Indonesia's long tail "fragmented trade" of mom & pop's, warungs etc. can be 50-80% of sales for big CPG companies like Unilever & P&G. However, reliable insights into the "sell-out" of a product to the ultimate customer are nearly impossible to achieve, given the labyrinthine distribution networks and low levels of digitization at the retail end-points. Philipp Stegmann, founder of eyos, discusses how the company; which is the product of a merger with London-based RetailTech platform yReceipts; delivers actual actionable insights at point-of-sale to prevent inventory stock-out's, enable timely promotions, and otherwise drive significant supply chain efficiencies.
Indonesia's long tail "fragmented trade" of mom & pop's, warungs etc. can be 50-80% of sales for big CPG companies like Unilever & P&G. However, reliable insights into the "sell-out" of a product to the ultimate customer are nearly impossible to achieve, given the labyrinthine distribution networks and low levels of digitization at the retail end-points. Philipp Stegmann, founder of eyos, discusses how the company; which is the product of a merger with London-based RetailTech platform yReceipts; delivers actual actionable insights at point-of-sale to prevent inventory stock-out's, enable timely promotions, and otherwise drive significant supply chain efficiencies.
ALAN 0:12
Welcome to the 30th episode of Season Two of the Indo Tekno podcast. Selamat datang semuanya. I'm Alan Hellawell, founder of tech consultancy Gizmo Advisors, and Venture Partner at Alpha JWC Ventures. Today we examine that sprawling part of the Indonesian retail landscape referred to as the "fragmented trade". This is the long tail part of the retail economy. It is where we find mom & pop stores, warungs, independent supermarkets, mini-markets and local chains. It is not small. It represents roughly 50% to 80% of the sales of a leading consumer packaged goods, or "CPG" player, like Procter and Gamble or Unilever. Much of this part of the retail offline world in Indonesia is "black box" to the CPG brands. That is to say, once it has passed its products to wholesalers and distributors, many brands have virtually no awareness of the ultimate sell-out data, meaning the point at which the product is sold to the end consumer. In other words, they're selling into the dark. Today's guest, Philipp Stegmann, has built eyos which is devoted to collecting big data at that retail endpoint to both better inform brands, and also help the shopkeeper do everything from preventing stockouts to increasing sales with well-timed promotions. Great to have you join us today, Philipp.
PHILIPP STEGMANN 1:39
Hello, I'm very happy to be here today. Many thanks for having me. Looking forward to our chat.
ALAN 1:44
Likewise. Now, Philipp, you're originally from Germany. Can you describe that path which led you out here to Singapore several years back?
PHILIPP STEGMANN 1:53
Yes, of course. It's been many years actually. Well, the first time I came here was 2003. I was studying here at the NUS in Singapore and of course as a student also travelled around a lot in the region. And then already was fascinated by the richness of culture, by the dynamics of the people and of course the good food. I then after my studies started my career, first back in Germany working with a CPG brand, with a retail company back then, before I moved then back again to Singapore first employed, but then at some point I co-founded this company eyos.
ALAN 2:26
Fantastic. Thanks for that background. Now eyos is the merger of Emporio Analytics and yReceipts, I think it might be useful first to describe each of these companies in isolation, and then maybe walk us through the merged entity. So Philipp, can you first tell us about the Emporio Analytics side of eyos? What is the genesis of this company?
PHILIPP STEGMANN 2:49
I co-founded Emporio Analytics back in 2015. And back then, it was an analytics consulting company here in Southeast Asia. We were working on big data projects in CPG (consumer packaged goods) FMCG (fast moving consumer goods) environments. So what we did was actually we partnered with retailers, with big names such as FairPrice, RedMart, FamilyMart in Thailand, for example, the Aeon group in Malaysia, or SPAR International, which you may know of. And we work with them in markets, even like Ireland, Italy, and Russia. And what we always did was we received their granular transaction data, we applied data science, we built our own models to create insights which are relevant for shopper marketing, and then we made those insights available to companies like the big CPG companies like Nestle, like Unilever, like Ferrer or like Brown Forman, etc. So during this time, we built a lot of knowledge: how big data is consumed, how big data is utilised by big brands, and how it helps them to optimise their shopper marketing. And I think we were at that time one of the pioneers in Southeast Asia in this space,
ALAN 3:57
Very useful background. Now, can you on the other hand, describe what yReceipts is all about?
