It’s normal for someone looking to set up a business to look towards ecommerce. It’s a market that will be worth US$525 billion this year. Companies that succeed in ecommerce will rake in cash, like Rakuten and Alibaba are doing in this region. Is there still room for more players in this segment? John Wong believes so. He is running a regional fashion marketplace startup called FaveChic. The twist? The new startup brings in products from multiple marketplace sites in a number of countries, and helps shoppers avoid the hassle of counting in international shipping costs and currency conversions.
Singapore-based FaveChic curates fashion products from overseas marketplaces in Japan (like Rakuten), South Korea (like 11st), and China (like Taobao), and translates these offerings into local languages – so far it’s just English and Indonesian. FaveChic customers in Singapore, Indonesia, and Malaysia can browse and buy the products in their local currencies as if they’re buying the items from within their country, while in fact they’re shopping directly from overseas merchants. Customers can even get refunds.
“We facilitate the cross border payment and logistics so customers do not worry about overseas payment and shipping,” explains Wong. He has a decade-long entrepreneurial journey that began with starting Catcha, a regional internet portal, in 1999. He brought his company to the stock market, went through the bursting of the dot com bubble, and ventured into fashion retail as well as ecommerce. FaveChic is his latest baby.
Surviving the dot com bubble
“The four of us – Patrick Grove, Ken Tsurumaru, Nic Lim and I – graduated about the same time and we co-founded Catcha in 1999,” says Wong. It was a web portal like Yahoo, with a localized approach in each of the Southeast Asian countries where it operated. The team offered news and content like travel, food, and live stock quotes. Catcha also had classifieds, forums, and a dating site.
“During those days, the internet portal business was the hottest dot com business and we were competing with the global players like Yahoo, MSN, and Lycos setting up in the region as well as local players such as AsiaOne [owned by Singapore Press Holdings],” Wong explains. “We were then en route to listing on the Singapore Stock Exchange when the dot com bubble burst in 2000. Our internet portal business took a beating as we had to downsize our team and resources when we did not raise funds as expected in an IPO.” The IPO didn’t happen.
In the end, the co-founders decided to venture into event organizing and the publishing business with magazine titles such as Juice and Stuff. And in 2002, as Catcha’s technology development came to a standstill due to a shift in business focus, Wong decided to leave Catcha and went into a brick and mortar business in retail, which eventually diversified into ecommerce.
A tech guy in the fashion business
Being an entrepreneur, Wong was looking to do something on his own and thought that the retail business was easy to start with a gentle learning curve. “It’s as simple as identifying a product to sell and where to sell it,” he says. According to his research, women shop more than men, and fashion accessories are products sold with high margins. He eventually started selling ladies fashion accessories in 2003 called AboveFashion, and at its peak had 15 sales outlets made up of shops and consigment counters in major department stores.
Although the business recorded good growth, he realized that they were always at the mercy of landlords and department stores. “Rentals in major shopping malls are escalating and management of the malls requires renovation every two years. With this I find it difficult to manage the retail business being a sole proprietor,” he says.
In 2004, the team explored and ventured into ecommerce, where their business – especially on eBay and Amazon – saw demand coming from overseas. In 2008, Wong decided to relocate his business to China, where he could source the products and ship them out to countries like the US, Australia, the UK, and Germany. During this time, Wong also diversified its product offerings to jewelry, and accessories for gadgets and cars.
However, he found another problem when relying on marketplace platforms like eBay and Amazon. “We found our growth was not scalable as we the merchants are deterred by the marketplace owners imposing higher listing and transaction fees, and that they do not promote large scale merchants for the fact that they want to give other sellers, especially new sellers, an equal opportunity to compete for business,” Wong explains.
This is why Wong decided to build his own online fashion marketplace and brand focusing on emerging markets in the region. It took him one year to work on FaveChic right from the idea stage to building the prototype, and finally launching the product in April this year.
