Vietnam, like most countries in Southeast Asia, is experiencing a rapid surge in middle class growth but at a rate faster than its neighbours. According to BCG, the ‘middle and affluent class’ is set to double to 33 million people by 2020 and earn approximately $714 or more a month.

Despite the slowdown of on-demand startups across the rest of the world, Vietnam’s developing landscape has been wide open for value-added services as more professionals in their late twenties and thirties move into their own apartments and pursue white-collar careers.

On-demand groceries and food delivery service MarketOi is one of few startups based in Ho Chi Minh focused on serving the increasing amount of individuals that can afford ‘status’ – expats included.

“It’s not only about being middle class, but also about showing that they’re middle class,” – Oscar Mussons from Dezan Shira & Associates.

eIQ talks to MarketOi’s partner, Nicolas Embleton, about how the company is tackling the ever changing market.

Southeast Asia’s “hip food scene”

The current “food commerce” startups in Southeast Asia – foodpanda, UberEats, honestbee, HappyFresh, etc. – are either delivering hot meals or groceries. MarketOi, founded by French entrepreneur Germain Blanchet last year, actually does it all.

Placed orders are fulfilled within an hour or less as separate in-house riders are based in each of Ho Chi Minh’s districts.

MarketOi “Hunger Games”-esque homepage

“Customers can order a pizza from a restaurant, a croissant from a bakery and a coffee at Starbucks within one order. We try to optimize the route by estimating cooking and preparation time, and sorting out the pickup order so that it makes sense in the delivery chain. The food has to be hot at arrival, and if it’s impossible, the customer is always notified in advance,” says Nicolas.

“MarketOi is a service, we have to do the best to make sure our customers get what they need.”

The company currently has 40 official restaurant and grocery store partners, with over 50 unofficial partners undergoing a trial period that typically lasts three months. MarketOi aims to reach 100 official partners by the end of this year.

“We onboard brands first to test their demand during trials,” says Nicolas. “If the feedback is positive, then we sign them as an official partner.”

Foreigners’ satisfaction about economic aspects in Vietnam and Japan. Longer lines indicate higher satisfaction. Graphics by HSBC

Today, 80% of MarketOi’s user demographic are expats and 20% locals.

On-demand food is notably popular among the stream of expats living and working in Ho Chi Minh thanks to the great “work-life balance” as reported by HSBC data.

“MarketOi is still growing, and since the founding team are foreigners ourselves, it’s easier to know what other foreigners want and become early adopters,” says Nicolas.

The platform services 500 active customers to date and carries out approximately 1,300 deliveries a month with $15,000 in monthly revenue. Since its launch last year, MarketOi has experienced 5% growth week on week.

The platform is also investigating delivery for things such as pet food and medicine, two areas where Nicolas sees potential.

“We essentially want to become top of mind for consumers when they need something in a short span of time,” he says.

As most service providers, convenience is key, but operating in a developing market like Vietnam is not without its challenges.

Scaling the on-demand business  

“The Vietnamese market is tough,” says Nicolas. “There’s a lack of brand loyalty and costs are high while margins are low.”

“Restaurants also feel the same pressure to fill seats in order to balance their high costs, but it can be tough in a city with low dining out preference for Western establishments,” says Nicolas.

“We offer restaurants a way to increase revenue without increased marketing costs,” says Nicolas. “MarketOi does the marketing and receives a commission for each partner order.”

It seems like eating out is picking up in Vietnam though, thanks to an influx of international brands but only for special occasions. The most common meal that the Vietnamese go out to eat is breakfast, with local noodle shops being the most popular option.

Only 7% of dine out destinations are at Western restaurants, including fast food chains McDonald’s and KFC.

Another interesting note is that more than a third of the company’s orders come through ‘chat app’, 30-40% from the website, and the rest from the MarketOi app. Not surprising as 9 out of 10 people access the internet through mobile phones in Vietnam.

Since majority of orders come in via chat, a MarketOi team is dedicated to answering customers and relaying orders to partners.

