We recently announced the Founders Series, in which Amazon Web Services’ Pieter Kemps interviews founders and CEO’s of successful startups on key topics that are relevant for startup founders, entrepreneurs and the wider startup community.
In the first interview of the Founders Series, PayrollHero talked about company and culture building. In this episode, Pieter speaks with Alexis Horowitz, Founder & CEO, Luxola, a startup that has expanded quickly in Southeast Asia and is currently active in six markets. While many startups talk about their business strategy for Southeast Asia, few have executed it on the ground as well as Luxola. Therefore, this article will explore Luxola’s lessons learned for effective business execution in the Southeast Asian region.
PK: Alexis, can you tell us something about Luxola and about yourself?
AHB: I dropped out of college for two years and ski-bummed in my home state of Colorado before going back to school. I moved to Singapore over five years ago and Luxola is actually my third startup. The first was in consulting and the second was a short lived e-commerce venture called The Sweet Spot, in the group buying space which I exited about five months after it launched. I started Luxola because I am passionate about e-commerce and the opportunity in Southeast Asia. I wanted a model that focused on great product selection, customer service and content over discounting, which is how most other regional models operate. I want people who shop on Luxola to feel fantastic about their buying experience from the beginning to the end. In fact, it is this mantra that the entire company really takes to heart and that differentiates us in an otherwise crowded space. To ensure every employee always remembers the importance of the customer experience, our whole company takes turns answering the phone so that all of us, no matter what our position is, can connect directly with our customers. In doing this we are able to better understand what is driving them and then use that information to make customer-centric decisions in the company with the goal of making everyone’s shopping experience better!
When you launched Luxola, did you start out with a focus on Singapore, or did you have a regional plan from the outset? If so, how did you change your plans based on the harsh realities of growing your company in Southeast Asia?
We launched our business in Singapore but always knew we would grow regionally. The market in Singapore is a great “test bed” for business, but as we all know it’s a fairly small market and we had ambition beyond what Singapore could deliver on its own. However, we wanted to learn some lessons about the business before launching in other markets. The initial lessons had more to do with the business itself: inventory management, product mix, basic customer acquisition strategy/refinement, etc. We learned a lot in the nine months we were purely in Singapore before we pushed out to other countries. Had we launched in all countries from the get go, we would have made some VERY costly mistakes. Now, we obviously made mistakes but these proved to be valuable lessons that we hugely benefitted from as we launched in other markets. As we progressed, our business model became more well-defined, so that when we launched the other markets, we were able to really focus on country specific problems like payment mechanisms, language, currency and logistics. All the markets here are different, so I think it’s a great idea to work out the kinks in your business model in a single country first. Once you expand, you have a whole new host of issues to deal with!
When you enter a new market, how do you decide on your market entry strategy? How do you test markets and decide whether you need an organization on the ground, or can fulfill from a central warehouse?
We have done it piece-by-piece. The first step was to look at the countries we wanted to be in (currently we are in six) and say “what is the easiest way to start acquiring customers in those markets”. There is really no point in building an on-ground capability if you can’t at least capture some customers first. So we pushed marketing spend into the new markets and worked on optimizing our approach. Simultaneously, we also figured out what logistics players to use to ship into those countries. Then, we started to prioritize further and decided we wanted to focus more on Malaysia and Indonesia. We hired local business leaders in those countries, built teams there, focused on localizing the strategy, etc. We still fulfill everything from our Singapore warehouse and the piece-by-piece approach has allowed us to try many different logistics partners. This has allowed us to find ways to get customers their packages extremely quickly – next day in most markets and 2-3 days in Indonesia – while avoiding the cost of warehousing in every market. For now, we like this approach. One day, we may have warehouses in each market. As we are a startup with constrained resources, the current strategy is a great way for us to scale up the customer base and really test our various plans and our next steps.
Can you share some of the key lessons learned in each of the markets that Luxola entered? Did you see many similarities, or was each country very different?
I think there are some similarities and some key differences. You can create a lot of efficiency in the organization by tackling a challenge in one country and then utilizing that solution when rolling out operations in another country. Payment options, for example, are a pain in Indonesia – we have seven payment options there. However, rather than try to roll out every localized payment option for every country at the same time, we prioritized Indonesia. This allowed everyone from our sales to development team to learn a lot of lessons in how the process should go. Now we are rolling out additional payment options in Malaysia and Thailand and it’s taking us a fraction of the time because we understand the process. So things like this have a lot of similarity, not in the exact solution but in the bureaucracy and process that it takes to get certain things like payment systems implemented in South East Asia. Then of course, there are also things that are different in every country. For example, how consumers like to be communicated with and what products they prefer. I think localized marketing is the most valuable piece of what we do. Our teams in the different countries execute on ideas locally that my team and I in Singapore would have never thought of because they understand the customers in those markets so much better than we can. Making assumptions that “what works in Singapore will work in Malaysia or Thailand” is simply short sighted.
Finally, do you have any advice for startups that are planning to address the Southeast Asian market?
I would say just be very planned about your resources and really enforce a culture of learning from your mistakes. Getting established in this region can require a lot of money quickly, so unless you have endless funds to work with I would advise that you take on a process or try something new in one market, see what comes out of it and then roll it out using the best practices you learned the first time around. It may be slightly slower than pulling the trigger all at once but you learn a lot and save a ton of money!
Luxola is big on Agile Development and has launched their business using AWS partner Heroku. They also use Amazon S3 for Storage, CloudFront for Content Distribution, and are currently exploring additional AWS services, especially around Big Data & Analytics.