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Here’s what you should know today.

1. Instagram’s direct-response Story ads are available for self-serve buys

Ads within Instagram’s Stories feed can prompt people to swipe up to visit a brand’s site or install its mobile app.

Instagram has officially started selling ads that can appear within people’s Stories feed and link to a brand’s site or app-install page in Apple’s or Google’s app stores.

Coinciding with the rollout of swipeable ads in the Stories feed — which is viewed by more than 200 million people daily — Instagram now lets advertisers set objectives for these ads, like whether a brand wants people to view the video, visit a website, install an app or complete a specified conversion event, for example, adding a product to a shopping cart on a brand’s ecommerce site.

The direct-response ads aren’t much different from the version that Instagram added to Stories in January. Brands can feature a single vertical photo or a vertical video that’s up to 15 seconds long as their ad, and they can target the ads using Facebook’s standard ad-targeting options, like people’s age, gender, location, interests and purchase history.

This could be very effective in Southeast Asia, considering how popular social commerce is in the region.

Read the rest of the story here.

 

2. Is Walmart’s new last-mile delivery program brilliant?

Walmart announced earlier this month that it was testing a new delivery method — one that has store associates making deliveries on their way home from work.

While the program is currently being tested at three stores — two in New Jersey and one in Arkansas — the system is an example of how multichannel merchants can further leverage their installed store base to compete with Amazon, its network of distribution centers, and a growing fleet of delivery options.

At a time when so many retailers have been closing their physical presence, this type of out-of-the box thinking needs to happen more with retailers. This empowers employees to make a difference that can count in supporting the company and their important roles. What else are retail experts saying?

Read the rest of the story here.

 

3. Why would Sea do its IPO in New York?

Sea Ltd, Southeast Asia’s most valuable start-up, is prepping for a US$1 billion initial public offering in the United States, a move that would be a major pivot for Southeast Asia’s rapidly expanding tech industry.

“For Southeast Asian tech firms, an overseas listing of this purported scale brings increased investor confidence in the region,” said Adrian Lee, research director at advisory and research firm Gartner.

The downside, however, is that a high-profile IPO such as Sea’s could “create pressure to satisfy overseas shareholders and dilute the focus on building up the core business in Southeast Asia”, Gartner’s Lee said.

Analysts and industry players argue that a listing in the US is the right strategy for Sea as bourses like Nasdaq are considered the best reference for technology IPOs.

“There is no better place to raise the kind of financing Sea requires than New York City, and that’s the simple truth,” said Justin Hall, principal at Southeast Asia-focused VC firm Golden Gate Ventures.

Read the rest of the story here.

 

4. Recommended Reading: The rise and fall and rise of beauty subscription boxes

With every Tom, Dick and, yes, Trump getting into the subscription box business, packaging and mailing curated goods to people on a monthly or quarterly basis sure seems like the big thing to do — which is surprising, considering that for a while there, the signs were pointing to the category reaching busting-bubble status, at least in the beauty industry.

Thanks to a few course-correcting changes, Birchbox managed to make some tweaks to offset its dip in new subscribers by modifying the brand’s loyalty program, focusing on Ecommerce sales, renegotiating contracts with some vendors to get shipping and printing costs down and reducing operating expenses.

“We had to shift gears quickly because we needed to prioritize profitability and take control, that was a great opportunity for us to press reset, dial a lot of things back,” says Katia Beauchamp, the company’s CEO.

Read the rest of the story here.

Amazon just had its greatest quarter ever. Revenues hit $29.1 billion versus the projected $27.99 billion, citing a 28% year-on-year growth. More importantly, it marked Amazon’s fourth consecutive profitable quarter, reporting $513 million in net income, the highest ever in the company’s history.

As a result, Amazon’s stock price peaked at a record $767.74. Over the last two years, Amazon’s stock has more than doubled while those of its traditional retail peers like Macy’s have remained flat or even declined. And this is just the beginning of Amazon’s growing success and decay of the traditional retail model.

