The Natural Progression of C2C Business Models, Garena Shopee’s Venture into B2C

Written by: Cynthia Luo on May 22, 2017

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.

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