Shipping affordable goods from overseas
“We want to bridge the gaps in ecommerce in the region where we find that supply is not meeting rising demand adequately,” says Wong. The local marketplace sites in emerging countries, being relatively young, may lack in offerings and perhaps do not fulfill as well as the more mature marketplaces abroad. FaveChic is removing the barriers to cross border ecommerce by facilitating the payment and logistics sides. “Merchants in mature marketplaces will have opportunity to grow beyond their countries – and consumers will have easier access to the wide range of product offerings in the competitive overseas marketplaces,” he reasons.
FaveChic is accessible via a desktop website and smartphone apps. Users can browse over 30,000 fashion products – which mostly cater to a female audience – and buy using a choice of payment methods like PayPal, local bank transfers, and ebanking. All prices on FaveChic are inclusive of shipping and delivery charges.
One way FaveChic makes sure the items are still affordable is by consolidating many daily shipments from different customers into one in each country and then making cross border delivery by bulk air freight. Wong explains how the startup processes customer orders:
As and when a consumer places an order, we will then place a subsequent order with the merchant in the overseas marketplace and due to the advanced logistics we will be able to receive the product from the merchant the next day. When we receive the product, we will provide a preliminary QC to ensure the product is ordered according to the customer’s requirements – i.e. size and colour – and thereafter re-package it, and bulk air freight with the other orders to be sent to the country of destination. When it arrives, we work with the local logistics to delivery it domestically. We like to call it JIT [‘just in time’] in ecommerce. Unlike Zalora or BerryBenka1, we do not incur warehousing and inventory costs.
Targeting three countries at once
Unlike most marketplace sites, which usually focus on making it in one country first as a pilot project, FaveChic immediately set up shop in three Southeast Asian countries. Wong explains that because the startup does not set up warehouses and logistics, it is easy for it to enter multiple markets using the same technology back-end.
The three markets the fledgling startup chose – Singapore, Indonesia, and Malaysia – are in different phases of ecommerce development. Singapore is a small market with a well developed payment infrastructure. Malaysia’s ecommerce market is growing with consumers being generally comfortable buying and paying online thanks to numerous popular flash sales sites. Being the biggest country of the three, Indonesia is FaveChic’s focus. The market is poised to boom while still struggling to grow out of issues like low credit card and internet banking adoption.
The team has put in equal amounts of expense for online marketing in the three nations, with varying results. The team is seeing the greatest number of registered users from Indonesia as the country has the lowest cost per click-through ad, followed by Malaysia and Singapore. However, Malaysia is the largest paying customer base, while Singapore users make more purchases in a single checkout thanks to the nation’s stronger purchasing power. “This is an interesting observation which we will never be able to get if we just did one country,” says Wong.
Banking on social
Other than shopping, FaveChic has social features inside. Users can upload and share fashion items that they like on FaveChic. And just like Twitter, users can follow each other and see the latest posts from their friends. There are already a few fashion bloggers recruited to the site whom you will automatically follow when you sign up on FaveChic. The team is developing a “shopping together” feature which allows two users on different devices browse on the same screen on FaveChic, as seen in this demo video:
Wong hopes that this social feature can be the difference between them and anyone selling or retailing fashion items, whether that’s on Zalora, Line, or Instagram. “We provide the three ‘C’s.” said Wong. “Content, community, and commerce.” He adds, “We believe user curation and engagement will in turn bring in more users so we believe our app can be a killer product.”
Wong assures consumers they won’t need to worry about import taxes when buying fashion goods for personal consumption, and not in bulk. Items like clothing, shoes, and bags are not known to be taxable in the region according to him.
Wong foresees two big challenges in running FaveChic. First is how they can reach out to people given that marketing will be a costly exercise. Second is how they can convince investors that they can put up a great fight against the bigger boys like Zalora or even Taobao. Wong explains, “Unlike Zalora, we do not build warehouses and hold inventory costs. Unlike Taobao or other marketplaces, they do not facilitate transaction as in the logistics. We hope to build the social community within [the site] so as to differentiate it from the other players.”
Other marketplace sites that are starting to sell items from overseas merchants include Rakuten and Qoo10.
Presently, the team has established a Chinese office and is in the process of setting up an office in Japan. They are embarking on fundraising and are open to strategic local investors to partner with.