E-Commerce: Giants can’t dance
By Tay Shan Li and Ija Mohan March 23, 2018
- Anvita Varshney, ex-MD, Lazada SEA sees niche opportunities in eCommerce
- Founders must get business model and unit economics right early on
The Global Entrepreneurship Community Summit 2017 (GEC) in December 2017 brought together thought leaders from around the world to Kuala Lumpur for 2 days. One of them was Anvita Varshney (pic, below) a former regional managing director of Lazada Southeast Asia (SEA) and former COO of Naspers Middle East and Africa, the venture fund that made billions from its early investment in Tencent of China.
Anvita who was a panelist at the MBAN (Malaysian Business Angels Network) Summit 2017 which was held in conjunction with the GEC, took time out from the Summit to share her thoughts on the future of e-commerce in SEA at a Startups to Scaleups Club fireside chat organised by alumni of the Coach & Grow Program, Babydash and 3ciety, and hosted by Lavinie Thiruchelvam and Ija Mohan the co-founders of Babydash and 3ciety respectively.
From the get go it was evident that Anvita was bullish about the opportunities for eCommerce in the region. When asked if there was still space for new SEA players given the 2017 entry of Amazon into Singapore and the market dominance of Lazada/Alibaba, Anvita was quick to point out that there are always opportunities within the niches and verticals of eCommerce. The big ventures might not be able to cater to the gaps of every market, furthermore as they grow bigger, they might not be able to move as fast to pivot to new opportunities.
However, to be successful within these niches, Anvita advises entrepreneurs not to be too generalist, but instead to focus on their core strengths and keep thinking about what they can do as a company so that customers would come to them instead of going to a big player. She believes that entrepreneurs shouldn’t be afraid of the big boys and their firepower but focus on their core strengths, unique selling propositions (USP) and execute it perfectly.
Execution and focus are the keys. You don’t need to always have a huge bank balance to do well but focus on solving one core problem, capture the target segment and validate your model before expanding and raising larger rounds. There is a reason customers don’t go as much to Amazon to shop for clothes but to core fashion verticals like FashionValet, Zalora, etc. Even if an industry is crowded, there is always a space for late entrants to enter who would focus on delivering a great experience thus building a loyal base.
Anvita candidly shared her experience with the Rocket Internet Group. She was involved in entering new markets for the venture as well as to continue growing market share. She believes that thus far they are the only eCommerce brand that has managed to be truly Southeast Asian and not belonging to one country. Though each country had its own challenges but there were enough synergies among them to use the experience from one country to enter the next.
One interesting learning was in understanding the payment habits of each market and the importance of getting the customer buy-in and trust. In SEA, making cash-on-delivery (COD) available was necessary to attract new customers. Although COD incurs higher costs per transaction and increases the risk of returns, it actually provided customers a sense of security. She added that once customers trusted the brand, they tend to opt for more convenient online payment options. So, the additional cost for COD can be considered an acquisition cost for new customers.
In her role as an investor today, Anvita stressed on the importance for founders to get the business model and the unit economics right early on. Even if startups are not projecting profitability in the first 3-5 years as they spend to get new customers, there should always be a focused roadmap towards profitability.
She also stressed the importance for entrepreneurs to keep selling the vision of the company. After all, to survive in the market, where profitability was 3 to 5 years away, entrepreneurs would need to continuously raise funds, keep and attract talent which requires constant faith in the vision and conveying this to the rest. With growth, comes lots of ambiguities and entrepreneurs need to be audacious and agile to deal with those ambiguities.
With regards to regional growth, Anvita believes the right time to expand to new markets is when a startup has proven its acquisition strategies in its home market with a loyal customer base. Expanding into other countries early on, just for the sake of regional expansion, or just to satisfy investors is a risky and costly strategy that can do more harm than good.
She also made an interesting observation on what a mature eCommerce player in SEA will look like. It won’t just be a marketplace or online store, but rather it would be an entire ecosystem which owns its own payment channel, logistics and will have multiple revenue streams.
A final takeaway from the session was Anvita’s advice on fundraising. As an active investor based in the Middle East, she urged SEA companies to look outside the region for funds, as there is quite a lot of liquidity and interest in good companies from regions like the Middle East and elsewhere. No one leaves a good deal on the table, she concluded.
Tay Shan Li is co-founder of Babydash and a DNA Digerati50 while Ija Mohan is founder of 3ciety.
(Babydash is Malaysia’s leading mum and baby portal, providing convenience to parents across the nation. Parents can get everything they need for their babies from their site and have them delivered straight to their doors. www.babydash.com.my)
(3ciety empowers brands and designers across Southeast Asia to monetise their consumer base via custom apparel. The 3ciety on-demand supply chain enables brands and designers to transform ideas to products at zero cost. 3ciety.com)