“Keeping the direct lines between us and the customer is important for an enjoyable experience but this system is impossible to scale because if our orders increase significantly, it will be difficult to manage the personal relationship with our customers,” says Nicolas.

He mentions that the company is currently working on in-house technology such as testing AI, processes, internal tooling and bots to help it scale.

What does MarketOi think businesses should know about Vietnam?

“Vietnam is a very ‘do it all at once, or not at all’ kind of country,” Nicolas observes. “Mass behavior is a thing here in Vietnam.”

For example, lemon tea shops were immensely popular a few years ago, and businesses filled each street with the same kind of shop, selling the same beverage and saturating the market.

This led to a fear of starting something new in Vietnam.

Government constraints are also a big hurdle for businesses that want to operate in Vietnam as noted by Raphael Wilhelm, SoNice.vn founder, one of Nicolas’s good friends.

“Paperwork takes time and the only way to speed up process is through local connections, which can be difficult to obtain for foreigners.”

“Sometimes, to get things done, you have to contact a friend of a friend in Ho Chi Minh,” says Nicolas. “It’s the way business happens around here.”

“Within the next year, we want to expand into another city in Vietnam and increase the speed of deployment. MarketOi’s advantage lies in the fact that the service is still very much needed here, but we are seeing a clear interest in other cities where it makes sense,” says Nicolas.

The MarketOi Team in Ho Chi Minh

Southeast Asia is undeniably mobile first and home to 854 million mobile subscriptions – the number of active mobile connections actually exceeds total population by a third.

And this is where Rebonics comes in. The holdings company based in Singapore owns second hand mobile marketplaces in Thailand (Mekaaa) and Indonesia (Laku6) to capture the growing demand for smartphones.

To understand more about Southeast Asia’s obsession with mobile, eIQ catches up with Mekaaa’s Head of New Market Expansion, You Teck Lam and Adirut Nithilerdviwat, GM of Thailand Operations.

Why used mobile phones?

“The idea for Mekaaa and Laku6 was born from the realization that Southeast Asians are very driven by the status of a mobile phone as it improves their quality of life,” comments You Teck. “Everyone has a mobile phone, but the emerging middle class cannot necessarily afford every upgrade.”

Mekaaa.com is a month old price comparison website that allows users to check the average asking price for a second hand Samsung or iPhone being sold on the marketplace. Browsers can then “buy” through the company’s Facebook page or LINE account.

Source: Mekaaa Facebook page

“For used products, it’s difficult to have a proper price comparison. Everyone knows how much the new iPhone 7 costs, but when it’s an older model, the lines become a bit more blurry,” says You Teck. “Our in-house algorithm calculates the average market price on C2C websites from a thousand sellers that are selling that day so they know they are getting the best deal.”

The website also allows users to trade in their old mobile phones to the Mekaaa office in Bangkok to obtain a discount for another product on the platform.

Launched in 2015, Mekaaa’s Indonesian counterpart Laku6 shares the same browsing functions, but allows users to buy directly through the website. 

It’s no surprise that price-sensitive Southeast Asian consumers would want access to a faster phone with more features.

Tackling a secondhand gray market

The duo noticed that many secondhand electronics purchases were happening offline at Bangkok’s MBK department store, well known for its wide selection of cheap electronic gadgets, games and underground DVDs.

But in an unregulated market, it’s often difficult to know how much a used item should cost.

“A lot of sellers increase their prices so the entire secondhand market has inconsistent price points. Not only do we bring the entire exchange online, we introduce dependable pricing as a form of regulation,” says You Teck.

Approximately 70% of Mekaaa’s products are sourced from MBK. The remaining 30% is from consumers themselves.

“Does the value proposition that we offer resonate with consumers?” says You Teck. “This is what we ask ourselves when observing each market. It’s important to any business, and a question that has led Mekaaa to a better understanding of Thailand’s consumer market.”

