FRESH from raising another $200 million, Klook’s COO and co-founder Eric Gnock Fah spoke to Yeoh Siew Hoon about how this new round was not about staying afloat but growing, its strategy to build an eco-system of services, backed by a merchant model, and how this year will not be about highest revenue growth but investing in the future.
Amid the onslaught of bad news the announcement from Klook this week that it had raised an additional $200m came like a breath of fresh air to an industry struggling to breathe.
It was a sign that investors still had faith in travel and were willing to bet on strong companies that had proven their mettle through the most challenging crisis ever to hit the industry.
I asked Eric Gnock Fah, COO and co-founder, to rate how difficult it was to raise this round on a scale of 1-10. He hesitated and gave it a 5. “I was thinking back to those early days in 2015-2016 when no one understood what we were trying to do – that was hard as well. Series C, D, and D+ came easier. This time, you have investors who are very pessimistic about travel and some who are very positive.”
He called the fund raise “a testament that the travel industry is here for the longterm” and a recognition of the potential for domestic leisure business “which no one really looked at before” in the region.
In a hint that this will be a future direction for Klook, Gnock Fah said, “2020 proved that day-to-day leisure is a business, whether you call it travel or not, there is a market. Companies like Meituan, which sell day-to-day leisure, also sell travel, the lines are blurring and we are seeing the digitisation of the service industry.
“E-commerce has happened, it was accelerated during Covid but the service industry, which is rebounding, is seeing digitisation.”
Gnock Fah has openly expressed his interest in the Meituan model, the Chinese Internet giant which started off in food delivery, and expanded into local services and travel. It’s a model that’s unique to China and has seen traction in Asia, with consumers willing to go to one place to buy local services, travel included.
“It’s not about staying afloat, it’s growth”
Asked if the $200m was about staying afloat or growth, he empathically said, “Growth. The last round, led by Softbank, was about staying afloat but this one is about growth.”
In terms of valuation, he said it is aligned to the 2019 Series D+ valuation – “over $1 billion”. Klook reached unicorn status in 2018. “It is a step back but it ensures we can chase growth.”
And with B2C business struggling and stumbling along with the virus across markets in Asia – one minute rebound, the next shutdown – it’s got its eyes firmly set on the B2B SaaS merchant model for the future.
“We observed in 2020 that there was increasingly more interest in how businesses wanted to digitize. And to my point earlier, the e-commerce boom has happened on the merchant front but the boom for service industry has yet to really take place.
“For the last few years, we and other players in the category have been pushing digitisation but more in the sense of online distribution. But it hasn’t really gone deep into how the merchants operate, and how they may even manage their own direct channels.
“They own the shopfront and most of these players are on social – Instagram, Facebook, TikTok – but they are not able to seamlessly connect with a transaction. I think this is going to become a stronger trend going forward.”
As he said this, the term “Shopify” came into my head – and that’s clearly where Klook wants to do – to help merchants run their own shopfront and manage their own direct channels.
Pursuing a hybrid model of store and merchant model
Digitisation of tours and activities of course is not a new space. Other tours and activities consumer brands have tried to develop a B2B track alongside a consumer facing business and this month, Taiwan-based KK Day threw its hat into the ring in South-east Asia. It announced the launch of Rezio “to bring streamlined workflow into more tours and activities businesses in the South-east Asian market”, and is running a series of webinars in markets this week to sign up agents for a one-year free trial.
I asked Gnock Fah if it would be hard to balance the interests between being a B2C brand and offering B2B solutions. Is it possible to do both well? After all, if Klook aspires to be a Meituan or superapp of services, wouldn’t that require all its resources and attention?
His thinking is, like Meituan, “we need a very powerful merchant solutions model to enable businesses to operate effectively in the digital channel”.
“I’ll draw reference to e-commerce – in e-commerce, the competitive edge is actually logistics, for example, Amazon and logistics. In the service industry, there’s no logistics so the edge is actually merchant operations and merchant solutions.
“We certainly recognise there are some merchants who want to manage their own channel more effectively, so we will extend those services towards them. If you look at Taobao, for instance, the merchants that are listed there see their store as being on Taobao, which has a powerful merchant system behind it. I would say that’s a model that’s slightly different from the US, and it’s that hybrid that we’re looking at.”
He remains optimistic about the B2C business although he acknowledges it will be a bumpy ride in the first half.
In markets such as Singapore, Hong Kong, Taiwan, China and Vietnam, its business was able to rebound even to pre-Covid levels “but now unfortunately, all markets are struggling even Korea. We do see that business is able to rebound when the Covid situation is stable”.
In Hong Kong, which is in the middle of the fourth wave, he said that it was interesting to see that domestic leisure was still holding up at levels higher than during the third wave “which means people are getting used to the situation”.
In Singapore, where it scored big with a marketing partnership with Singapore Tourism Board and became one of the five appointed distributors of the SingapoRediscover vouchers programme, Gnock Fah said it learnt the lesson of valuable partnerships and “working together to create that demand”.
“There was no demand before for domestic tourism and we became a lot more focused on product development.”
There is no doubt though that Asia Pacific travel has been hardest hit by Covid with air travel at 5% of 2019 levels, according to IATA, and Gnock Fah said that despite having handled the Covid outbreak well, it was ironic that inbound and outbound in the region was struggling because countries were stricter in opening borders.
The winner is the one who can identify the right strategic pillar to invest in
As for how much of the industry will be left after this, no one knows but he said the advantage is that because tours and activities businesses are not asset-heavy, they don’t get dragged down as badly “but if this thing lasts longer, it will be hurtful and businesses will have to turn towards local markets which some are reluctant to do because the price point is lower”.
One of Klook’s priorities for the year is striking the right balance between a global and local strategy. “With a team of just 1,000-plus people, that’s always challenging so right now it’s making sure people are settling into their new roles as well as the synergies between the local and central team”.
Its second priority is to look at new opportunities such as staycations which have done well in markets that had started to recover. “I think this product-market-fit needs to be localized into the other new markets, and how we can scale that.”
And circling back to merchants, “I think merchants did okay over the last 12 months but we’re starting to see some cracks around how they can really survive over the next 12 months. So for them to be able to go digital faster, they will have to reach out to a larger audience in a much more scalable way – that’s now becoming more key.”
When I asked him what kind of travel companies would survive 2021, he hesitated for a while and said, “I’m thinking about – who is able to invest in the longer term? In times like these, we’ll always look at opportunities that we try to capture right away, but sometimes those opportunities are short term.
“Right now, we can afford to say, we don’t need to worry too much about the revenue this year but what strategically makes sense and is here to stay. The winner is not the one that has the highest revenue growth in 2021 but the one that’s able to really identify the right strategic pillar to invest in.”
• All images credit: Klook
