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As the fastest growing industry in one of the world’s fastest growing markets, the evolution of Southeast Asia’s ecommerce landscape means new players and a lot of consolidation since last year’s first ECOMScape series by ecommerceIQ.

This year’s new edition of the ECOMScapes kicks off with Indonesia.

Expected to capture the biggest chunk of the $200 billion ecommerce opportunity in Southeast Asia, it’s easy to see why Chinese giants like Alibaba, JD, and Tencent have rigorously left their home-market to tackle Indonesia. What has happened over a span of only one year?

1. Chinese Companies are Hungry

Out of the total $3 billion investment put into Indonesia startups in the first eight months of 2017, 94% of the funding came from Chinese investors.

News regarding Alibaba leading a $1.1 billion investment in Tokopedia created excitement in the industry, especially because JD was rumored to also make a bid for the popular local marketplace.

Indonesia startups investment

Although that opportunity passed, it hasn’t stopped JD from participating in the funding round of Indonesia’s two other unicorns, ride-hailing app Go-Jek and online travel booking platform Traveloka. Chinese giant Tencent also joined the round for Go-Jek.

2. Natural Selection: A Race to the Bottom

As the market in Indonesia saturates, in both players and investment, it’s only a matter of time before natural selection weeds out the weaker companies (especially those with shallow pockets).

The past year has seen several ecommerce companies in Indonesia either shutting down or pivoting business models, and investors pulling out before stakes become worthless. And don’t think it’s only happening to the small fish.

Some cases? Alfacart and Elevenia.

Earlier this year, Indonesian convenience store chain Alfacart announced its decision to ditch the marketplace model after a continual lag behind e-marketplaces like Lazada and MatahariMall.

Launched in 2013, Elevenia is the joint venture of telco companies XL Axiata and Korea’s SK Planet. Despite claims that Elevenia has seen positive growth over the years, it’s a telling sign when both companies pull out and sell their stake to Indonesia’s conglomerate group Salim.

Even the ecommerce arm of large telco company Indosat, Cipika, shut down in June citing unprofitable business model and high cash burn rate as reasons.

Indonesia ecommerce landscape

With JD and Alibaba investing directly in local companies, it’s not a stretch to expect fewer names on the ECOMScape next year.

3. Marketplace Competition Heats Up

If this time last year Tokopedia was focused on growing its core C2C business, the Indonesian marketplace has long since been strong arming its shift to B2C as signaled by Unilever’s official store opening on the platform.

The move is already serious competition to Lazada, especially as the two ecommerce companies interchangeably grab the top spot in web traffic in Indonesia (which is probably why Alibaba invested in both companies).

Indonesia’s top C2C players have been moving into the B2C space i.e. Tokopedia. Traffic of ecommerce websites compiled by ecommerceIQ. Find more here.

Sea’s backed Shopee has also opened its platform for brands as it launched Shopee Mall that claimed to offer over 500 brands.

The shift from C2C to B2C is a natural progression as companies attempt to increase revenue and leverage their already large customer bases.

4. Having Fintech is for “Cool Kids” But the Nerds Will Win

While payments still remain a pain point in Indonesia ecommerce even though multiple companies released their own e-wallets last year, the country and the region potentially, might finally have a real solution.

Both Kudo and Kioson are arming micro-entrepreneurs and business owners such as mom-and-pop shops in rural areas with their digital platform to empower them to act as the bridge between ecommerce companies and rural citizens.

The O2O (online-to-offline) concept clearly has some merit, as both companies attracted investor attention and made headlines in 2017. Kudo was acquired by Grab and Kioson raised $3.3 million as the first tech company to IPO on the Indonesia Stock Exchange (IDX).

Kioson during its IPO in October 5, raising $3.3 million. Source: Kioson.

Indonesian startup darling Go-Jek is also leveraging its millions of users by launching its own mobile wallet, GoPay, which has real potential to become the WeChat of Indonesia.

GoPay’s usability has improved from payment for rides to also allowing peer-to-peer (P2P) transfers and making the order of food, groceries, tickets, and beauty treatments extremely easy in one app.


Are we missing any key players? Let us know via Linkedin | Facebook | Twitter

Download ECOMScape Indonesia 2017 here.