In Indonesia, Laku6 operates under the same principle, but currently, Indonesia is a larger consumer market for the company. According to You Teck, the Thailand team is currently trying to reach the same level of penetration here with Mekaaa.

Same concept, different strategy

“The idea from Singapore was that each country and team should have full localized control because who better else understands the market?,” says You Teck. “This is why we chose to have two separate names, because they are ultimately two different products.”

Localized knowledge means that Mekaaa knows where to source the products from such as stores in MBK.

To You Teck, this is one of the most interesting things about Thailand’s markets – making the secondhand mobile phone network transparent to help offline sellers offload their inventory to a new audience.

Although the concept is the same, the strategy varies in Indonesia to attract more potential buyers.

“Laku6 has an offline partnership with Samsung, so if a buyer is looking to buy a newly released model but can’t afford it, they contact us and we pick up their phone, then they pay a bit more to upgrade to a newer model,” says You Teck.

For example, a Samsung S6 Edge user can trade in their phone and top-up $376 (4,999,000 IDR) to get a brand new S7 Edge, where full price is $790 (10,499,000 IDR).

Majority of online sales and trades for used-items in Thailand are happening on C2C platforms like Kaidee or Shopee where Mekaaa also has a presence to reach customers beyond Bangkok.

“Currently, our sales are split 50/50 between Kaidee and LINE as people tend to come check the price on Mekaaa, then contact us directly via LINE,” says You Teck.

It seems that so far, Thai consumers value good deals much more than the two step process of buying a phone.

“Probably because Thais are used to the same process as buying from an Instagram shop,” comments Adirut. “Thailand ranks first globally for most online shoppers who have purchased a product directly via a social media channel.”

Currently, a significant portion of sales come from food stall sellers and factory workers who are searching for affordable phones. When asked where they may have heard about the platform, You Teck says Mekaaa routinely advertises on tech blogs, and posts on their Facebook page – a popular channel for bargain hunters.

While the company is not shipping out brand new phones, You Teck and Adirut wholly understand the importance of a good last mile experience for ecommerce.

“We work with a packaging supplier to create our own Mekaaa branded boxes. If they’ve spent money online, the package should feel like a gift,” says Adirut. “It’s not rare for one of us to accompany the delivery man to ensure the whole process goes well.”

This level of personalized service is not easy to find, especially when dealing with non-premium, secondhand products.

What’s next for Rebonics?

The plan is for Mekaaa to eventually become a fully shoppable ecommerce platform like Laku6 in Indonesia and market expansion into neighboring countries is also in the blueprint, but You Teck vows to fully succeed in Thailand first through better understanding of the market.

“A piece of advice I would give startups that want to expand beyond their home market, is finding local partners. This has been said before, but it’s so important. Find someone you are able to work with, a distributor you can trust, and most importantly, one who knows the ins and outs of your demographic, it cuts down a lot of time,” says You Teck.

Are online shops a fad?

There is an estimated 12-24 million ecommerce sites around the world of which, only roughly 650,000 generate more than $1,000 per year. While this may be an approximation, it does put in perspective how competitive the industry has become.

Some digital experts, on the other hand, see an opportunity. Arcadier, a Singapore-based company has developed a platform that lets businesses easily set up a marketplace online for a monthly fee.

Why? Because Kenneth Low, Arcadier co-founder and Chief Commercial Officer, is certain that exchanges from one person to the other, whether it be in marketplaces or offline, is something embedded in human DNA. His company is simply facilitating it online.

Fight for the single merchant

A textbook case to build a successful business is to find a problem and provide a solution as either a product or service. This was exactly how Arcadier founders came up with the idea to build a software platform for multi-seller marketplaces. It helps bootstrapping entrepreneurs develop their own ecommerce venture without any coding knowledge.

Arcadier started out in 2013 when the founders built customized marketplaces on a project basis. After working several years in PayPal during the eBay era, Kenneth and the other co-founder of Arcadier Dinuke Ranasinghe saw an opportunity for the provision of a marketplace platform enabling entrepreneurs to build their  “Uber for X” models.

