Vietnamese ecommerce firm Leflair temporarily halts local operations

Vietnam-based ecommerce startup Leflair has temporarily suspended its local operations as it looks to make adjustments in its business structure, the company’s co-founder and CEO Loic Gautier told Tech in Asia.

Photo credit: Leflair

Founded in 2015, Leflair focuses on making high-end beauty, home, and fashion products more accessible and more affordable. The company says it directly sources products from brands and distributors that it consigns to its warehouses for faster delivery times.

With this model, Leflair said it maintained the highest average order value among ecommerce players, with about 40% of its total user base spending upwards of US$100 every month on its platform.

To maintain the quality of its service and sustain its growth rate, Gautier said a large amount of funding is required. “With our current revenues in Vietnam, it would require many more millions of dollars in funding to get to a place where we would be able to generate significant profits, which we could not find in the current context and for our geography,” he explained.

According to Crunchbase, Leflair has secured a total of US$11.8 million in investments so far over four rounds of funding.

With its hiatus, the startup plans to take a step back and rebuild its operation model. In the meantime, the startup said it will maintain its operations in Singapore and in the Philippines.

Local media outlet CafeBiz first reported about the development. In a letter to merchants acquired by the media company, Leflair said that “changes in the investment landscape for startups” made it difficult for the company to continue with its current business strategy.

“Under a capital crunch and requirement for cutting costs, we have to come up with the tough decision to cease our operations in Vietnam,” the company added. Leflair, however, assured that its operations in the country will restart in 2021, after it makes some changes to its operational structure. It also plans to come back with a new offering.

According to data from Statista, revenue in Vietnam’s ecommerce market is likely to amount to roughly US$3.4 billion in 2020 and is expected to reach about US$4.5 billion by 2024.

Leflair faces a tough environment at home as it looks to capitalize on the market’s growth.

As of January 2019, an iPrice report showed that regional player Shopee topped Vietnam’s ecommerce scene in terms of monthly visits. Shopee was followed by homegrown player Tiki, Alibaba-owned Lazada, and then another local player Sendo.

In addition, low consumer confidence, logistics issues, as well as obstacles in physical, digital, and legal infrastructure are constraining the ecommerce industry in Vietnam, according to a report from the South China Morning Post.