Featured image credit: Martha Suherman

*Introducing the eIQ BrandData series that shares insights to different brand strategies online and how they’re performing on marketplaces across Southeast Asia in collaboration with data tool BrandIQ.

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Electronics is one of the top performing categories online in Southeast Asia, especially during the holiday sales festival period when pricier items are discounted.

The BrandData series this week takes a look at the top two electronic brands on Lazada Indonesia in the Laptop category – Asus and Acer – both of which have an official shop-in-shop on the marketplace.

The performance was measured based on each brand’s search rank for the top five most popular generic keywords for Laptop discovery (according to Google Keyword Planner). The keywords are:

  • Laptop
  • Gaming laptop
  • 2 in 1 laptop
  • Laptop Umum (General Laptop)
  • Laptop Travel

If a browser uses the above keywords to search on a marketplace, products from Asus dominate four out of the five queries and account for the majority of the top 10 results.

Laptop brands Lazada

Asus products came out as #1 in the search result of the top five keywords for Laptop category on Lazada Indonesia. Source: BrandIQ

What does this mean?

Although both brands have an official shop-in-shop on Lazada Indonesia, Asus may have the advantage over Acer by listing a wider product offering online.

On its official store, Asus offers 66 SKUs consisting of 45 laptops and 21 smartphones, while Acer only has 8 products listed on its official store.

Even by taking into account the numerous unofficial merchants on Lazada that sell Asus/Acer products, which brings the total number of products to 2,000 and 1,300 for Asus and Acer respectively, offerings from Asus are still almost double that of its competitor.

And this discrepancy might be the reason why Asus products rank better on Lazada.

Laptop brands Lazada

Why does it matter?

Brand performance on marketplace search ranks is important because almost 57% of Indonesians bypass search engines like Google to go directly to marketplaces to begin their product journey online.

Online Consumer Indonesia


HOW IS YOUR BRAND PERFORMING ON SOUTHEAST ASIA’S TOP MARKETPLACES? 

Deliveree logistics marketplace

Deliveree’s Group CEO Tom Kim and Group Head of New Product Nat Atichartakarn at Deliveree’s Jakarta HQ

The current state of logistics in Southeast Asia is often bemoaned as one of the main challenges holding the region back from its full economic development.

Alibaba founder and chairman Jack Ma remarked that with Indonesia’s geographical state, a comprehensive logistics network is needed to stimulate growth.

His assessment is also applicable to other emerging markets across the region.

But these types of infrastructural projects in the Philippines, Thailand or Vietnam is not an easy, and certainly not, cheap feat. Here are a few examples of current plans in the works:

  • World Bank estimates $500 billion is needed in Indonesia over the next five years to bridge the infrastructure gap
  • President of the Philippines, Rodrigo Duterte, proposed a $161 billion six year plan to improve railways and ports to connect the archipelago’s islands
  • Thailand’s government has also started 20 infrastructure projects worth $50.2 billion to improve the country’s current rail lines

This regional bottleneck has opened opportunities for startups to figure out the cheapest and quickest way to get a package from point A to point B.

Companies solving last-mile headaches for ecommerce companies have attracted a lot of investor money like Lalamove and NinjaVan with $100 million and $30 million funding rounds, respectively.

But a logistics technology company that recently raised $14.5 million is looking to tackle another problem.

“We’re interested in solving bigger, bulkier problems that sit further upstream from your last mile delivery challenges,” explained Tom Kim, Group CEO of Deliveree. “With marketplace technology, we want to fundamentally challenge the way companies approach first and mid-mile bulk logistics.”

Deliveree logistics marketplace

ecommerceIQ speaks with Tom and the Group Head of New Product, Nattapak Atichartakarn, to discover how the logistics company found success in Southeast Asia by helping businesses reduce costs for first and “mid-mile” goods transport and what they plan to do with the recent Series A injection from Gobi Partners.

Logistics but focus is on technology

Through the Deliveree mobile app and web marketplace, customers have access to screened qualified drivers of commercial vehicles to move their merchandise and/or cargo.