A colleague asked me a few weeks ago which stocks I would invest in. “One, Tesla, and two, Amazon,” is what I answered. Little did I know he had regrettably sold his Amazon shares a few years back expecting it to decrease in value.

Why would someone want to invest in Amazon stock at such a peak price? Very simple. Amazon’s dominance and stock value will only keep increasing with the ongoing global structural shift from offline retail towards ecommerce. Ecommerce penetration in the US today is “only” 7.7%.

Can you imagine Amazon’s stock price when this number hits 50%? Never mind economic recessions impacting people’s purchasing power, America’s consumers – Amazon’s home field audience – will keep on buying even if that means borrowing more money from the Chinese.

ecommerceIQ, 10-year returns for major retailers in US

10-year returns for major retailers in US. Amazon stock beat the Nasdaq index by almost 20x over the last 10 years whereas traditional retailers’ stock prices have remained flat or declined. $1,000 invested in Amazon stock in 2006 would have been valued $26,993 today (unadjusted for inflation). Source: Google Finance, August 2016

Short-term, traditional metrics impede long-term strategic vision for traditional retailers

When speaking to traditional retailers across Southeast Asia about doing ecommerce, the question that always comes up in one way or another is, “What’s the Cost of Sales (CoS) for investing into and growing my ecommerce business?”. In ecommerce and the tech space, many of us are familiar with using metrics like customer acquisition cost (CAC), customer lifetime value (CLV), and return on investment (ROI).

However, the metric that resonates most with offline retailers is cost of sales, which is essentially marketing investment divided by revenues. It’s the percentage of revenues that traditional retailers allocate for marketing spend in their annual budgeting.

CoS for traditional retailers often hovers around the 5% mark, driven by legacy organic offline traffic and brand awareness. For ecommerce, especially during the first few years and depending on how aggressively the business acquires customers to grab market share, this number can be somewhere between 50-150%. Obviously, this is much higher than the number traditional retailers are accustomed to and, as a result, is often a major deal breaker for offline businesses thinking of moving into ecommerce.

Fortunately, CoS goes down when the number of SKUs online increase, leading to more organic traffic, higher basket size, and more frequent repeat purchases. In the long run, as ecommerce businesses are able to build up their customer database and find multiple ways to monetize it (more on this later), CoS will decrease and potentially be comparable to comfortable offline retail channel values. aCommerce internal data shows an example of a multi-category online retailer in Thailand starting at approximately 25% CoS and trending down to 5-10% at the end of year one and 5-8% by end of year two.

Unfortunately, most of the traditional retailers in Southeast Asia fail to adopt a long-term vision and never make the initial jump into ecommerce. The lack of talent in the region exacerbates the issue as many retailers have no choice but to put offline retail people into ecommerce positions whose mindsets aren’t wired to think beyond the next holiday season.

In year one, CoS is a whopping 30% but trends down towards 15% by the end of year two, indicating an alignment with offline retail costs in the long term. Source: aCommerce Internal Data, May 2015

In year one, CoS is a whopping 30% but trends down towards 15% by the end of year two, indicating an alignment with offline retail costs in the long term. Source: aCommerce Internal Data, May 2015

Controlling the last-mile: It isn’t about selling more physical products, it’s about who owns the customer

Traditional retailers often see ecommerce as just another store but online. This legacy mindset prevents them from seeing the grand scheme of things.

Unilever didn’t buy Dollar Shave Club (DSC) for $1 billion for better razors, it bought the direct relationship DSC has with more than 3 million male dominant members and the potential to sell them adjacent products and services. Rather than going through retailers like Walmart, Unilever can now go direct to its consumers with all the benefits including higher margins and deeper customer insight.

Alibaba didn’t buy Lazada as a distribution channel for more Chinese products, it bought the direct customer relationships and distribution power to bring in higher margin products and services such as payments and insurance.

