Southeast Asia’s ecommerce startups thrive under giant marketplaces’ long shadow

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Every day, ecommerce marketplaces engage in a fencing match. Contenders thrust and parry with their pricing algorithms to undercut one another. Larger sharks advance, applying sharp discounts to their products to bleed rival minnows dry.

Beyond the theatrics of giant marketplaces, however, exists a parallel universe of niche ecommerce companies that aren’t just surviving, but thriving. It is a sign that opportunities still exist in little-seen corners of Southeast Asia.

Dramatic flair

In Vietnam, Loic Gautier is plotting his next move. He is the founder and CEO of Leflair, a website that sells branded goods at a steep discount to upper-middle class consumers.

Business has been brisk. Its sales have been growing at 10 percent every month, resulting in the figure doubling in 2017 compared to the previous year. Gautier shares more numbers:

• Average customer spend: US$80
• Monthly visits: 1 million
• Annualized revenue: more than US$10 million, achieved late last year.
• Funding raised from investors: US$5 million
• Marketing spend: around 10 percent of revenue.

While these are not bad for a two-year-old business that serves only Vietnamese consumers, any VC-funded business can put their top line on steroids by letting its marketing machine loose and ignoring unit economics. But not Leflair, says Gautier.

“It’s considerably cheaper to promote a brand that everybody knows – especially when we sell it at 50 percent of retail price,” he tells Tech in Asia.

Vietnam is not so scary anymore

The era of startups in Southeast Asian ecommerce has seemingly ended. As Amazon and Alibaba pour their unlimited resources into the region, entrepreneurs starting their own marketplace today may be signing their bankruptcy filing.

But for companies that entered the ring a few years ago, good times may lie ahead. There is plenty of room for growth: Southeast Asia’s ecommerce market is still slightly behind India, and even further behind China.

Development levels vary even within Southeast Asia, according to a report by price comparison site iPrice, which compiles anonymized data from ecommerce sites like Lazada.

Singapore is a tiny market but the leader in basket size. Meanwhile, Vietnam has a large market but trails its neighbors in basket size and credit card usage.

Southeast Asia’s ecommerce ocean

The empires strike back