Arcadier received inquiries from startup entrepreneurs, but a quotation scared off too many of them – no one had the minimum $50,000 to build an application. Kenneth says to build a minimum viable product for an online marketplace can cost around $500,000.

“We realised there was a whole market that was underserved. There were many software providers for building single merchant online shops cheaply and affordably, such as Shopify, PrestaShop or Magento and the big boys would go to Demandware and Hybris, but there was no commoditized product for cash-strapped entrepreneurs,” explains Kenneth.

“We couldn’t believe it. We were thinking, “Surely, Shopify would have done this!?,”” says Kenneth.

He explains that the back-end is much more complex setting up an online marketplace than for a single seller shop as it requires features such as multi-seller listing, inventory management for each of the sellers and split payment settlement.

Because existing players were all fixated on capturing the attention of single merchants, no one had invested in a platform for building marketplaces.

The hyper-localized hyper-niches

 Kenneth believes an online marketplace can create a win-win for sellers and customers, but Arcadier is not about helping others build the next Lazada or eBay, there can only be so many such global marketplace companies.

Instead, the trend is shifting towards hyper-localized and hyper-niche marketplaces, such as an Airbnb equivalent for female travelers in Asia or Christian travelers in Jakarta.

“Owners of these niche marketplaces never dream of being the next big thing, but they understand enough of the local market to know how it can work for them,” says Kenneth.  

Over 2,000 marketplaces spanning 45 countries and over 150 cities have been created using Arcadier’s platform.

Even without much spending on marketing, signups increase at 60% compounded growth rate month-on-month.

Arcadier operates on a software-as-a-service (SaaS) model charging its customers a monthly fee that can range from $0 to $399 per month – the free version is limited to 250 transactions per month. As the number of transactions increase, so does the platform subscription fee, but there are no transaction fees.

The platform is appealing as there are marketplace templates for selling goods (equivalent to eBay), booking professional services (similar to ServisHero), renting spaces (similar to Airbnb) and equipment.

In the recent years, Arcadier has gained a few competitors, a company in Finland called Sharetribe, another in Silicon Valley called Near Me,  and one two others, but Arcadier is leading in terms of sign-ups, asserts Kenneth.

While Arcadier is Singapore-based, 21% of all sign-ups are from US, 11% from the United Kingdom and 9% from Australia.

It also has users from India, Canada, Brazil, France, and Spain.

 “Our value proposition is to be the global leader in multi-vendor technology and our mission is to make sure we provide this technology to anyone, especially those who don’t understand tech,” says Kenneth. The tricky part is to make this technology simple to use, highly scalable and highly configurable, but Arcadier has got it covered.

Signup takes 5 minutes and the administrator’s user interface is very easy to set up the marketplace layout, what information is required from sellers, choosing languages and currencies of the marketplace, payments methods, etc.

The power of B2B

Kenneth gets passionate when speaking about how the trend of sharing economy is driving the growth of online marketplaces and not that much contributing to the single–merchant shops.

“Since the days of Agora in Rome and Grand Bazaar in Istanbul, marketplaces have always been the way people discovered things. A single merchant store isn’t sustainable – this trend is only now happening online,” argues Arcadier’s co-founder.

“Whatever you can think of, people build marketplaces for it. Marketplace for trading horses among owners, booking freelance DJs or belly dancers, these are some of the examples of what has been built using our platform,” says Kenneth.

He is also convinced that Southeast Asia in the long run will be the bedrock of ecommerce growth.

“The environment of trade is disorganized in countries like Thailand, Indonesia, Malaysia and the Philippines, which offers many opportunities for disruption.”

But the sleeping ASEAN giant has additional challenges of its own. Kenneth, a native Singaporean, counts language, regulatory systems and payment acceptance as the three biggest impediments to adoption of ecommerce and trading.

What does he believe makes a good marketplace?