It’s only a matter of time before Jack Ma brings his trojan horse Ant Finance and all its associated products such as Alipay (third-party payment platform) and Yu’e Bao (online mutual fund) into Southeast Asia. Alibaba’s foray into insurance through Zhongan and its recently announced partnership with AXA shows us a future where Alibaba can increase its average revenues per user through selling non-physical products online.

Xiaomi pretty much gives away its smartphones for free by selling it at close to bill-of-material prices. Their goal is to amass a huge user base and monetize through selling them peripheral products, plush toys, software, and online and mobile advertising. With over 170 million users as of 2016, Xiaomi has more users than Snapchat (70+ million) and is catching up to LINE (220 million).

The Procession of the Trojan Horse in Troy by Domenico Tiepolo (1773)

The Procession of the Trojan Horse in Troy by Domenico Tiepolo (1773)

Pure-play, Internet first retailers are bringing their game to traditional offline retailers

Traditional retailers still believe they have one unique advantage over pure-play retailers: their physical stores. All the hype and buzz about omnichannel retailing has been a ray of hope for the Macy’s and Walmarts of our world. Even as Macy’s shuts physical stores, it has been ramping up its omnichannel game by transforming the surviving ones into show rooms and mini-fulfillment centres for in-store pickup of online orders.

Today, the company no longer breaks out online sales in its investor reporting, arguing the lines have blurred between website and stores. Walmart, having missed the ecommerce boat, has doubled down on omnichannel as well, expanding its ‘buy online and pick-up in store’ initiatives to around 30 markets in the US.

Unfortunately, even that advantage is slowly being eroded as pure-players are quickly moving offline, not so much for distribution but more as an extension of their online brand.

“By opening stores, brands have increased consumer awareness and subsequent site traffic. These disruptors saw the Internet as a way to establish a proof-of-concept and access cheap capital before making the leap to retail.” — L2 Inc

Warby Parker has 12 retail locations across the US, with plans to open seven more. The same applies to Birchbox, the online subscription beauty retailer, which has a flagship store in SoHo in New York and is planning to open at least two more by end of 2016. Even Amazon launched its first physical store in Seattle in late 2015 with a second one planned for Southern California.

Online player Warby Parker has 12 offline stores in the US.

Online player Warby Parker has 12 offline stores in the US.

Contrary to traditional retail merchandising strategies, these stores typically go beyond the “big head” of products and focus on displaying as many product variations as possible, including “long tail” SKUs. The objective isn’t to sell in the store; the goal is to get customers to experience the brand and the products so they’re more likely to buy online.

“These stores carry little physical inventory onsite and are instead designed to help customers zero in on their ideal sizes and fits. This approach echoes that of the company’s website, giving every single item its own opportunity to shine.” — Erin Ersenkal, Chief Revenue Officer of Bonobos.com

It’s not hard to imagine Alibaba and Lazada opening offline stores across Southeast Asia to serve as marketing and branding channels. With the shortage of online and offline customer acquisition channels and increasing cost-per-clicks in emerging Southeast Asian markets like Thailand, Indonesia, and Vietnam, having your own proprietary offline channels provides a strong competitive edge over traditional retailers as well as online peers.

Debunking the omnichannel advantage myth for traditional retailers, pure-play, Internet first retailers going offline are seeing better store efficacy. Source: L2

Pure-play ecommerce going offline has better efficacy than many traditional retailers. Debunking the omnichannel advantage myth for traditional retailers, pure-play, Internet first retailers going offline are seeing better store efficacy. Source: L2

 

Pure-play, Internet first retailers opening offline stores see a significant lift in organic traffic to their websites. Offline stores are more than just another fulfillment centre; they’re becoming a proprietary branding and customer acquisition channel. Source: L2

Offline stores serve as a branding and marketing channel. Pure-play, Internet first retailers opening offline stores see a significant lift in organic traffic to their websites. Offline stores are more than just another fulfillment centre; they’re becoming a proprietary branding and customer acquisition channel. Source: L2

