E-commerce start-ups in SEA have had a big impact on the internet landscape. Let’s see which companies are making their mark and how they are excelling.
From new shoes and clothes, household items to groceries, e-commerce or online shopping has taken the region by storm. We can’t seem to get enough of it, so much so that retail spaces are starting to slowly fade into obscurity. However, the most interesting part about this massive shift in consumer behaviour is that it is being led by start-ups.
Led by brands such as Lazada, Shopee, Zalora and others, Google-Temasek’s eConomy SEA Spotlight 2017 report states that Southeast Asia’s internet economy is worth $50 billion, with the Gross Merchandise Value (GMV) of first-hand goods surpassing $10 billion, up from $5.5 billion in 2015. The Compound Annual Growth Rate (CAGR) over the past couple of years has been at 41%, which highlights the exponential growth of the industry spurred on by e-commerce start-ups.
Southeast Asia is also a mobile-first ecosystem, and e-commerce start-ups have been quick to jump on that. They accounted for 72% market share of mobile traffic – a growth of 19% in the past 12 months.
Read why SMS is essential to e-commerce in the region.
E-commerce start-ups dominating the region
There are a few players in the region that have multi-market presence. They were able to overcome the hurdles associated with localisation and increased customer acquisition costs, to gain traction across multiple markets.
Leading the pack is Lazada, a B2C Singapore-based startup backed by the deep pockets of Berlin-based Rocket Internet. Launched in 2012, Lazada sells non-niche products like clothes, household items, beauty products, technology gadgets and much more. This helps them cater to a wide base of customers. It dominated e-commerce in most Southeast Asian markets by being one of the first to attempt mass market expansion. Additionally, it had the funds and infrastructure to operate across borders, solidifying its brand quickly.
However, its position shifted when it ran of out funds in 2016, giving the Chinese e-commerce startup-turned-giant Alibaba the opportunity to swoop in with $1 billion in exchange for 51% of the company. This led to Lazada expanding its product line to include Taobao products, which are direct from Chinese online retailers. In March 2018, Alibaba injected another $2 billion into the startup. With the region likely to become the next battleground for the e-commerce space, it is likely Alibaba will continue to expand their presence in the region. They will face stiff competition from other regional players as well as global powerhouses like Amazon, who entered the region last year with the launch of PrimeNow in Singapore.
Shopee, another Singapore-based startup, is making waves in the C2C and the B2C market. Operating in Indonesia, Taiwan, Vietnam, Thailand, the Philippines, Singapore, and Malaysia, Shopee has taken up quite a bit of market share across the region.
Local e-commerce start-ups offer hyper-local options
Alibaba or Lazada and Shopee may have the majority of the market share in the region, but each market has its local competitors that will be giving them a run for their money.
With 22.1% retail e-commerce sales growth in 2017, Indonesia is a hotbed for start-ups. MatahariMall is the largest e-commerce platform in the country, offering a wide range of products. On top of the “traditional” e-commerce system, MatahariMall utilises the O2O shopping method (online-to-offline and offline-to-online). This method gives customers the option to pay, receive, and return products via Matahari Department Stores across the country.
Blibli entered the Indonesian e-commerce scene in 2009. With the backing of PT Bank Central Asia Tbk (BCA) – one of the country’s largest – the startup was able to scale up quickly, making it the first-established online marketplace. The platform sells everything from fashion items to electronics.
Local Filipino startup Metrodeal has taken a strong position in the Philippines, offering both products, as well as online coupons. This has helped them gain traction on both Shopee and Lazada in the Philippines and they are currently expanding to Indonesia and Thailand as well.
Challenges facing the industry
Even though growth continues unabated and analysts are bullish about the overall regional market, constant challenges remain in the industry. Competition increases by the day, hence the need for start-ups – as well as established platforms – to manage their operations efficiently and effectively.
A foremost concern is customer experience. From the get-go, e-commerce start-ups face the challenge of onboarding customers, so retaining them is even more crucial.
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In order to succeed, these start-ups use tools to streamline their processes – from customer onboarding to logistics and customer support. Considering that Southeast Asia is a mobile-first region, start-ups face the need to keep up with mobile technology innovations in order to remain competitive.
For their scale of operations, it is neither cost-effective nor efficient to rely on a manual text messaging system. Instead, major players in the Southeast Asian e-commerce industry rely on services that offer a robust communication platform. These services integrate messaging solutions and video interaction into e-commerce start-ups’ own platforms seamlessly, allowing them to automate SMS notifications and live video interaction support.
Often, they also offer Video Interaction for technical support. In addition to these features, a communications platform for e-commerce companies needs to guarantee high uptime percentages, security, and accessibility.
Lazada, for example, uses an automated SMS API solution to send SMS notifications to inform their customers when orders are accepted, processed, and delivered. By doing so, they give customers a sense of control over their purchase – they know what is going on at every stage. This service costs the customer nothing but can make the difference between a repeat customer or a one-off.
Tokopedia uses the same messaging solution to send SMS notifications. In addition, they utilise mobile messaging solutions for user authentication by sending a one-time password (OTP) and conducting promotions.
As with every technology-reliant sector, e-commerce is subject to constant change. E-commerce start-ups have been revolutionising the digital marketplace in Southeast Asia, and seeing how they are quick to adapt to change, they will continue to shape the landscape of the digital marketplace in the region.
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