Having seen a fair share of online marketplaces created, Ken shares his best practices.

  1. Own at least one side of the market

Online marketplaces always have the chicken and egg issue – buyers attract sellers and sellers attract buyers. If you don’t own at least one side of the equation, you should not be starting an online marketplace.

Entrepreneurs tend to think technology is the biggest hurdle for marketplaces while the biggest challenge is actually finding buyers and sellers.

  1. Know the market which you plan to serve

Not all B2B marketplaces are the same. Some industries require merchants (or sellers) to provide a letter of credit, some need vetting of merchants. So, be sure to know the existing workflow of the industry that you’re in.

Don’t use technology to change market participant behavior because that is impossible and you will fail. Make sure your technology works with the existing behavior, just automate it differently.

  1. Be patient

Building an online marketplace is not a sprint, it is a marathon. Don’t build a marketplace and wait for customers to come. You have to actively market it – know your customer acquisition channels and constantly manage them.

  1. Integrate with key service providers, not all

Many clients ask for an integration with all fulfillment, payment and other service providers, but that isn’t necessary. What you need is to find the key service providers in your vertical and integrate your systems with them. If it is SAP for accounting  or aCommerce for fulfilment, integrate it.

  1. Solve the trust issue

Trust between sellers and buyers is a fundamentally important part of building a successful online marketplace. Accept you will never fully solve grey market issue when some sellers and buyers decide to make the transaction offline and cut out the middleman’s (your) charge.

Customers still trade on eBay because they have buyer protection i.e. Airbnb has insurance for homeowners. Trust can be strengthened in the form of guarantees or you can use escrow services when funds are held by a third party until seller and buyer report a successful transaction. In any case, do think about how to encourage trust in your marketplace.

By: Aija Krutaine

Join the eIQ Insider Network for more exclusive content.

Company Factsheet:

  • Launched: 2013 (Operations in Thailand began in 2014)
  • Funding: Bootstrapped until Series A, US$15.5 million in total funding to date, investors include: Tripadvisor
  • Markets: Thailand (Bangkok, Pattaya), Singapore, Malaysia (Kuala Lumpur), Hong Kong
  • “A restaurant always makes more money with eatigo than it does without,” says Cluzel.

Funny how a company that raised over $15.5 million in funding and is backed by one of the largest names in travel, TripAdvisor, all started with a graph.

eatigo co-founder and Group CEO, Michael Cluzel, an economist by nature, shared with ecommerceIQ that he was determined to create a business that would be sure to add value to the market.

“What I noticed were the inefficiencies of airlines, hotels and restaurants,” shares Michael. “The global sit-down restaurant market is worth $2.6 trillion but restaurants operate at only 30% capacity and was the only stream being underserved, whereas hotels have always practiced yield management and airlines have to run at 80%.”

So how do companies fill empty airline seats, hotel rooms or unseated tables?

Discounts.

By anticipating or modifying consumer behaviour – in this case, eating outside the typical meal times to save money – returns that would otherwise not exist can be maximized. Enter eatigo, a restaurant reservations platform that offers discounts at off-peak hours to fill otherwise empty establishments.

Creating an ‘exportable business’

To date, the company has seated over 4 million people at 1,000 restaurants across the region and operates in Thailand (Bangkok, Pattaya), Singapore, Malaysia (Kuala Lumpur), and most recently, Hong Kong.

eatigo has also accomplished something not many startups in the region can say,

“Our LTV is bigger than our CAC so we have positive unit economics.”

“Every month I can decide if I want to invest in growth or be profitable, it’s a healthy business at its core,” comments Michael. “I wouldn’t invest my own money otherwise.”

But like most success stories, it didn’t happen overnight. The app actually had zero bookings for 2-3 weeks when it first launched.

“But it was fine, there is no shortcut to experience.”

“It took us two years to understand exactly what we’re doing to allow us to scale. We didn’t rush into it at all,” says Michael. “And that’s why the challenges that face us now are purely executional.”

