The next phase of SEA ecommerce: niche ‘super-verticals’

Even as consumers moved online during the Covid-19 pandemic, Indonesia-based beauty startup Social Bella did the opposite. It “aggressively” expanded its offline stores while also entering Vietnam – its first overseas market – amid travel restrictions.

That strategy appears to have paid off. Not only did it report healthy revenue growth for 2020, a source close to the company says its latest funding round – currently ongoing – would catapult it into unicorn status.

But it also signals a broader trend in Southeast Asia’s ecommerce space. While “horizontal” marketplaces like Shopee and Tokopedia continue to dominate, players like Social Bella – which some are calling “super-verticals” – are finding a niche and thriving within it.

“There are consumer cohorts who prefer such players for the depth of their offerings – versus the breadth available at the horizontal players – as well as curated offerings, better product quality, and customization,” Roshan Raj, partner at research firm RedSeer, tells Tech in Asia.

One of several Sociolla stores that Social Bella has put up in Jakarta / Photo credit: Jofie Yordan

Ecommerce players have different approaches when it comes to finding their niches. Blibli, for instance, became a newly-minted unicorn by catering to affluent Indonesians. But others, like e-grocery players or rising direct-to-consumer (D2C) brands, focus on a particular vertical.

This may all correlate with rising affluence, which causes consumers to be more discerning. Sheji Ho, co-founder and CEO of healthcare marketplace HD (HonestDocs), saw the same thing happen when he was in China.

“People are going to develop their own tastes, and they want to be different from everyone else,” says Ho, who also co-founded ecommerce enabler aCommerce. He adds that this type of scenario will become more demanding for platforms like Shopee, as “if you try to do everything, you cannot do everything really well.”

Rising affluence lifts the ecommerce boat

While niche ecommerce players have been around for some time, the early years primarily saw fashion players like Zalora and Berrybenka. The newer entrants enlivening the sector, however, are more diverse.

For instance, there is HappyFresh in e-grocery, Dekoruma in home and living, and Social Bella in beauty. All of these platforms have received new funding in 2021.

Indeed, there is massive opportunity in this space – in Indonesia alone, the ecommerce pie is slated to reach US$53 billion in value in 2021. High ecommerce penetration implies high customer usage levels, while a large market implies a viable path to profitability for “sizable” niches, as Raj points out.

“Going by the above two variables, some of the large and developing economies in Southeast Asia – Indonesia, Vietnam, and the Philippines – are attractive markets for niche ecommerce players,” he says.

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