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Relationships with customers are also dangled for merchants. Chan likens ShopBack Go to the Starbucks app and loyalty programme, but in a form that’s accessible to smaller retailers. Larger chains could invest in their own app, but ShopBack hopes they’ll tap its platform to reach new customers and their existing base by offering deals. Brands can also hop on, as with the online product, with incentives if users buy their products through specific retailers.

Both Chan and Chhor—the ShopBack investor—admit the theory is still to be proven. But they see potential for expansion to markets with high consumer spend and a propensity for savings. If successful, ShopBack Go could massively grow revenues.

Offline on hold

ShopBack’s international operations continue chugging but its offline programme, ShopBack Go, is on hold during the outbreak. That applies both operationally in Singapore and for market expansions, which Chan said had been planned for this year.

ShopBack is currently in the process of signing up mobile wallet partners, having landed Visa payWave and Mastercard PayPass on launch. The strategy is to extend the benefit of cashback offline by allowing users to link their favourite payment methods to their ShopBack account.

Payment companies don’t make revenue through ShopBack Go. They are incentivised to build a direct relationship with their customers, who typically interface with their bank. That could present opportunities to sell in other services, or simply increase engagement with existing products against competitors.

“E-commerce is just 2-10% of retail. The real market is offline.”

SHOPBACK CEO HENRY CHAN

Other future monetisation strategies could include targeting advertising to brands. This would see ShopBack promote links to brand’s websites in exchange for money upfront and on condition of sales.

In response to lockdowns, ShopBack is currently “thinking of new ways for merchants to reach consumers” remotely using its platform, according to Chan.

Moving up

E-commerce in Southeast Asia is forecast to grow to $153 billion in 2025 from $38 billion in 2019, according to a report from Google, Temasek and Bain. The figures pre-date the Covid-19 outbreak, but overall upwards growth bodes well for ShopBack and others that work with e-commerce platforms.

By virtue of its recent funding, the company isn’t on the hook financially. “The answer to the pandemic isn’t just to raise money, but to get your house in order,” Chan said. The new cash, though, may allow it to enter other people’s houses, too.

“I strongly believe they can weather this virus situation,” said Willson Cuaca, co-founder of East Ventures, a Singapore VC that invested in ShopBack at Series A stage. “With their cash position, they are well placed to be acquisitive.” Cuaca added that ShopBack adapted fast at the beginning of the pandemic. “They’re aware of the situation and what is being hit.”

As founder, Chan said he’s had to learn the virtue of patience. The deal with Temasek, for one thing, took 18 months to come to fruition. With the business in hibernation across some segments, the new test is being in the right place once Asia’s economies reopen.

RateGain culled and analysed data from its platform for more than 135,000 hotels across India, China, Singapore, Thailand, Malaysia, Indonesia, and the Philippines. It also shared data on over 900 commercial airlines in partnership with OAG, an aviation data intelligence company. The data is divided into two periods—January through the first week of May this year, and the same period last year, with an equal number of samples taken for both periods.

Buckle your seatbelts

While airlines have suffered in general as travellers shelved their plans, flight schedule data mapped out by country show some larger patterns.

This covers both international and domestic commercial flights in each country, irrespective of the carrier.

The sharp drop in India and the Philippines is reflective of the sudden ban on flights. In India, international flights were suspended from 22 March, while domestic flights were suspended two days later when the nationwide lockdown started. The last week of March, therefore, shows a 68% plunge in scheduled flights as compared to last year.

Similarly, in the Philippines, on 16 March the government said it would stop issuing visas and placed a blanket ban on incoming foreign visitors of all nationalities. Filipinos travelling as tourists were barred from leaving the country. This resulted in a 31% drop in scheduled flights that week. Both domestic and international flights in the country are suspended until 31 May.

Singapore is an interesting case since all flights taking off and landing in the island nation are international flights. As other countries—notably China—started closing their borders in early 2020, Singapore saw a steady drop in scheduled flights. The drop accelerated in late March, when Singapore Airlines said it would halt 96% of its flights.

Transit is a huge business for the country’s national carrier, Singapore Airlines. With that coming to a stop, schedules have taken a hit and the airline slumped to its first net loss in its 48-year history. The island nation’s Changi Airport also suspended operations at two of its terminals this month.

“Singapore’s strong position in connecting traffic has been impacted through Covid, but as travel restrictions ease, it will undoubtedly recover to its previous position of strength”, says Mayur Patel, regional sales director of Japan and Asia-Pacific for OAG.