“Think of an empty table as a perishable good – fixed costs are incurred, an electricity bill is incurred and contribution to an empty table is zip.”

By incentivizing patrons and partners alike to give some and get some, restaurants – the fixed asset owners – win, the consumer wins and the startup itself wins. There is profitability on every table.

eatigo app. Source: eatigo

Michael, an avid user of the app himself, says eatigo is open to partnering with anyone from McDonalds to Michelin, the only factor being the restaurant needs to have a good reputation and healthy foot traffic. Upcoming partners in Thailand include The Coffee Club and Wine Connection.

His steps to obtaining an exportable business? A lot of trial and error and consideration of these factors:

Market size/potential

  • Are we entering a sophisticated market or do we need to educate?

For an emerging market like Thailand, there isn’t much competition but penetration and understanding of ecommerce is quite low so it needs education. Sophisticated markets like Singapore means consumers are comfortable with paying with credit card online but is crowded.

Another question important to eatigo when looking at market potential:

  • Will the demographic be comfortable on mobile? 95% of bookings are made through the mobile app.

Product/market fit

  • All of Southeast Asia has a discount affinity and so,  

“You can’t make a non-discounted booking on eatigo, users will always pay at minimum 10% less and our partners must offer 50% off at some time of the day.”

  • Two eatigo alpha markets – Thailand and Singapore – both have an ‘eating’ out culture and spend a higher percentage of their disposable income on eating out than Germany.

The company also discovered interesting quirks about each market and tailored its UX to be widely usable across the region:

  • In Thailand, users like to browse, they don’t like to fill out forms or click through menus and they respond best to photos of food.
  • Singaporeans are cerebral and typically know which restaurant they want to dine at and they respond best to photos of the venue.
  • Malaysians are more impulse bookers and Hong Kong users like to dine in groups.
  • But across the different Southeast Asian markets, reservation habits aren’t too dissimilar as eatigo data reveals.  

Regulatory/legal framework  

Competitive situation

  • “The delivery market is a red ocean whereas total eating out spending is 8X bigger than delivery,” says Michael.

Startup ecosystem

If you look at companies trying to scale in Southeast Asia, it’s all flags, no troops. They open offices everywhere but 90% of their revenue comes from HQ.   

As the company grows, professionalization of the company – getting more efficient in processes and simply “growing up” as a business – is vital to sustainable growth. The founding team also has an average age of 40 and have all managed sizeable businesses before.

“We’re like a teenager now, we’re not nobody but we’re not a somebody yet – we have traits from a corporate business but corporate processes don’t work in a startup,” says Michael.

KPIs are a) time to market and b) time to meaningful revenue

“eatigo is not a marketing company, we’re a bottom-line company that is able to differentiate yielding and marketing.”

After only two months, eatigo shares that Malaysia and Hong Kong are hitting reservation levels that took Thailand and Singapore over one year to reach.

The new markets after two months already make 15% of total revenue.

But no company is without its own set of challenges:

“We’re like Uber and AirBnB in the way that we are the interface, it’s not a problem of demand, the challenge comes with the supply. The user wants the discounts so we need to deliver a section of good merchants. We will never have 7,000 merchants in Bangkok because  it’s not about ubiquity and once we hit 800-900, we begin changing bad ones and good ones,” says Michael.

“I can always invest money to get more users but there is no shortcut on inventory.”

A crowded food space

In the past few years, a number of food commerce startups have emerged to capture the growing appetite of Southeast Asia’s booming population. They include Offpeak, Hungry Hub, foodpanda, UberEats, etc. to name a few but eatigo isn’t worried, the company has never been about niche, it’s about eating out, relevant to everyone everywhere.

“eatigo’s moves have never been influenced by others – we do what’s strategically in our own interest. People think it’s easy to just copy business models but you can’t look from the outside and know our playbook.”

And what about the boom of delivery apps driving the ‘eating in’ culture?