The company’s new marketplace model houses 15,000 commercial vehicles consisting of cargo vans, pickups trucks, small-large box trucks, as well as economy vehicles such as MPVs and hatchbacks on its platform — covering three metro cities in Southeast Asia; Bangkok, Jakarta, and Manila (the company operates under “Transportify” due to a trademark issue in the Philippines).

Having started with serving end-customers, the company realized in order to grow its business, it had to focus on serving corporate clients.

“The bread and butter of our business is goods, merchandise, and cargo — bulk movement from outer provinces to warehouses in the cities, factories to distribution centers, and distribution centers to retail stores, or what we call modern trade,” explains Nat.

Now, nearing the end of its third year of operations, the company says it is close to financial break-even in its core markets. Nat credits this success to the quality of technology and drivers that Deliveree provides.

The company’s tech team of 30 developers in Vietnam is responsible for building, managing, expanding, and innovating the company’s marketplace tech capabilities and solutions that focuses on businesses needs:

  • Batch booking toolsets for high volume customers
  • Flexible booking scheduling from immediate to two weeks in advance
  • Drop off package at multiple destinations up 10 locations
  • Real-time tracking of driver and package location
  • In-app chat between customers, drivers, and customer support
  • Cash on Delivery and original document return services
  • Contract logistics option for businesses that need dedicated resources
  • Full commercial insurance

In addition to targeting SMEs, Deliveree also partners with transportation and logistics companies without their own technologies to connect them to new customers on its platform.

“People think these big logistics companies own their whole logistics network, when in fact, many don’t. A lot of them outsource ground transportation elements of the business and they use us as a provider of ground transportation for bulk goods and cargo so we address the gap and needs of the industry,” says Tom.

Capitalizing on quality

Deliveree logistics marketplace

The company takes pride in the high quality of its drivers, achieved by imposing a high standardized screening process, something Tom doesn’t skimp on.

It’s easier to get into most colleges than to get into our driver pool.

“We only invite a third of the driver applicants to training — it’s less than the acceptance rate at the most universities,” says Tom.

Calling it the “best trained fleet on the market”, every single driver must endure six hours of in-class training, which includes customer etiquette, and pass a 50 question final exam with 80% score or higher.

The company also enforces additional training for drivers with low satisfaction scores and regularly do real-time quality checks with a mystery shopper.

While not the most scalable process, Nat says it’s a price the company’s willing to pay.

Growth without quality is more of a step backward for us.

With such high investment in human resources, is the company worried about “leakage” – the shift of user-driver relations moving off the platform?

“There will always be a case or two of customers trying to work with our partners directly, but most of them end up coming back to our platform. Why? Because one of the reasons they come to us in the first place is they don’t want to, or can’t, manage this specific part of the business,” said Tom.

“And with the added value we provide for them, I don’t see why businesses would want to even bother.”

Ride-hailing apps aren’t built for cargo

With the heated war between ride-hailing companies in the region, parcel delivery is one of the added value services that is being offered by Uber and Grab to capture a wider clientele.

But Deliveree isn’t worried.

“These ride-hailing companies have always been doing logistics but they haven’t been doing it right,” said Tom.

According to Deliveree, the services provided are not comparable as the requirements for logistics is radically different than the passenger business.

“If you’re looking at the value of delivery bookings in Uber and Grab, it’s probably not more than a few dollars. Our average booking value is more than 10 times the amount and at the same time, our resources and costs to support each booking are higher than what a passenger app would expend per booking,” said Tom.

Tom also pointed out the security risks highlighted by a recent ruling in the Philippines by the country’s Land Transportation Franchising and Regulatory Board (LTFRB) that banned any package delivery through ride-hailing apps accompanied without a passenger. The reason? Drug-trafficking concerns.

“Trust me, it won’t only be the Philippines that will apply this rule,” commented Tom.

Small ecommerce pie for Deliveree

With the current state of ecommerce in Southeast Asia where fashion still tops all categories in popularity and ordering large items like bicycles or washing machines is still uncommon, the pie for Deliveree’s business is not that big.

“Ecommerce is primarily a business comprised of small things, and we don’t move small things — we move big things,” says Tom.

But Tom believes the company will eventually grab their share of Southeast Asia’s ecommerce pie.

