Last Thursday, Momentum Works held an exclusive online sharing session “Off the Record: Ecommerce in Southeast Asia 2023”, where we covered unfiltered insights on the ecommerce landscape, competition amongst platforms (incl. Shopee, Lazada, TikTok), ecosystem (brands, logistics etc.), as well as future outlook.
There were some interesting questions from the community of participants, which we feel would be useful to share with everyone here. The full presentation deck is available for purchase here.
1. Can you discuss Tiktok Shop’s logistics strategy? Are they at a structural disadvantage to Shopee because Shopee has a head start in building out 1st party logistics capabilities?
Answer: Yes, by owning its own logistic capabilities at scale, Shopee is at a structural advantage. This is also evident from J&T Express’s declining gross profit/order in Southeast Asia, which was largely driven by Shopee squeezing prices.
TikTok’s structural advantage over Shopee and other platforms is its social/entertainment user base, which saves acquisition and retention costs. However, at scale, they would also need to figure out optimising logistics and payment. If TikTok eventually does not build its own fulfilment capabilities, such optimisation will largely depend on the level of fragmentation of 3PLs and the ensuing negotiation power on both sides.
2. How do you see the development of e-com enablers in SEA (for brands, sellers and KOLs)? Especially compared to China and if there are some venture-building opportunities
Answer: A lot of ecommerce enablers sprung up in the region over the last few years. We see some consolidation recently as some with weaker operational processes (and hence worse financial performances) exit the market.
We do see a continuous role of ecommerce and live commerce enablers as it is just more efficient than each brand/manufacturer acquiring their own capabilities. However, as each part of the ecommerce ecosystem is now more conscious about costs and unit economics, ecommerce enablers which wish to operate at scale will need to do more in improving efficiency and cost-effectiveness (for example, stronger ERP/cost control). Otherwise, you can choose to work with higher margin brands/categories (e.g. supplements) which come with smaller scale and better profitability although hardly any defensible moat.
The consolidation we see here happened in China before – a few larger ones (e.g. Nasdaq-Baozun) work with major brands while there are many smaller ones operating in different parts of the ecommerce ecosystem.
3. There seems to be a key question as to whether customers want to watch a video vs read and navigate via category/search?
Answer: Consumer ‘wants’ are hard to predict until products/services are presented before them with specific form factors (e.g. live/short-form video).
There are many factors which will determine whether consumers will buy into video commerce, including:
1) the products being offered;
2) the profile of the presenters (celebrities, influencers?);
3) the skills of the presenters;
4) the discounts offered (for known products/brands); and
5) the check out experience.
That said – from experiences from China category/search is bigger than just pure video-based algorithm-driven impulse buying. That’s a key reason why Douyin (now TikTok) also moves to build a marketplace.
4. How do you see brand’s high production value content on TikTok work compared with the original UGC/KOL nature of the platform?
Answer: High-production value content for branding can be quite different from video content that is optimised towards conversion. Similarly, UGC/KOL content might or might not cater to encouraging the buying behaviour. In China MCNs (and some sellers) have figured out a formula of content that optimises conversion – from our discussions with practitioners in Southeast Asia, they are still testing what is scalable (e.g. systemically training presenters rather than being held by their natural variances). They might figure that out sooner or later.