“Delivery is need based and eating out is opportunity based – let’s go out because I’m bored and I want to be with friends,” explains Michael. “When people decide to eat, the choice to eat in or eat out has already been made, eatigo is there to help them discover where they want to go.”

“Delivery also creates strain – they tend to happen during peak hours when the kitchen is already full. 95% of our traffic happens when kitchens are empty.”

What’s on eatigo’s plate?

“Finish our roll out to be in 6-7 markets, prove scalability, establish ourselves as a dominant regional player and move into next round.”

“We’re in the business of changing human behaviour and to succeed, you need either a lot of time, a lot of money or you need a good reason,” says Michael. “We have the reason.”

Garena, a Singapore-based internet company, recently made splashes in the news as the tech unicorn, one of the few in Southeast Asia, raised US $550 million in funding. The fresh batch of investors include Cathay Financial and GDP Venture, who are supporting Garena’s aggressive push into Indonesia. The company also announced plans to change its name to ‘Sea’ Ltd., an acronym for Southeast Asia.

If the new name is anything to go by, it seems Garena is making big plays within the region this year – namely with its mobile-first ecommerce platform, Shopee.

The mobile shopping app reported more than 5 million downloads in Thailand since its official launch two years ago, and 25 million downloads in total across seven markets; Thailand, Singapore, Indonesia, Vietnam, Malaysia, the Philippines and Taiwan.

In an email interview, representatives from Shopee Thailand shared exclusively with eIQ that the platform achieved 43% MoM growth across Asia last year and reported over 3 billion in annualized GMV to date.

The company’s healthy growth can be attributed to the rise of mobile adoption in the region. Bain estimates 85% and 79% of online shopping happens on mobile outside of major metro areas in Thailand and Indonesia, respectively.

But with other strong mobile-first contenders and e-marketplaces in the field, notably Singapore’s Carousell, the company needed to innovate.

A shift towards B2C

Blackmores’ official brand store on Shopee TH

A glance at Shopee’s homepage indicates that the marketplace is onboarding brands such as phone maker Vivo and Blackmores, in addition to facilitating its normal C2C transactions. This move places the C2C-B2C platform in the same playing field with marketplace heavyweights such as Lazada and Korea’s 11Street that made its Thailand debut at the end of 2016.

“Shopee Thailand is currently focused on the expansion of our market segments, including having more corporate brands on the platform in order to strengthen our portfolio,” says Terence Pang, COO at Shopee.

With an already strong consumer base in Thailand, Shopee is heading down a path naturally explored by other C2C players:

  • Indonesia’s Tokopedia initially started as a C2C platform, but recently integrated official brand shops from P&G onto its platform.
  • Alibaba’s Taobao marketplace is a C2C platform but sprung out Tmall as a B2C subsidiary of the marketplace.

One reason that may explain the C2C-B2C pivot is financial change. Ironically, as C2C marketplaces grow in membership and transactions, the model essentially hits a dead end.

An example can be made from European car sharing platform, BlaBlaCar. As a C2C business, it relied on customer interactions to drive revenue but pivoted to B2C in 2015 after the founder realized that by facilitating transactions between customers, it essentially demoted the platform into a lesser role.

“We [now] manage not only the interaction but also the transaction,” said Nicolas Brusson, founder of BlaBlaCar.

Does this mean that C2C models are all essentially poised to adopt the B2C model?

Well, why not? An already existing user base can only grow with more product variety and marketing dollars provided by the brands while the marketplace itself is poised to earn commission.

But what companies should watch out for is having two stark businesses coexist on the same platform. Some marketplaces can be at risk of alienating businesses and established brands due to the fear of being placed next to hastily taken images of home appliances from an inexperienced merchant but Shopee has successfully separated the two.

 Characteristics of a strong C2C-B2C hybrid

“We are working to bring more personalization for Shopee users through product recommendations based on browsing history and also optimizing our chat feature so consumers have direct contact with sellers,” says Terence.

Shopee’s efforts to optimize its product features does not come as a surprise as Thai consumers highly enjoy chatting on social platforms and also connecting with sellers.

