STARTUP

Leapfrogging or Launching Region-wide: What’s The Best Way to Expand Across Southeast Asia?

This travel start-up shares some lessons

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BY Ezra Ferraz - 24 Feb 2017

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PHOTO CREDIT: Getty Images

For start-ups in Southeast Asia, there seem to be two common approaches to launching and expanding. The first is doing a blanket region-wide launch. The second is launching in a single market, most often in a start-up’s home country, before leapfrogging from market to market to expand.

Travel start-up Tralulu, based out of the Philippines, shares some of the thought processes behind their own launch, as an example of how carefully start-ups and small businesses should consider their launch and expansion.

Tralulu connects foreign travelers with local guides who can provide them local travel experiences. After travelling in Vietnam and other Southeast Asian countries, Tralulu co-founder and CEO Andrew Huang Cua saw that local guides were undervalued and underpaid across the region, not just in the Philippines.

“In fact, five other countries have local guides and local communities that are in far more backward and underprivileged conditions than the Philippines,” Cua says, adding, “That’s when I realized that this dream cannot be just limited to the Philippines.”

As a result, Cua chose to launch simultaneously in the Philippines, Malaysia, Cambodia, Vietnam, Thailand, Indonesia, and Myanmar.

Apart from the social element, there was also a strategic reason to launch in this many countries at once. Namely, after studying technology start-ups, Cua found that those in the travel industry require a network effect across different countries in order to be financially sustainable. Travelers, after all, are likely to book experiences in a country different from their country of origin, and when they do travel, it’s often to multiple countries in a single journey.

“With a high user acquisition cost per traveler, it’s definitely more sustainable to launch in countries that are traveled together to be able to provide more value to every traveler,” Cua says.

Yet launching locally also has its own perks. In the case of Tralulu, they could have focused more on the domestic tourism market and operated at a lower cost for a start-up and left more room for mistakes. Thus, Cua is leading a blended approach.

“While we are simultaneously present in the other countries, we ensured that majority of our efforts are concentrated in the Philippines until we generate significant traction locally. Alongside this, we’ll sustain and grow the operations in other Southeast Asian countries simultaneously given adequate resources,” he says.

 

The pitfalls of a region-wide launch

This approach is not without its challenges. Many of the guides are not familiar with digital platforms. So when Cua and his team tried to recruit them digitally, they were met with skepticism.

To address their concerns, Cua and his team engaged potential guides face-to-face and country-by-country. “We built local guide communities, ran local meet ups for guides, and also conducted trainings to help educate them to get digitally ready,” he says.

The user side is fraught with its own issues. Since Tralulu offers local guides in more than seven countries, their travelers can hail from a variety of geographies. Cua and his team have to find these potential users in the right place at the right time. “Many travelers plan their trip and itinerary ahead of time, even prior to arriving at the country, so it’s important to reach them while they’re still preparing for their trips,” he says.

In an effort to do so, Tralulu has created digital communities for these travelers to help them resolve the difficulties of travelling around Southeast Asia. While Tralulu has gotten a lot of organic bookings here, the channel is not yet sufficient to keep the start-up sustainable. For 2017, the company is thus heading toward partnerships, content marketing, and growth hacking to acquire more users.

Cua advises other entrepreneurs in Southeast Asia to take a region-wide approach only if they can generate multipliers for the value they create by being simultaneously present in multiple countries.

“For dual marketplace start-ups like ours, having guides across these countries is a strategic route to give a variety of options for travelers and to generate repeat bookings for travelers who hop countries,” he says, adding, “The same network effect is applicable to start-ups that can gain similar network advantage.

Cua thinks the region-wide launch should be undertaken in all but the rarest of cases.

“However, this approach is not applicable to the majority of the start-ups out there given the risk involved and the early upfront cost needed, especially ones that require a hyperlocal focus,” he says.