Week in Review: SEA e-commerce claims another high-profile victim

By Karamjit Singh June 24, 2016

Region’s touted potential beginning to resemble siren’s call
iPay88 sees niche players taking it gradual as doing well

Week in Review: SEA e-commerce claims another high-profile victim THE South-East Asia e-commerce market is beginning to resemble the sirens’ call of Greek myth. In Homer’s Odyssey, ships were regularly doomed from sailing too close to the rocks, lured by their irresistible melodies.

In the South-East Asian context, replace ships with Internet companies and replace the siren song with the region’s ‘potential.’

A number of large companies, with Rocket Internet being the most aggressive, have collectively invested hundreds of millions of dollars into building up their e-commerce presence in the region, all in the belief that when e-commerce finally matures in a region with a 650-million+ population, they would have built a strong enough brand and market presence to capture most of the value.

This also stems from the belief (shaped by the US experience) that one or two players would likely dominate the market and capture around 80% of the value.

You may believe that yourself, but it’s going to be a lot tougher journey than even the most bullish analysts envision.

We are only six months into the year and already the e-commerce market has delivered its third major shock, with the news that the Patrick Grove-inspired, Australian Securities Exchange-listed Ensogo Ltd is withdrawing from the e-commerce market, shutting down its sites in six countries in the region: Indonesia, Malaysia, the Philippines, Thailand and Singapore, plus Hong Kong.

This comes after Rakuten first withdrew from the region in February. The second major piece of news was in April when Alibaba bought into Lazada, with the Chinese Internet giant eventually becoming the majority shareholder as well.

The long-held belief had been that the Samwer brothers-owned Rocket Internet would eventually sell its Lazada business to Amazon, if and when the US online retailer decided to enter the region. (By the way, don’t miss our story on Amazon reportedly on the cusp of entering Indonesia!)

That didn’t happen and it was ‘saved’ by Alibaba coming in. I say ‘saved’ because its five-year effort in the region did not yield the multibillion-dollar sale the Samwer brothers likely envisioned.

With a remaining 8.8% stake once the Alibaba deal is fully transacted, Rocket can now leave the hard work of reaping the potential from SEA’s e-commerce to Alibaba, which should take heed of the warning from Ensogo whose experience in the region has led it to describe e-commerce in South-East Asia as “a very complicated business.”

Keep all these lessons close to your heart as you go out and build your e-commerce business, and take note of the view that going niche is perhaps a better way than going big.

That is at least the view of Lim Kok Hing, founder and chief executive officer of regional payment gateway iPay88 Sdn Bhd.

“I am seeing local e-commerce merchants in South-East Asia focused on selling their own products, not aiming to take on the world, but growing cautiously – and are already profitable.

“These companies are growing in this region one country at a time, and are certainly more sustainable in their business,” he shares.

Clearly, there is value shaping up in going niche, but if you are still seduced by and want to play at the 650-million market ‘potential,’ good luck to you and watch those jagged rocks!

Meanwhile, with just over a month to go before DNA’s What's Next conference, don't forget to get your tickets ‎and come listen to ‘old economy’ tycoon Vincent Tan of Berjaya Corporation, Izzaddin Idris of UEM Group, and Sharan Valiram of Valiram Group talk about how they view and are dealing with digital disruption ... and much more!

And don’t forget to get the e-reader version of our Digerati50 Vol 2, which profiles the top 50 movers and shakers of Malaysia’s digital economy. The download buttons can be found at the top of this page.

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Previous Instalments:

Week in Review: More moolah for SEA startups, and Digerati50 2.0 is up!

Week in Review: Should the CEO be a chief pivoting officer?