But while the number of scheduled flights crashed, they did not go to zero in any country. Some carriers have ferried medical personnel or have been used to rescue nationals stranded in other countries. Some airlines also use passenger aircrafts for cargo operations, says Patel.

Aviation—“that sinking feeling”

In Indonesia, where the lockdown has not been as severe as in other countries, the drop in scheduled flights is a relatively tepid 25.9% for the week of 4 May—compared to the same period last year.

China, though, gives hope. Its flight traffic is picking up, albeit gradually. The country where the first case of Covid was recorded went into and emerged from its lockdown much before others. Still, as of last week, scheduled flights in China were down 32% year-on-year, largely due to little to no international air traffic.

Last November, Carro teamed up with venture capital firm Insignia Ventures Partners—also an investor in Carro—and gaming hardware firm Razer to apply for a wholesale digital bank licence in Singapore. Having the licence could help beef up Carro’s underwriting capabilities for automotive-related loans.

Tan told The Ken that Carro is also actively looking to apply for digital bank licences beyond Singapore, without naming any specific country.

Dealing with dealers

There is a blue ocean in the used car market waiting for new players like TiinTiin to dive into. According to Monteiro, used car dealers spend 85% to 90% of their time sourcing cars. Working with used car marketplaces offer these dealers unlimited access to inventory minus brokers.

Steven Soon’s car dealership Amcar Motors came across Carsome around when it was founded. “Carsome has an ongoing database for us dealers to access, and we can make up our minds on what cars we want to bid for. So it’s more transparent, because all the prices, car specifications are listed,” says Soon.

The only difference between a small and large dealership is their access to capital. We believe we have both supply and the product to help them forward and double their business. We have built our product to scale and localise to any market we think is suitable. The ambition is Southeast Asia but definitely Indonesia first, since it is 35% of the regional market.

ROLF MONTEIRO, CO-FOUNDER, TIINTIIN

It’s been a particularly tough time for dealers. In Malaysia alone, about 79% of used car dealers surveyed by Carsome saw their income went down while 32% reported zero income.

Although Malaysia is restarting its economy again with Eid around the corner, sales are still slow, notes Soon. The festive season is usually a peak period for automotives sales. But Carsome’s Cheng is not worried.

Based on its platform’s data, Carsome claims it saw about 70% in sales recovery since markets like Malaysia and Thailand started opening up in May.

The startup has also launched a support programme worth up to RM55.5 million (US$12.7 million) to help dealers rebuild their businesses and finances. It offers cash rewards when dealers purchase inventories from Carsome, credit lines to improve cash flow, and advertising support to drive sales.

Meanwhile, Carros’ Tan thinks consumers will still err on the side of caution in the coming months. “I think it will be a W-shape recovery—we will see a momentary spike but it will decline and stabilise before going back up. Primarily due to lack of availability of credit (through financial institutions) and the broader macro outlook,” he says.

C2B2C: a circuitous route

Beyond facilitating used car transactions, financing and insurance are becoming increasingly important verticals for used car marketplaces. With a huge pool of used car transaction data, these marketplaces become the key for banks to tap into for the used car loan segment.

“[The auto-lending scene in Southeast Asia is] huge. Indonesia and Thailand sell about 4 million cars [used and new] annually. Assuming an average order value of just US$10,000, that would be a US$40 billion potential loan market,” says Carro’s Tan.

A funding round for ZEN from an undisclosed Chinese investor fell through at the last minute in 2018, as per a source with knowledge of events. Deep in financial trouble, ZEN had to downsize its business. It exited several of its eight Southeast Asian markets and executed brutal layoffs

ZEN has since stayed focussed on the Philippines. The company offers guarantees selectively, and most of its properties are fully leased, giving it better control of the margins, said co-founder Boublil. Its SaaS product—alongside a revenue management service—helps hotel owners manage inventory and distribute rooms online without giving up their own brand. As a result, they don’t have to spend on sprucing up their property to join a franchise chain.

Been there, done that

The SaaS product enjoys a “special distribution” arrangement with online travel agent (OTA) Booking.com, which backs Yanolja, said Boublil. He added that the SaaS business has continued generating revenue during the Covid-19 crisis, but declined to divulge any figures.

But ZUZU offered the SaaS-plus-service model first. The model made sense as people no longer cared about the brand in the mid-to-budget segment thanks to OTAs, which provide crucial information like customer reviews.