PHILIPP STEGMANN 4:03
yReceipts is one of the leading retail tech companies based in the UK basically. It is more in the area of receipt marketing, digital receipts, data automation, etc. And over the past, I think, 7-8 years, they have built unique capabilities in the area of ePOS (electronic point-of-sales), of cashier-agnostic data capture and automation. So they would usually work with "high street" stores. So some of the customers are (and they're still our customers) The North Face, Timberland, Lego and such stores. And we work with them in over 40 countries. But it's a little bit of a different value proposition for those customers. So it's about data. It's about receipt automation, but it's a very unique technical capability here.
ALAN 4:48
Got it. So two very different companies, but I can see some common elements. So maybe you can walk us through the thinking behind this merger. Why would we want to merge Emporio Analytics and yReceipts?
PHILIPP STEGMANN 5:02
That's indeed a good question. Basically, as I said before, we as Emporio have worked with all these CPG companies: Nestle, Unilever, etc. And our clients were very happy with what we do with the modern retailers. And they asked us: "Can you do the same for fragmented trade? So can you do the same for smaller mom and pop shops, etc, because we are entirely in the dark there." And then, this was the moment, this was a bit of an "eureka moment", I think, where I saw this opportunity. And when we dug deeper into this field and this segment of retail, we saw that there's currently no data ecosystem in this fragmented trade. And that was the starting point when I reached out to yReceipts, which, by the way, is co-founded by my brother. And we started discussions to come together and to work together. Because both technologies we have; our on the Emporio side, the data analytics FMCG knowledge rooted in Southeast Asia on the one side; and on the other side the ePOS-agnostic data automation on the other side. This is the secret formula for how we can unlock this massive global opportunity of big data automation in the fragmented trade. And that's why very soon after some partnerships, we decided to merge those companies together and build eyos.
ALAN 6:21
So clearly fill up your parents put in the cereal of you and your brothers something odd that resulted in both of you entering into the same broad industry, but on different sides of the earth. Is that correct?
PHILIPP STEGMANN 6:33
That is correct. We also don't know how this happened. It was not planned, obviously. But at some point, we are now complementing each other. And it's a very great adventure.
ALAN 6:43
I can imagine it's an extremely important glue, when we're talking about connecting business models that are separated by 12 or 15 timezones.
PHILIPP STEGMANN 6:52
Yeah, and not only that, we also merged during the pandemic. So we could not really meet. We could not even bring our people together, which we usually would do in a merger. So it is very important that there is a level of trust and that we know each other. And this, of course, helped us a lot here.
ALAN 7:11
Excellent. Now, are there any specific elements of yReceipts technology that we have successfully incorporated for our clientele in the more developing markets of Southeast Asia?
PHILIPP STEGMANN 7:23
So basically, the beauty of this merger is that we are basically using the exact same technology in a high street luxury fashion store on Fifth Avenue, as we are using now in an independent small mini market in Kalimantan. So we have one technology platform in the end, which allows retailers of all sizes, of all scales, to work with data in a better way. And also, on the other hand, actually, we are also of course, bringing our core technologies; the yReceipts, technology and experience we bring to independent merchants here in Southeast Asia. But we are also bringing the Big Data expertise and analytics expertise to our customer base in High Street retail in other markets. At the same time, we also know that the technology is the same. And that's great. That makes the whole thing very scalable. But of course, our solutions layer on top is highly customised, because we know that a store assistant in the UK has a different behaviour and different expectations than the merchant of a mom-and-pop store in Indonesia. Or a CPG brand has other experiences and expectations. So we're using the same technology. It's fully integrated. But we are building unique solutions and propositions on top,
ALAN 8:36
Truly unique because I'm very much used to inviting guests on who have built companies that they claim to be the mirror image of a company in China or the US. But in this case, in our very DNA, we have two different companies but which are very symbiotic with each other.