The role of ecommerce for traditional retailers

Traditional, offline retailers are left with two choices when it comes to ecommerce adoption:

1. Ecommerce as another store branch

Treat the online store as another physical store and benchmark it based on the same cost of sales metrics (Eg. 5%), or in Jack Ma’s terms, “Ecommerce as a dessert, not the main course.” Don’t expect hypergrowth with this approach due to short-term metrics ruling out any big, upfront investment. The long-term threat here is that brands being sold by the retailer will cut the retailer out and go direct to consumer themselves as they get the upside of higher margins, customer data, and transparency. Unilever’s move to buy Dollar Shave Club is to do just that, and razors are just the beginning.

2. Ecommerce as the channel to own customers

Use ecommerce as a scalable and cost-efficient channel in the long term to acquire and own direct customer relationships. Later, use these relationships to sell more products, both physical and non-physical, especially higher-margin products like financial services (insurance, loans) and advertising. By owning more customers, retailers increase their bargaining power vis-à-vis brands that increasingly take the option to cut out retailers and go direct.

Not all retailers in Southeast Asia are settling for ecommerce as just another store branch. Lippo Group’s MatahariMall is one example. With top-down support and a long-term outlook from John Riady, heir to the Lippo empire, MatahariMall.com is quickly becoming the number one competitor to Lazada in Indonesia. Moving beyond only retail, MatahariMall is also going into payments and financial services through a partnership with Grab. In Thailand, Central Group is stepping up its ecommerce game with the recent acquisition of Zalora Thailand and Vietnam, and Cdiscount Vietnam.

It’s evident that in order to survive, traditional offline retailers like Matahari, Central Group, or The Mall Group need to successfully reinvent themselves to take on the foreseeable onslaught of pure-play, Internet-only retailers like Lazada moving into their territory.

Traditional retailers also need to worry about online brands cutting them out entirely and adopting a direct to consumer model, something already bubbling in the works for brands like Nike. However, the best bet is on the smart retailers who can carve their own ecosystem, own customer relationships – most of which are increasingly digital, and monetize through a multitude of ways (eg. insurance, advertising, services) and not by peddling products at increasingly low margins. Then, and only then, will the traditional retailer as a distributor survive the disintermediation brought upon them thanks to technology. 

Don’t suffer the same fate as Circuit City.

By Sheji Ho

Share your feedback to @ecomIQ and @sheji_acommerce

Why We’re Heading Towards a Bloodbath and 4 Strategies to Avoid it

Being the new kid on the block means that ecommerce ventures in Southeast Asia have the luxury to learn from the mistakes of others from mature ecommerce markets like the US and China. It has been over 20 years since Amazon (1994) and eBay (1995) were founded, Jack Ma started Alibaba in his Hangzhou apartment in 1999, right before the Internet 1.0 bubble burst.

A lot has happened in global ecommerce since then, including the slow but steady march of Amazon, the quick rise and fall of daily deals and flash sale sites, and Alibaba’s blockbuster IPO in 2015. What’s next? This historical review creates the two frameworks, the Ecommerce Lifecycle and Ecommerce 1.0/2.0, to help predict the future opportunity of ecommerce in Southeast Asia.

1. The Ecommerce Lifecycle – How Ecommerce Models Evolve Over Time

There is a distinct pattern that has emerged from the more mature ecommerce markets’ evolution that offers a degree of prescience for ecommerce in Southeast Asia. This follows the trajectory of Classifieds and C2C to B2C to eventually Brand.com. The US went from Craigslist, eBay and Amazon to brand sites like Nike, J.Crew and Gap. China went from Taobao, Tmall and JD to the many standalone and marketplace brand sites, like Estée Lauder, Burberry and Coach.