Today, ZUZU has more than 2,000 hotels as clients, to which the startup has delivered an average 40% increase in online revenue, claimed co-founder Vikram Malhi. We could not independently verify the claim. ZUZU earns mainly by taking a cut of the revenue, which is why its business has been affected by the crisis. But because it doesn’t need to hire people to manage properties nor spend on minimum guarantees, “we were profitable on a unit basis [before the crisis],” he said.

Unlike ZUZU, ZEN may find it harder to scale its SaaS business because of conflict-of-interest concerns. “If I’m an independent hotel owner, how can I be sure that ZEN is not prioritising its properties over mine?” said an investor who asked to remain anonymous to avoid upsetting any of the players in the space.

Finding ways to cope

It appears that investors were right to worry about whether the OYO model, while scalable, was sustainable.

With revenue on a downhill slide, hotel chains, mainly OYO and RedDoorz, have been compelled to restructure their contracts with franchised hotels. They’ve pulled the plug on guarantees, claiming force majeure. Both have switched those contracts to pure revenue-sharing. “Everything we have implemented has been done as per our contract terms and in full accordance with the hotel partners’ support,” said RedDoorz’s Saberwal.

For wholly-leased properties, companies had to make concessions with hoteliers, getting them to waive rent, agree on a discount or defer payment due dates.

ZEN’s exposure to minimum guarantees was little, claimed Boublil. Landlords of half of its fully leased properties in primary market Philippines, as well as Singapore agreed to negotiated terms. The other half enjoyed high occupancy rates—when borders closed, Singapore had to play host to a large number of its stranded Malaysian workers. In the Philippines, a ban on all public transportation meant accommodation for workers near offices.

It all boils down to how rapidly the chains expanded. Following its India playbook, OYO grew at breakneck speed. Soon, RedDoorz, too, found itself growing at all costs to counter OYO’s aggression, with its sight set on an initial public offering, said former employees.

In contrast, ZEN, which had its share of stumbles back in 2018, has since grown more conservatively. Backed by South Korean motel unicorn Yanolja, it has kept its headcount lean and also diversified its revenue streams. The company’s war chest is one of the smallest among Southeast Asia’s hotel chains.

Total disclosed funding to date

OYO
US$2.4 billion; of which US$200 million was for Southeast Asia
RedDoorz
US$134 million
ZEN
US$23 million
ZUZU, which challenges the concept of franchising, is an outlier. The startup is present across six Southeast Asian markets, but has kept its workforce small and raised just about US$7 million to date. Unlike the hotel chains, the company does not deal with brand upkeep and guarantees. It solely offers independent hotels SaaS products and services to manage and grow their bookings—something ZEN also does. While its revenue has plummeted, ZUZU’s lean cost structure has shielded it from massive layoffs.

It’s uncertain when the menacing clouds hanging over the tourism industry will clear, but the players think they have ample cash to survive.

Though some may exit markets in the region. For good.

Hire fast, fire faster

RedDoorz and OYO’s problems didn’t start with Covid-19. Last year, after the WeWork debacle, RedDoorz introduced “performance-based” job cuts, affecting 10% of its workforce, according to a former employee.

OYO began a series of cuts by January 2020—first in India, and then markets like China and the United States. Little has been reported about what’s been happening to its Southeast Asia operations. We learnt, after conversations with former employees, that about 200 people in Indonesia and dozens in the Philippines were dismissed.

The sacking spree escalated once the pandemic struck. Many employees are outraged with the way it was executed. “They sent an email to those that were let go informing them of the decision and that was it,” said one furloughed OYO employee. “Those who were given salary deductions were not even consulted.”

Another OYO employee feels their furlough was as good as being laid off. “How do I support my family during that period?” OYO said the 90-day furlough period was based on its initial assessment, adding that it is “constantly evaluating the situation”.

In Vietnam, RedDoorz managers allegedly read out names and asked them to go to a different room. “They were let go on the spot,” said a former employee. In the Philippines, the layoffs were done over Zoom calls.

RedDoorz co-founder and CEO Amit Saberwal said the company had to implement “a number of hard but necessary measures to safeguard its business in light of Covid-19”. He added that RedDoorz rolled out the measures in phases:

Three different waves

Wave 1 (before 15 March):
Cutting marketing and travel expenses, senior management pay cuts between 15%-35%, hiring freeze, forfeiting variable pay, delay in appraisals
Wave 2 (after 15 March):
Work from home and social distancing initiatives, reduced working hours, temporary furlough leaves, laying off less than 10% of total workforce
Wave 3 (1 May):
Salary cuts across the board based on tiers of seniority, starting with 15% reduction