A study conducted by Forrester revealed that 44% of consumers surveyed said that having questions answered live while in the middle of an online purchase is one of the most important features of a website.

A communications platform also eases concerns about fraud and heightens trust during online transactions.

Personalized suggestions can benefit the marketplace itself because it provides a solution to the long-tail problem; more exposure to obscure items that are not very popular and do not drive revenue.

Recommending long-tail items to shoppers can provide higher return on investment for slower moving inventory.

By showing customers what they may enjoy, but might not necessarily discover on their own, marketplaces are able to heighten the entire shopping experience.

These tactics are already being used across the globe by tech titans such as Amazon and Netflix and it all seems to be working for Shopee Thailand as the company is experiencing over 1 million orders a month.

What does the future look like for Garena (Sea)/Shopee?

Sea is doubling down on the region and has publicly expressed intention to seize a larger chunk of the Indonesian market. Recent reports suggest the company is already performing in the top leagues.

The region’s largest market makes up 40-50% of Shopee’s transaction volume and the country experiences 200,000 daily transactions for physical goods, according to CEO Chris Feng.

As the region continues to thrive as an attractive retail ecosystem, Shopee’s expansion to a C2C/B2C marketplace will help it withstand the incoming tech titans and compete with the existing e-players for the attention of 650 million Southeast Asians.

Shopee Thailand team with Shopee University attendees, a workshop to help SMEs sell more efficiently on the platform.

Grace Sun Xia, Tencent’s Senior Director of Corporate Strategy and Investment, sat down for a highly anticipated fireside chat with Harry Wang, Founding Partner at Linear Venture – a VC that works with early stage startups in China – at Echelon Thailand.

I identify opportunities in other markets, and bring in companies to Tencent’s ecosystem,” says Grace, who spent time in Silicon Valley studying & working but returned to China to capture of its market opportunity.

What are her views on China’s ecosystem?

“In China, there is a large capital pool where a lot of companies can go big in a short amount of time.”

“China VCs are constantly looking at Asian markets – our secret is to get local and capable companies to work with us. We want to back them throughout the multiple stages of their business and we want to work with proven Chinese business models to help them succeed.”

What are her views on Southeast Asia’s paralleling ecosystem?

“Tencent started the process looking into the region two years ago,” says Grace. “There are more opportunities than challenges.”

Tencent led Go-Jek’s investment round for $1.2 billion in early May this year to strengthen its presence in Indonesia.

“Southeast Asia is a unique environment, the size is decent, the GDP is $2.3 trillion so technology and innovative business models can drive a large value increase,” says Grace.

Tencent’s Senior Director of Corporate Strategy believes a few business models can be successfully replicated in the region:

  • Share economy: it picked up great momentum in China and has good expansion potential in Southeast Asia.

China is in the process of transitioning from a manufacturing to a service centric economy and this is where “sharing” can drive the shift forward. But big corporations, regulators and the government need to work together to put boundaries around the sharing economy.

  • Tech infrastructure: payment apps need to be built to overcome the lack of credit card adoption.
  • Omni-channel: convergence of online and offline where brick and mortar stores can be used as fulfillment centres.

“In China, all the major ecommerce players have been investing in grocery stores and consumer electronics chains to gain access to a massive population that still shops offline.”

  • Diverse content & media space: China’s media space can facilitate anything from donations, transfer of virtual goods, content licensing, advertising, etc.

“Social platforms don’t have to be the centre piece of all services, Go-Jek is a good example as they are on the way to becoming a WeChat platform. Platforms with high frequency transactions can begin to monetize the traffic.”

“Content is king for all media companies in China. Those with the capability of creating IP (intellectual property) are able to connect with their fans, make income and own all rights to their content.”

Her final comments?

“China is know to be able to re-invent business models, but actually a lot of the new tech is coming out of China. How can anyone get sick of China’s market? There’s so much.”

#EchelonTH2017