Today’s Southeast Asia is following a similar pattern but at a much faster pace due to “1 to n,” horizontal progress and the resulting leapfrogging behavior. In our region, we have Classifieds (OLX), C2C (Tarad, Tokopedia, Shopee), B2C (Lazada, Zalora, MatahariMall) and Brand.com (L’Oreal, Estée Lauder, Adidas) all happening at once within a very short time frame.

The Evolution of Ecommerce Business Models in Southeast Asia

Figure 1: Ecommerce Lifecycle Model

LIMITATIONS TO THE MODEL

Local nuances give rise to unique ecommerce business models

eBay could only have been invented in the US because of its auction-driven model in a consumerist culture characterized by excess goods and plenty of hobbyists (think baseball cards and Pez dispensers). eBay didn’t work in China for many reasons, one being the auction model was not appealing to Chinese users who preferred to buy first-hand goods and to negotiate person-to-person via chat.

Tmall’s B2B2C model originated in China because of the bazaar-like, hustle and bustle shopping environments that many Chinese were used to in their offline world.

HOW SOUTHEAST ASIA ECOMMERCE IS DIFFERENT

Southeast Asia is a hybrid between the US and China

Lazada, the dominant ecommerce platform in Southeast Asia, is both an Amazon and a Tmall. Founded in 2011 by Rocket Internet as the “Amazon of Southeast Asia”, Lazada today gets 70% of its GMV from third-party, marketplace transactions, with the remaining 30% generated through “traditional” Amazon-style direct retail. Post-Alibaba acquisition, it’s likely that Lazada will follow the Tmall model and move towards a 100% marketplace with all the model’s inherent scaling benefits.

Compare this to Amazon, which traditionally used to be 100% direct retail but has been moving towards a marketplace model. Today, Amazon gets 59% of its GMV from B2B2C.

B2C, B2B2C and Brand.com all happening at the same time

In China, brands progressed from selling via Tmall as a stepping stone towards operating their own brand.com site. A case in point is Uniqlo, which started selling through a Tmall flagship store and then later added their own brand.com webstore.

In Southeast Asia, we see brands doing both at the same time, selling via Lazada as well as their brand.com stores, in addition through distributing through e-tailors like Central Online and MAP. This is driven by technology making it much easier to sell through different channels but also necessitated by the high degree of fragmentation in the ecommerce market. Consolidation is expected to happen soon.

Southeast Asia is mobile-first, C2C ecommerce is jumping straight into mobile marketplaces

Whereas in mature ecommerce markets desktop C2C still plays a pivotal role, in Southeast Asia the leapfrogging towards mobile is disrupting traditional, desktop-first marketplaces. Mobile-only C2C marketplaces like Carousell and Garena-backed Shopee are making aggressive moves against their older desktop counterparts like Tarad in Thailand and Tokopedia in Indonesia. With an estimated 85% and 79% of online shopping outside of the major metro areas in Thailand and Indonesia happening on mobile, it’s not surprising that companies like Facebook are also betting on mobile C2C. The ad giant recently launching mobile payments in Thailand where an estimated 50% of C2C transactions are happening on social networks.

2. Ecommerce 1.0 to Ecommerce 2.0: 4 Strategies to Avoid the Imminent Ecommerce Bloodbath in Southeast Asia

Southeast Asia is the next ecommerce gold rush. For this very reason, it’s also quickly becoming the next ecommerce bloodbath. We’ve already seen many casualties, especially in the B2C space of selling third-party brands. As we previously predicted, Rocket Internet’s Zalora had to sell their Thailand and Vietnam businesses for chump change to local retailer Central Group. This same year, Cdiscount Thailand, part of French retail conglomerate Groupe Casino, was sold for $31.5 million (28 million EUR) to TCC, a local Thai company that also owns the popular Chang beer brand. 

Ecommerce 1.0: Selling other people’s stuff to the masses at low margins

Ecommerce guru Andy Dunn adopted a strategy that allowed his business to stand a fighting chance in the Amazon bloodbath of the US.