“Our company is not closely aligned with the ecommerce industry today because the items that people buy are still small parcels and it isn’t our specialty because of the challenging economic units,” said Tom. “Ordering anything and everything online is an evolution that will probably happen in the next over ten years or so.”

“This is when we (Deliveree) will likely play a much bigger role in the ecommerce value chain.”

Growing its current markets

With new funding from its Series A round, Deliveree is exploring some interesting growth plans.

The company hasn’t ruled out M&A to grow the business in key markets and although expansion to new cities and countries are in the cards, Nat said that Deliveree is more interested in growing the cities where it is currently operating at the moment.

Deliveree logistics marketplace

“Imagine if Asus, Lenovo, and Acer compete with each other in the tablet market in Jakarta,” said Tom. “When the sales start, there’s a limit to how far the competitors can go because they have inflated costs the further the consumers. If we can bring down the cost base and give them more margin latitude, the competitive playing field will force some of those savings into discounts, sales, promos, even lower everyday pricing and ultimately the consumer wins.”

Deliveree logistics marketplace

“These are the kind of big problems we love to be involved in solving,” concludes Nat.

commerce marketing

Criteo Exec Connect 2017 in Bangkok

“The question that needs to be asked is not for more channels but have we maximized our efforts in the current ones?”

This comment comes from Scott Minteer, VP of Online Marketing at LOOKSI (previously Zalora Thailand), during an executive roundtable held by Criteo Exec Connect last week.

The once popular question, “should I go online?” has long passed.

In a room filled with the region’s top ecommerce players, enablers and forward thinking global brands – LINE, Lazada, Agoda, Beiersdorf, Meiji, aCommerce, Orami, Konvy, etc. – the question has now become, “how do I maximize the returns on my existing ecommerce assets?”

How can I drive a higher number of quality users to my app, my webstore, my marketplace shop-in-shop to increase conversions?”

When the majority of retail’s biggest names are trying to reach customers through a desktop/mobile website, marketplace official shop, and/or dedicated app, it’s easy to get lost in the digital space.

This is where quality commerce marketing technology comes into play.

Companies with vast ad networks mixed with new age machine learning such as Criteo, one of the world’s largest commerce marketing ecosystems, exist to help growing businesses like fashion retailer ZALORA and booking giant Expedia capture the attention of Southeast Asia’s most relevant 200+ million digital consumers.

Commerce Marketing

Alban Villani (Criteo), Julien Chalté (LINE), Thanawat Malabuppa (Priceza)

ecommerceIQ chats with Alban Villani, General Manager of Criteo Southeast Asia, Hong Kong and Taiwan, to understand where the region stands in terms of marketing maturity, how brands can optimize online performance and how businesses can adapt to gain more from marketing tech.

But First, Education.  

There are multiple ways that a business can drive traffic to its ecommerce store – banner ads, search keywords, SEO-optimized content, etc. – but marketers need to first understand if they are utilizing the right channels for their market.

Is the business driving traffic to the best channels?

Alban believes there are a few changes that need to happen before retail can really take off in the region.

  1.     Ditching a conservative approach

“Smaller brands need scale and personalization to compete on equal footing with larger retailers. Sometimes all marketing effort is still placed only on desktop,” says Alban.

The desktop started as the main device favored by consumers to shop on but in order to reach the new generation of shoppers using various devices to browse through multiple platforms, companies need to capture much more information than the conventional statistics reveal such as age, gender, geographic location, etc.

MatahariMall.com, one of Indonesia’s largest retailers, used a Criteo specialized retargeting tool to discover an online visitor’s readiness to purchase by assessing factors such as consumers’ online navigation patterns and what they add to ‘shopping carts’. This increased the e-retailer’s advertising ROI by 900%.

Once a customer has been segmented, simple dynamic retargeting tools can then display the most relevant ads in real-time to them later in the purchasing funnel and local brands can leverage targeted marketing to capture relevant shoppers outside the walls of their own assets on third-party apps like Facebook.