PHILIPP STEGMANN 8:54
Most of the startups that I observe right now are helping merchants to become more efficient. So they have maybe better ordering process through a B2B marketplace. They have maybe better bookkeeping, or help them to operate their store more efficiently. That's also very valid. But we are really focusing on the "sell-out" side of things. I think we are the only, or we are one of the few companies, which is really focusing on the sales performance part of things. So we are helping the merchants to sell more. And that's also our pitch towards merchants. We say "connect your store and grow your sales". The only thing the merchant needs to do is to instal a tiny little app on their cashier system. It works entirely in the background. It observes all the transactions happening in the store etc. It learns and enables the merchant to run the best price promotions, for example, which help to grow the sales automatically. All seamless. All automatic. All funded by the brands. And then we have certain other services we give to the brands which they currently don't get from others. We help them to learn about their sales performance. We give them benchmarks. For example, we give them advice and alerts if something's out of stock, for example. And we can easily connect them to value adding services that we talked before about, such as bookkeeping services or something, without the need to type in things manually. That's on the merchant side. And on the brand side, there's also I think, a very clear value proposition and a very unique proposition that we have for them. You said it in your introductory statement. The brands currently have very limited visibility into what's happening in this channel, They know what they sell in, but they don't know really, what is my sell out? What is the shopping behaviour like? What is the pricing in the stores? Where is an out-of-stock happening? What is my market share, actually? And they want to act on it. We call this "revenue growth management". In modern environments with big chains, etc, brands have access to more data. They can collaborate with the headquarters of a supermarket chain, to analyse data to react on this. In fragmented trade, there is no such headquarters or integrated data ecosystem. And eyos is now more or less the "virtual headquarters" for those shops. So we provide granular, real-time insights for the entire category, even on store-level, to be truly actionable.
ALAN 11:12
So Philipp, I understand. And I love the imagery of the virtual headquarters. Can you give us a real life example of this technology at work?
PHILIPP STEGMANN 11:21
Well, there was something very interesting happening just in the past few months. Maybe you have heard about the rumours going on in Indonesia that the "Bear Brand" milk could prevent a COVID-19 infection. This led to panic buying of this brand. Prices went up drastically. There were out-of-stock situations. Competitors' brands were overtaken easily, which has a long term effect for those brands, of course. So this happened at the beginning of June. We could see newspaper articles about this after two or three weeks. The traditional ways to measure such things would be to give insights after maybe one and a half months, because there's always a delay. There are many manual processes currently, with traditional measurements. We and our clients saw this already after one day. We saw that something unusual is happening. And that enables our clients to react with campaigns right away, to react with better supply, to maybe implement cross-buying promotions right away, and react with different mechanisms to protect their brand, etc, etc. So that's a good example how real time and granular insights can really help.
ALAN 12:27
I suspect that a large part of the Indo Tekno audience are milk drinkers. So I'm sure they'll understand that example.
PHILIPP STEGMANN 12:34
Another issue we solve for brands is the limitations they have in implementing targeted promotional campaigns. And that's usually a main marketing tool. A lot of CPG marketing budget goes into shopper and trade marketing. But due to the fragmentation and due to the multiple distribution layers you have with wholesalers, etc; it is not easy for brands to implement promotions (for example, buy two get 10% off promotion types), and to make sure it really reaches the shoppers in the end. So it always takes a few weeks to implement those campaigns. You never have data to measure the effectiveness usually etc. It's totally black box. So we entirely disrupt this process. And basically with the click of a button, brands can start a highly targeted campaign in-store, and even quickly measure the return on investment of this campaign. So basically, we solve three major problems for brands: 1) real time actionable, granular insights of the sellout, 2) targeted instal campaigns, and 3) ROI measurement of all marketing activities.
ALAN 13:34
Understood. Now Philipp, how do we make our money?
PHILIPP STEGMANN 13:37
it's important to know that merchants do not pay anything at all. It's entirely free for them. We are in the end a data company. A data platform. So, every use case we create with the data; it could be a report, it could be a promotion, it could be feeding data into a third party system; creates value. And usually the party who has the marketing budgets will pay to unlock this value. Usually it's the CPG brands or maybe partner-startups who are using our data, etc.
ALAN 14:07
Now Philipp many players in the broader space, admit that training the mom & pop, and moreover, keeping them loyal to a certain solution, can be very costly. Is this also a challenge for us?
PHILIPP STEGMANN 14:20
I definitely can see that it is a huge challenge for many startups out there. Luckily, it's not for us. We looked at this. And we also said the only way we can solve this is with automation. So we believe in automation. We don't want to change behaviours. We have designed a system in a way that is entirely seamless. It runs in the background, and the merchant doesn't have to do anything. It just works. Of course we are also improving further and we are also learning and the experience will also be better and better in the future. But basically, that's our philosophy. It works great and it is a big advantage compared to other solutions.
ALAN 14:59
Understood. Philipp, are there many other players across the startup landscape that we partner with currently, or that you feel would definitely benefit from partnering with us in the future?