“If you’re selling other people’s brands, you are competing not via a local group of competitors but with everyone. In this type of market, you might imagine having one large national winner. You might imagine that winner is ruthless about scale and cost, and is run by a visionary leader who with an extreme long-term focus. Such a company might not make real money for a long time — but when it does — it will be incredibly powerful.”

With Alibaba coming into the region through the $1 billion Lazada acquisition, it increasingly looks like ‘Alizada’ is becoming the big threat for other retailers in the market, both in the pure-play and omni-channel space. Expect the bloodbath to intensify and more consolidation to happen over the next few years.

Today, none of the B2C / Ecommerce 1.0 players in ASEAN have dominant market share yet.

Granted, Lazada has a headstart with an alleged 20% market share (2014) but this number pales in comparison with Amazon’s 60% in the US, Tmall’s 50.6%, and JD’s 51.9% (direct retail B2C market) in China.

ecommerce 1.0, The Evolution of Ecommerce Business Models in Southeast Asia

The Ecommerce 1.0 Goliaths

Over the next 5-6 years, Southeast Asia B2C will go through further consolidation to end up in a 1-2 player game

There is no better way to visualize the ongoing consolidation in Ecommerce 1.0 than with ‘search interest’ data from Google Trends. The graph for Thailand shows the rise and fall of desktop C2C and daily deals, the fragmentation in B2C, and the rapid ascension of Lazada.

google trends, The Evolution of Ecommerce Business Models in Southeast Asia

Figure 3: Google Search Interest Showing Ongoing Consolidation in Ecommerce 1.0

This is where things start to get interesting. Whereas Ecommerce 1.0 is a game of brute force and strength, Ecommerce 2.0 exploits 1.0 loopholes in many creative ways in order to avoid the zero-sum game against the likes of ‘Alizada’.

“This next generation of ecommerce companies is as much about what you exclude as what you include. It is a paradox that excluding some things takes more time than including everything. The new models are fundamentally — whether the merchandise is proprietary or not — about merchandising.” — Andy Dunn on Ecommerce 2.0

The Evolution of Ecommerce Business Models in Southeast Asia

Figure 4: Ecommerce 2.0 – Four Strategies for Avoiding the Bloodbath

Gilt, the posterchild of Ecommerce 2.0, rose from the ashes of the 2008 financial crisis with a unique business model that offered high-end luxury goods at a fraction of their original price through time-sensitive flash sales. One of New York City’s first unicorns at a point in time, Gilt later struggled as the economy recovered and brands no longer needed a distribution channel for clearance stock.

While Gilt played the pricing angle, others like Birchbox and Rent the Runway innovated on the product side by offering a unique shopping experience. Birchbox started the monthly beauty subscription commerce craze and inspired countless “Birchbox for X” clones. Rent the Runway is basically fashion on-demand by providing users rental access to high-end, designer fashion.

Ecommerce 2.0 in Southeast Asia: A glimpse of hope for aspiring ecommerce entrepreneurs?

With the Ecommerce 1.0 bloodbath in Southeast Asia still ongoing as we speak, a few entrepreneurs have realized that it’s futile to compete against the Lazada’s and MatahariMall’s of the region without deep pockets or any other strategic moat. Instead, they are focusing on emerging opportunities in Ecommerce 2.0 by positioning themselves in a unique way.

Proprietary Merchandise

Pomelo Fashion

Founded by the ex-Thailand Lazada founding team, Pomelo Fashion is one of the first Ecommerce 2.0 companies in Southeast Asia. Rather than selling other brands’ products with low margins, Pomelo Fashion has taken a M2C/D2C (Manufacture / Direct-to-Consumer) approach, focusing on building its own fashion brand and vertically integrating its supply chain, going as far as manufacturing its own clothing and apparel.

The Evolution of Ecommerce Business Models in Southeast Asia

Glazziq and Franc Nobel

Inspired by Warby Parker’s success in the US, Glazziq and Franc Nobel are applying the proprietary merchandise model in the eyewear space in Thailand and Indonesia, respectively. Glazziq adds a local spin by positioning itself as prescription eyewear for Asians.

