retail world in Asia.

1) Asia is online first, offline second.

IR500 stated that North America’s total online retail spend in 2014 was $305b. The top ten online retailers accounted for approximately $152b of that spend (nearly 50%). 7 out of these top 10 retailers started their life as brick and mortar businesses. They went offline to online.

In contrast, in China specifically, E-commerce revenue topped the US for the first time in 2014 at$450 billion. The top ten online retailers in China accounted for only 28% of this spend. A whopping 9 out of these 10 retailers started online and don’t have any offline presence. All of them have received significant venture funding and some have gone on to list on NASDAQ.
So what does all of this mean? When selling a big data solution into Asia and China specifically, you must have an online-first offering. While our system can just as easily ingest point of sale data from an offline retailer as the online e-commerce platform feeds, we don’t need to waste any time talking about our offline capabilities.

2) General analytics and BI are still 8-10 years behind North America

Baidu Analytics is still the predominant online analytics system for retailers in China. Baidu Analytics is generally regarded as 4-5 years behind Google Analytics in terms of functionality. Additionally, freemium or low priced SaaS offerings like Kiss Metrics, RJ Metrics, and Mixpanel are still early in the Asian expansion strategies. Finally, enterprise grade solutions like Coremetrics and Omniture have little to no market share in China.

This is an opportunity for all analytics start-ups. Asia retailers have an opportunity to leapfrog these legacy systems directly into a modern combination of a flexible data visualization tool and an automated analytics system. We think the perfect combination is something like Looker/Tableau/Qlik and Rubikloud. This saves online retailers significant integration and licensing costs and allows them to leapfrog their North American counterparts.

3) Explain big data in person.

It’s naïve for North American start-ups to think they can build partnerships via conference calls. It’s even more naïve to think that we can explain complicated topics such as big data over a conference call. Yes it’s exhausting flying 10-15 hours for a business trip, but in our belief there is only one way to do showcase your vision for the future – and that is in person. Building the relationship in person is core to the Asian philosophy of doing business. More importantly, being in person allows you to get a sense of the local retail behaviours. For example, Asia is still a cash based economy and online retailers have to take that into consideration. Additionally, it’s very common for online retailers in Asia to sell multiple categories versus focus on specific verticals like in North America. All of these nuances are so much easier to understand incorporate into your product offering when you are meeting the retailers in person.
It’s undeniable that Asia and specifically China are going to be a consumer and retail growth engine for many decades to come. To all start-ups, especially ones in the big data space, I would leave you with one message: Dive in head first. We live in a global marketplace with global competition. The old mentality of waiting until year 6 or 7 before entering Asia will not work anymore.