PHILIPP STEGMANN 15:10
What we are building here is of interest for many, many other startups and apps. We are building a data ecosystem. I would maybe call it the "rails for independent retail" here in the market. We are building a digital network. We have integration into the cashier of each store, which enables and unlocks a lot of value for many other startups. We can help them to automate their processes and overcome the challenges we have just discussed with loyalty and with training of the merchants. But we are also at the beginning of this. So we are in some talks with some players, and we will definitely do more. And we are also always open for more ideas. And I think basically many startups can benefit from this. It could be payments. It could be the B2B marketplace for automated ordering. It could be loyalty systems, which are automatically applied. It could be FinTech, or maybe financial companies who want to use our data for better scoring of loans to merchants. It could be e-commerce platforms, who can onboard the merchants much quicker with automatic product and price listings, with the click of a button basically. So we want to establish this ecosystem and connect all the startups because in the end, it will really help the merchants and we want to support the merchants who play such an important role in the local communities.
ALAN 16:26
Clearly a number of very interesting partnership opportunities there. Now it was originally the good people at Unilever who introduced me to you a few years back as proof of their improving ability to see how product was being trafficked at the retail end points. What is our history been with Unilever in particular?
PHILIPP STEGMANN 16:44
Unilever has been, and still is, a great partner for us. I think it was back in 2017. We started to work with Unilever, when we joined the Unilever Foundry startup collaboration programme there, which was a great institution and team which connected Unilever teams of startups. And since then we have done various projects together in many markets also outside Indonesia, and also outside the fragmented trade. But for sure in this product, and this solution, Unilever helped us to realise our vision, and we are very happy that we really can create the value and the benefit for them, and sustainable benefit for them.
ALAN 17:20
And what other MNC brands do we work with intensively?
PHILIPP STEGMANN 17:24
Our solution is absolutely a solution for all CPG companies out there. We worked for example, with Johnson and Johnson, with Danone, with Beiersdorf, with PC Cousins and also other big international brand companies. And we're all solving the same problem for them. And we get really great feedback.
ALAN 17:44
That's great to hear. Do we work much with local Indonesian brands?
PHILIPP STEGMANN 17:48
Yes, we do. And I think the solution is, of course, also extremely relevant for local brands. For example, we worked with Mayra (Indonesian F&B brand) on several initiatives. And we can see that the fragmented trade is very important for local brands to also defend their position against the international brands. The thing is that the fragmented trade is not only a sizable market, but it is also very relevant for brand building. Households who start discovering new brands who maybe have more disposable income available, they usually discover brands first in their neighbourhood stores, in their local stores. So it's very important that you are present there, that you can measure, actually who is buying my brand, and that you start there already to build your brand loyalty. So that's equally important for MNC's, but also for local brands to stay relevant here as well.
ALAN 18:39
That is a great story. I remember following that over the 15 years that I covered China. The rise of the middle class and being able to help them when they were still in a third tier market on their way to the coast and beginning to form their brand affiliations. That was the most important investment that a lot of the brands made. Now Philipp, our current focus is on players such as independent grocery shops, which must be an absolute menagerie of devices; high-end and low-end Android devices, various POS systems and other types of electronics. Yet, we claim to be device-agnostic. We don't have to integrate with any ePOS devices. And we can work in any environment. How have you been able to do that?
PHILIPP STEGMANN 19:24
Yeah, absolutely. That's why we are so unique. Because we have "cracked it", and we have cracked it in a scalable way. We have bi-directional connection into every cashier regardless of the POS software or regardless of the POS hardware setup. And on top, we are an entirely software play. We are a software-first company. So we have even no hardware maintenance, Device Management needs etc. And we have full scalability. Of course it is our IP and forgive me if I cannot disclose too much about this. So far we have proven the scalability with hundreds and 1'000's of different people. setups. And we fully avoid dependency on other systems. And here also, we invest a lot in improving this further, because also the technology and the market is, of course, developing this further. But I think also the integration on the till, on the POS, is not the only unique part here. Another piece of our IP is what happens in our back-end. It needs a lot of logic to harmonise, to automate all the different data streams, which are all different. And I think we have done a lot of investment here to crack this. There's a lot of data science, modelling, AI automation. And so far, I have not seen any other company who's doing it at the scale like us. And that's also a key to unlock the value here.
ALAN 20:45
Understood. Now we've talked about how our solution allows the merchant to avoid stockouts, propose promotions for maybe inventory that's ageing, and otherwise help drive sales. Can you give us a real-life example of what quantifiable improvements the use of the eyos solution has created for the merchant and the brand owner?
