The curious acquisition of Ezbuy

LightInTheBox (LITB) recently announced that it was acquiring Singapore’s ecommerce daigou platform Ezbuy for US$86 million, in the form of “non-interest-bearing one-year convertible promissory notes.”

This is a dramatic development in LITB’s desperate efforts to avoid delisting after its share prices went below US$1 for 30 consecutive trading days.

LITB took a series of actions, including replacing CEO Quji Guo, to save itself. However, buying Ezbuy is a curious one.

Past glories

Established in 2009, Ezbuy used to be called 65daigou. Its main business was helping consumers buy goods from Taobao.

While Ezbuy was not the only daigou player in the country, it was one of the first to adopt an English interface and product descriptions, widening the audience dramatically to the local population.

The model was simple and effective: the consumer would place orders using its website or app, and Ezbuy would purchase from Taobao and ship the goods to the consumer.

When Taobao started shipping overseas themselves, daigou platforms were hit hard. Ezbuy, however, survived that blow because of its English interface and cohort of repeat customers.

Good growth numbers gave investors confidence, and Ezbuy raised US$20 million in series B in March 2016.

Turning sour

Since then, a number of crises have seriously crippled the previously confident company.

The biggest is no doubt the 11.11 shopping festival in 2017, when Alibaba closed thousands of accounts Ezbuy used to purchase on Taobao, claiming that Ezbuy was being unfair to Alibaba’s ordinary customers.

For a daigou platform, not being able to buy is devastating. He Jian, the founder of Ezbuy, wrote a long public letter accusing Alibaba of bullying. But in the same letter, He also exposed the company’s operational model and its weaknesses.

Aside from Singapore, Ezbuy failed in almost all other markets, and many of its employees have since left.

What happened?

The first change was Taobao improving its overseas shipping. This gave Chinese-speaking customers another choice.

Alibaba’s acquisition of Lazada also changed the dynamics, as Alibaba increasingly preferred that consumers buy directly from Lazada rather than through third parties.

In addition, selling in Southeast Asia is not easy. Aside from Singapore (and to a certain extent Malaysia), many countries’ rules and regulations are not straightforward. Only big players can negotiate and influence authorities as well as the ecosystem, pushing reforms and benefiting from them.

Ezbuy’s problems

Reflections

Ezbuy + LITB