Take for example, Joan is browsing on the Lazada app for a Maybelline lipstick on the brand’s official SIS (shop-in-shop) during her morning commute to work. In the evening, she accesses her desktop computer at home to look at vacation photos on Facebook when she notices an ad that shows her the same lipstick she didn’t purchase earlier in the day. She decides to buy.

https://www.youtube.com/watch?v=1vgAQvWZMzk

Businesses of all sizes are slowly beginning to realize that channels are all connected and marketing efforts should reflect the same by tracking cross-device and cross-platform performance.

  1.     Investing into a mobile application

“They [brands] are already making money on web, so they don’t spend too many resources on app,” says Alban.

Southeast Asia’s affinity for smartphones has caused companies such as Shopee and LOOKSI to adopt a mobile-first strategy to reach a wider audience. By building an app with strong UX and ads targeted at encouraging installs, they can directly send alerts and deals with loyal customers.

Central Group’s Scott commented that majority of the LOOKSI’s revenue came from its app.

Commerce Marketing

LOOKSI app advertising

“We build brand awareness through desktop so it’s still needed but the conversion rate is higher on the app,” says Scott.

The popularity of mobile apps in the region and performance marketing tactics like in-app retargeting by Criteo increased Zalora’s app traffic and sales transactions by 9X from September 2015 to 2016.

More than 4 in 5 Thai respondents find it more enjoyable and convenient to use a retail and shopping app over a brand’s mobile website – Criteo APAC Research

“The key to mobile success is keeping the retention rate high because even a 5% increase could grow the value of purchase from anywhere between 20 to 90%,” shared Ronen Mense, VP Asia of Appsflyer, during the roundtable.

“You can talk about the future and what’s going to happen based on future technologies like progressive web apps, AR, VR,” he continues. “But the most important thing to focus on is where your consumer is engaging with your brand and service today. If you wait until a new technology reaches critical mass, it will be too late.”

“The focus isn’t only on installs anymore, the key challenge for brands is encouraging repeat usage and improving conversions,” says Alban. “Very simply, it costs more to acquire a new user than it is to retain an existing one.”

A Real Marriage Between Online and Offline Data

“Thailand started to slow down in [retail] progress a year and a half ago. What we have seen is mostly consolidation, meaning there are fewer ecommerce sites and fluctuating churn.”

Less opportunity has led to an emerging hybrid model where brands and ecommerce sites must work together.”

What Alban is referring to is a symbiotic relationship where ecommerce platforms like Lazada, Konvy, etc., build tools to enable sellers to gain more visibility on its platform and sellers in turn, share consumer behavior data – what do they like to buy? Which products do they purchase together, what time do they like to purchase?, etc.

“Lazada wants brands to be more involved, we empower them through our platform and technology, while brands bring in their deep consumer knowledge,” commented Aurélien Pallain, EVP of Marketing at Lazada Group, at Criteo Exec Connect.

Although marketplaces are slowly developing in-house solutions to help its sellers drive traffic to their shop-in-shops, majority are still heavily dependent on off site re-targeting agencies to acquire high volumes of traffic by tapping into a large publisher network.

“Data sharing is necessary to help companies maximize their online performance, it benefits all parties and ultimately the consumers by allowing brands to reach them with relevant offers,” added Julien Chalté, Head of Ecommerce at LINE Thailand.

To optimize existing ecommerce assets is to optimize available marketing tools through data.

But in order to capture valuable data, structured systems need to be in place internally in a business and this is where Thailand’s traditional retailers and brands lack maturity.

Criteo has the capacity to utilize a brand’s offline database to reach a custom audience online, but very few players in Thailand’s retail industry have tech-powered brick and mortar stores or “clean, usable data” from offline purchases.

“Criteo uses first-party data, never the third party, to build quality product recommendation so clients use us as a discovery tool as well as a conversion tool.”

“We can take data from the brand that they have collected from their CRM, loyalty cards, and offline transactions and match it with our recommendation engines for O2O [offline-to-online] marketing but not many businesses have this type of information readily available,” says Alban.

How can this be fixed?

By holding more brainstorming sessions like Criteo Exec Connect and building more partnerships within the ecommerce ecosystem between enablers, platforms and brands, Alban feels positive about the region’s development and piquing interest from brands looking to improve existing marketing efforts.