PHILIPP STEGMANN 21:07
For example, we can see year-on-year growth of merchants who use our system, versus merchants do not use our system, of 15%. And given the early stage we are in, that's already a great result. And of course, if you have sales growth of this size, this of course also means that the "sell-in" is also higher, because they need more products to sell in the end. We can also see very high return on investment for our marketing campaigns, because they are really targeted. So it's not seldom that we see ROI's (return-on-investment) of 10 times on certain marketing campaigns. So we can really see good results. But of course, it's always very dependent on what category you are in, how promotion-sensitive your shoppers are in this category, etc. There are a lot of influencing factors. So the numbers are always very different from category-to-category or from brand-to-brand. But we can clearly see positive results. And that's also why many of our clients and merchants stay with us
ALAN 22:08
Understood. Now I assume that despite our best efforts and the success of our platform, a lot of transactions still remain untraceable, whether it is someone paying cash at the till, and no transaction being logged, or business leaking otherwise. How do we manage this challenge?
PHILIPP STEGMANN 22:26
I would say that's the reality of big data in the end. By the way, we also track cash payments. It's not just found on card payments or wallet payments. We track every transaction which is logged in the ePOS. But of course, some are not logged in the ePOS. It can happen. And I think that's the reality of big data as I said. You will never trace everything. But the sheer amount of data you have gives you a very good basis for understanding. You cannot expect that every communication of one person will happen only on Facebook. People still talk on the phone sometimes. But yet, the huge amount of data you have available gives you a very good insight for marketers. And usually you can expect that there's also a normalising effect. So you use the interactions you have there, you can measure very well. And this is also happening in our case. We are now tracking around 150 million shopping trips per year, just in Indonesia. And it's growing. And by this we are already the largest FMCG receipt database in Indonesia, actually. So we have a very rich database of information where we can see patterns and trends and can drive actions. In grocery at the same time, the problem I think is also not too big, because merchants also realise that they can only manage a grocery store with a growing assortment (for example 2,000 or 3,000 or 4,000 products) with the help of technology. So usually the ones who have a POS already, they're also using it. But of course there are exceptions, of course and this we need to take into account. So what we also do is we have implemented a lot of validation rules to identify which insights are really valid, which is biassed, where's the gap, etc. And where is potentially also fraud, of course. And there, it helps us that we have learned a lot during the past seven years of dealing with big data in retail. And we have there are a lot of validation logic. What we can also see actually, a very interesting effect, is the more added value we unlock with every receipt, the more campaigns we run, the more maybe extra services we give to the merchants, the more the merchants will use their ePOS. Because then they see the benefit from using it. It's not just tracking and sales, but it's also "Oh suddenly a promotion has come out," etc. So I think maybe this will also have an effect at some point.
ALAN 24:46
Yeah, the classic virtuous cycle. Now Philipp, what are our growth expectations for 2021 and 2022?
PHILIPP STEGMANN 24:53
We definitely have big growth plans in Indonesia, but also globally. We will grow stores. We will create more and more data use cases. We will onboard more CPG brands. The problem we are solving here is anyway a global phenomenon. It's not just happening in Indonesia. So we're starting in Indonesia. But it's not just happening in Indonesia. It's also happening in other Southeast Asian markets. It's happening in India. It's happening in African markets, in Latin American markets, even in developed countries in some specific retail segments. So fragmented retail is a "black box". We unload Big Data automation here at-scale. And this is our foundation for growth. So we will grow our networks in the countries where we are in. We're also expanding into other countries. We are investing further in our technologies. So all of our direction is about growth.
ALAN 25:46
Understood. Well Philipp, I learned a tremendous amount today, and I hope our audience did too. Thanks a lot specifically for so patiently describing Indonesia's fragmented retail industry structure, where we play in this complex web, and what efficiencies and other benefits we deliver to the ecosystem. Please do make sure you come back again to the Indo Tekno podcast to share the future innovations that you have on your roadmap, yeah?
PHILIPP STEGMANN 26:10
Fantastic Alan. Yes, I will. And thank you very much. I enjoyed it a lot.
ALAN 26:14
Excellent. We hope our listeners have enjoyed today's episode. As always, please consider sharing any feedback that you have about the Indo Tekno podcast with us. Terima kasih telah mendengarkan. Sampai jumpa lagi!