Halal B2B ecommerce: an uncontested blue ocean

As a consumer of halal goods, a constant observation is that it is often challenging to find products that meet my expectation while travelling around. This also got me thinking that other Muslim travellers and local residents must have the same dilemma.

To give you a simple example, the Japanese government is currently aggressively promoting tourism in the Middle East. However, many tourist destinations in Japan simply don’t have the infrastructure, goods or services to support halal needs. For instance, restaurants are uncertain whether the ingredients used are halal certified. Questions such as whether the meat was prepared in a halal compliant manner further complicate the matter (apparently what makes Japanese beef so special is the secret fact that cows are fed sake and beer).

Huge market but several pain points

The global muslim population is currently more than 2 billion. In other words, nearly a quarter of the world’s population is Muslim and this is only growing further.

When the word “halal” is mentioned, the first thing that comes to mind is often food. The fact is, halal products also include drinks, medicines, and cosmetics. According to Thomson Reuters, the market size of the halal industry in 2019 is estimated at $3.7 trillion.

Despite the impressive size and potential of the market, the way buyers and sellers trade is still inefficient and traditional. They often establish links through traditional means such as trade shows, yellow pages, etc. After a completed transaction, logistics and payments services too are arranged via telephone, email or other old conventional means.

Not only is this inefficient, but the growth potential of buyers and sellers is severely curtailed due to asymmetry of information throughout the chain and lengthy repayment cycles.

Moreover, the existing halal certification system has several issues. The information regarding thousands of official, semi-official, and unofficial certification bodies around the world is quite limited. In many cases, it not only seriously affects efficiency, but also leads to losses for cross-border buyers and sellers.

A Malaysian food brand that we are familiar with shared with us some of the issues they face: First, all the raw materials purchased from different countries need to be halal certified in order to guarantee their own certification. However, these certifications are carried out by various different bodies. A lot of manual work goes into checking whether they are reliable, and whether they meet the requirements of the Malaysian certification body.

Many countries that export halal goods are non-muslim countries (such as Thailand and Brazil), while Japan and South Korea are also promoting halal food exports. Our friends from the Japan Trade Organisation (JETRO) have repeatedly told us that many Japanese companies investing in Southeast Asia feel that the process of obtaining a halal certification is cumbersome and unpredictable. Both buyers and sellers who already have a stable trade relationship are of the opinion that the entire process is very complicated and inefficient. For example, if a food factory in Bahrain imports ingredients from Vietnamese sellers, just adding a new ingredient requires the seller to provide a new certification.

Existing players and unresolved issues

Many saw the opportunity early and began tapping into the space in Malaysia. Since the time Mahathir was previously in office, Malaysia included the development of the halal industry in its national policy. The focus was to become the world’s largest exporter of halal food and to promote halal certification globally. Singapore and the Middle East too have a few smaller B2B halal ecommerce companies.

Our observation regarding all the players in the landscape is that the business aspects of these ecommerce companies are relatively at an early stage, and do not solve buyers’ and sellers’ pain points.

Buyers can also procure goods from large B2B platforms such as Alibaba and Amazon. However, these ecommerce giants have other focuses and lack the credibility to address halal requirements for certification of good and logistics.

Another challenge that persists is that big software houses such as SAP, Oracle, and the likes focus on rigid processes for large MNCs, and do not offer services to solve actual pain points faced by SMEs with halal requirements, who are then left behind.

HalalNode

Over the past few months, I have had several discussions with the team. After indepth research and understanding of the core issues, we decided to work together to build a new halal goods supply chain ecosystem. Our platform Halalnode.com is now online and has secured some deals.

We focus on solving four major pain points:

1. Halal certification. As mentioned above, certification of halal goods is a major pain point in cross-border trade. For many products, it is difficult to determine with the naked eye whether they are halal. Some examples would be yogurt, chewing gum, juice and other processed foods containing edible gelatin, which is processed from the connective tissue of animals.

This involves complex certification and systematic inspection: how to quickly verify that the supplier’s certification is reliable and effective? How to quickly complete a complex authentication process involving multiple parties? How to maintain the integrity and interoperability of certification throughout the supply chain?

Halalnode first ensures that the halal certification of all products are verified and valid, and the data is continuously improved during the process.

Apart from helping suppliers obtain cross-border halal certification, and provide transparency and traceability to buyers, we also plan to help certification bodies to manage information better. We have had in-depth interactions with major certification bodies in Southeast Asia, Japan, Korea, and South Asia. Two pilot projects will be launched soon.

2. Access to global suppliers. There still exists a gap between buyers and sellers. Buyers are looking to source new goods or diversify their sources; sellers are looking to increase their top lines by reaching out to more buyers both locally and internationally. Buyers often change their procurements needs and suppliers because of changes in product mix and season.

Most of the halal B2B ecommerce players mentioned above are limited to the local market and neighbouring countries regardless of their vision statement. Halalnode has screened quality suppliers in major exporting countries around the world, thus opening up major trade corridors.

3. Logistics. Logistics is also a major pain point in the halal industry. In addition to the logistics issues involved in the general cross-border trade, there are concerns specific to halal products. If the service provider is to comply with halal standards, they need to ensure that the places, equipments, personnel, and handling processes involved in the transportation of the products are effectively and honestly managed to preserve the halal nature of the goods.

Halalnode’s logistics partners are selected using strict standards. In the future, we also intend to conduct audit and certification of logistics companies so that buyers and sellers have our trust and assurance. Meanwhile, integrating logistics with specific trade channels has already achieved efficiency and cost control.

4. Payments. On Halalnode, buyers can directly pay online and use our partner services that ensure security of buyers and sellers. Moreover, we are actively communicating with financial institutions in several major Islamic countries and we have plans in the future to establish and adopt trade finance solutions in accordance with Islamic finance.

Realising our vision

Halalnode is an important project for Momentum Works. They have recruited some excellent team members with Rocket Internet experience who have a deep understanding and practical experience in ecommerce, supply chain, business development, product, and marketing.

It is true that the vision of this project is large and the complexities are not small. However, the project has made good progress in various aspects over several months. They quickly built a complete technical team to develop and improve the systems round the clock; the sales team swiftly established contacts with key sellers and buyers in major countries.

More importantly, in a very short period of time, they received support from various players in the ecosystem. The government trade promotion agencies and chambers of commerce from Indonesia, Malaysia, and Japan have given them great support and they also partnered with important logistics and payment players within this brief period.

It is widely said that the pain points of the halal trade industry have existed for a long time and everyone has long been expecting a system and a platform that can effectively solve these pain points.

The team hopes that through their concerted efforts they will turn hope into reality. As they continue to work hard to achieve our goals, they welcome partners from inside and outside the ecosystem to join them in building the next generation of global halal trade ecosystem.

Feel free to write to HalalNode at [email protected].