Increasingly crowded space

Recently, we sat down with a friend who operates in the e-commerce enabling space, where he briefly summarized his thoughts as follows: The e-commerce enabling players have become numerous; in Indonesia alone there are at least 30 or so players and counting.

After all, what started out as a business that served brands actually turned e-commerce enabling companies into modern-day media agencies. E-commerce enablers (at least those who are dominant in the space) are increasingly realizing that many brand accounts are simply unprofitable and expensive to maintain (as clients) – turning them towards launching their in-house brands or working directly with smaller, niche brands.

Titans arrived at the party – Has it ended?

There’s zero doubt that Group M and Keppel (via UrbanFox) are playing catch-up, having missed out on a major growth industry of the last decade: E-commerce.

However, what are the factors driving these major players to enter this space all of a sudden? Let’s take a look below.

1. Losing customers (brands) to e-commerce enablers

To be honest, we are surprised major agencies have let this ride for quite some time. Brands have been freely shopping for e-commerce partners rather than relying on their traditional media partners. This led to the rise of e-commerce enablers.

Perhaps it is better late than never. Being able to offer a full suite of services (no matter how inexperienced you might be) helps you retain customers. That’s the bottom-line.

2. Traditional bargaining power shifted hands

The rise of major online marketplaces has placed the bargaining power for logistics demand solely in their hands, instead of traditional distributors (and brands). As such, traditional barriers to entry and relationships between logistics players and distributors have gone down the drain. This trend is clear as day, where Amazon has already been phasing out its major logistics partners.

In Southeast Asia, Ninja Van and the likes are increasingly gaining dominant positions in last-mile logistics (transportation and smart-warehousing) – with more and more new entrants (Flash Express) who have significant venture fundings, while traditional players are non-existent. It is only a matter of time before they start to own planes and ships. If the new market economy is widely expected to ride on e-commerce, Titans such as Keppel have to start somewhere and soon, or risk fading into irrelevance.

Conclusion: Scorecard for the Titans – If any?

To be really honest, we are not an easy bunch to impress. We had our team carefully study them and admit that it was too early to actually tag a score to their progress. Perhaps, solely based on effort, we can give a commendable grade of C-.

Our sources shared with us that Group M has only just started to put together a loosely strung together team of “e-commerce” experts in recent months, and Keppel (through UrbanFox) had just recently set-up satellite offices in Malaysia and Indonesia. Their team also appear to consist largely of non-heavyweights from the e-commerce space unlike existing dominant players such as aCommerce or N-Squared.

Only time will tell whether a blank check can actually help these Titans play catch-up.

This article is contributed by an industry veteran with more than 7 years of experience in the region’s e-commerce space.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].