Commerce Marketing

Criteo Exec Connect 2017 in Bangkok

“Smaller brands must tap into an open commerce marketing ecosystem and use machine learning to connect shoppers to the products they need and love. Criteo’s technology allows them to engage shoppers with relevant experiences on both retail apps and third-party platforms directly driving sales and profits.”

“There’s actually a quicker speed of adoption in Thailand than Singapore between brands and agencies. The big difference is in the average revenue per user (spend) but most brands are more interested in looking at market potential.”

And where else has a brighter potential than Southeast Asia’s online future?

Download the Report2017 Criteo APAC Research: App Commerce Goes Big in Thailand

THIS POST IS SPONSORED BY CRITEO

Despite its reputation as the next biggest ecommerce market after China and India, Indonesia’s playground has caused many players drop out.

Alfacart, an e-marketplace offering products from various categories, is the latest name in retail that has shifted strategy in order to remain in the game.

After more than a year operating as a horizontal marketplace, Alfacart has reverted back into an ecommerce channel selling products solely from its parent company, Alfamart – Indonesia’s second biggest convenience store chain.

The pivot has not only caused the downsized in the team and C-level management to resign but as well, all third party sellers.

What happened?

Alfacart’s beginning

Alfacart was first introduced to the country as AlfaOnline and built in 2013 when Alfamart realised the importance of having an online channel to expand its reach. The platform at that time focused on selling groceries and various daily necessities.

After three years and a lack of significant growth, the company decided to open its platform to third party vendors and increase their product categories to include items under Fashion, Gadget, and Lifestyle.

“Our digital presence needed to be transformed into full-fledged ecommerce to be able to win the market and contribute significantly to the group’s revenue,” said CEO Catherine Sutjahjo at the time of the transformation.

This pivot came along with a new name, and Alfacart was born.

Alfacart pivot

Alfacart portal before the pivot

To distinguish themselves from the other many horizontal marketplaces – Lazada ID, elevenia, Mataharimall, blibli, etc. – they introduced O2O (online-to-offline) by leveraging Alfamart’s offline network of over 7,000 stores nationwide.

Customers ideally could pickup and return their order at any Alfamart counter, which also widened their payments options to cash.

However, despite its efforts, Alfacart struggled to compete with the already established marketplaces. A quick look at web traffic ranks in Indonesia show that Alfacart hasn’t managed to come in the top five.

Alfacart pivot

Alfacart (purple line) traffic is seen declining in the last three months

Say yes to the horizontal marketplace?

Alfacart is not a lone case in Indonesia’s saturating retail space. Only a month earlier, Cipika, a  marketplace backed by Indosat Ooredoo – one of the largest telco providers in Indonesia – announced that it was shutting down its business.

Similarly to Alfacart, Cipika also evolved into a multi-category marketplace model by offering snacks and electronics in an attempt to reach more potential customers but called it quits after almost 3 years.

Alfacart pivot

Cipika’s shut down announcement on their website

The company’s reason for closing down?

“B2C ecommerce will take a long time to reach profitability,” admitted Prashant Gokarn, Chief Strategy and Digital Services Officer at Indosat Ooredoo.

Say no to the marketplace.

The landscape for B2C ecommerce in Indonesia is indeed crowded and becoming more so as big corporations and conglomerates scramble to back new ventures by pumping in millions of dollars.

Alfacart pivot

Indonesia’s crowded B2C space

The problem though is a lack of any distinguishing factors between these marketplaces as they all offer similar product categories, operate on the same models, and target the same people.

With the same people vying for the same slice of pie, one way to win the consumer is by offering heavy discounts — a strategy that hasn’t changed since the birth of ecommerce in the country 4-5 years ago and still yields the same little return. Another way would be to diversify.

Blibli is a good example of a B2C site offering new categories such as local Indonesian goods and travel through the acquisition of Tiket.com.

What’s important to note is that the playing field is about to get even more rough as notable C2C players like Bukalapak, Tokopedia and Shopee have also branched out to B2C by onboarding big brands like Unilever to their platforms.

Who will be standing at the end of the year?

Alfacart pivot

Alfacart’s C-levels: CCO Ernest Tjahjana, CEO Catherine Hindra Sutjahyo, CMO Haryo Suryo Saputro with Alfamart’s IT Director, Bambang Djojo (in red)

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.