The Evolution of Ecommerce Business Models in Southeast Asia

Sale Stock

In Indonesia, another startup has taken a cue from the Facebook and Instagram seller playbook, and scaled it 10x. Sale Stock, a fast-fashion startup based in Jakarta has taken a similar path to Pomelo Fashion, with vertical integration of design, manufacturing, and supply chain.

Proprietary Selection

Motif Official

Motif Official is a fashion retailer based in Bangkok focusing on proprietary merchandise and selection. Their ‘Motif Official’ label is designed and manufactured in-house. For their ‘Motif Select’ range, they select and curate minimalist brands from across the world. Motif’s ecommerce strategy eerily resembles that of Nasty Gal in the US, where founder Sophia Amoruso started the business in 2006 by curating vintage clothing sourced from second hand stores.

The Evolution of Ecommerce Business Models in Southeast Asia

“We are an online concept store specializing in women’s apparels and accessories; from our own in-house label ‘Motif Official’ to our ‘Motif Select’ range, where we curate the best pieces from brands all around the world to your everyday wardrobe. We believe in the concept of minimalism, with attention to details, shapes and silhouettes.”

Motif proves that you can still compete with the big retailers by focusing on a niche and dominating a category through curation. Many of the premium brands on Motif would never sell on Lazada, let alone Zalora.

Following pure play ecommerce companies in the US like Warby Parker and Birchbox who went offline to augment their brand, Motif also operates physical stores in Central World and Siam Discovery in the heart of Bangkok.

 

The Evolution of Ecommerce Business Models in Southeast Asia

Figure 5: Ecommerce 2.0, Global vs SEA Comparison and Opportunities

The Future of Ecommerce in Southeast Asia

Applying either the Ecommerce Lifecycle or Ecommerce 1.0/2.0 framework makes it easy to see where ecommerce in Southeast Asia is headed.

The B2C war will continue to wage for the next 4-5 years until some run out of money and throw in the towel. In China, this process took almost a decade with Tmall going from 0% to 50.6% market share from 2008-2014. In the direct retail B2C space, JD went from 15% to 51.9%. In the same period, previous leaders like Dangdang (16.2%) and Amazon China (15.4%) faded into irrelevance with 4% and 3.5% market share remaining as of 2014.

During this time, we will also see more startups and venture capital going into the Ecommerce 2.0 space. Ecommerce 2.0 isn’t new to Southeast Asia— many have tried to bring the Birchbox model into the region but failed due to the immature market. However, the next few years may be a fertile time as evidenced from the traction that companies like Pomelo Fashion, Sale Stock, and Motif are getting.

Does this mean we can go ahead and copy something like Gilt into Southeast Asia? It really depends. A model like Gilt needs access to old inventory of premium brands which in markets like Thailand and Indonesia are controlled by 1-2 distributors such as Central and MAP. This is the same issue that caused the downfall of Zalora in the same markets. Any Ecommerce 2.0 model launched in Southeast Asia will need to be customized for the local market.

Ecommerce in Southeast Asia is still relatively young, with only 1% of total retail GMV being generated online compared to 7.1% and 15.9% in the US and China. However, the region is already widely being touted as the next frontier of ecommerce opportunity, or the next ecommerce gold rush and recent research predicting the market to grow 32% year-on-year to reach $88 billion by 2025 (6.4% penetration), up from today’s $5.5 billion (0.8% penetration). As shown in our analysis, there are plenty of opportunities in ecommerce for those with deep pockets as well as those who adopt unique and local strategies.

“Don’t always go through the tiny little door that everyone is trying to rush through… maybe go around the corner and go through the vast gate that no one’s taking.” — Peter Thiel

By Sheji Ho

Share your feedback to @ecomIQ and @sheji_acommerce