- Despite positive macro trends, sees e-commerce as ‘a very complicated business’
- Industry pundit see irrational competition driving closures, M&As over next 2yrs
ENSOGO Ltd dropped a bombshell earlier today (June 21) by announcing it is closing all its e-commerce markets in South-East Asia and Hong Kong, with its chief executive officer Krzysztof Marszalek (pic above) stepping down.
Describing its e-commerce experience in South-East Asia as “a very complicated business,” an Ensogo spokesperson told Digital News Asia (DNA) that a decision would be made in the coming weeks on when to officially shut down its business in the region.
The spokesperson did not disclose how many employees are affected, but this comes in the wake of two massive entrenchment exercises over the past few years. Its most recent saw the company laying off more than 300 of its total 600 employees in only the first three months of this year.
And despite all the macro trends in South-East Asia pointing to a bright future for e-commerce, the Ensogo spokesperson told DNA via email that “macro trends are one thing, but the business has not been performing at the level we would have liked, and therefore a decision was made to stop and preserve the shareholders’ capital first.”
Ensogo also denied that one factor in the closure was the entry of China-based players into the South-East Asian e-commerce space.
It was as recent as early May that DNA sat down with Marszalek, who talked up the progress its most recent pivot into a B2C (business-to-consumer) marketplace was making.
And while he declined to describe the various pivots it had made over the past few years as failures, clearly shareholders have run out of patience and are terming the e-commerce venture as one.
You can also chalk this up as one of the few failures Catcha Group founder Patrick Grove has suffered as well.
Grove, a former chairman of the board, was the mastermind behind the listing of Ensogo in 2013, back then called iBuy, convincing three e-commerce companies in South-East Asia and Hong Kong (Marszalek’s Beecrazy) to merge their businesses and list on the Australian Securities Exchange (ASX).
The other two sites were the Catcha Group-incubated and -owned dealmates.com, and a Singapore-based site, deal.com.sg.
Grove told DNA then that investors he approached wanted an Asean story, someone who could consolidate the region. Grove gave them what they wanted, but it is clear that the e-commerce market in the region is proving to be much tougher than anyone imagined.
But confidence is still there. Paul McKenzie, a consultant at regional brokerage and investment group CLSA Ltd, who produced a massive 500-page report on e-commerce in South-East Asia, is still confident of the region’s prospects, especially in Indonesia.
READ ALSO: Amazon’s US$600mil push into Indonesia will change the e-commerce landscape
“However, the big theme in the next two years will be closures and M&As (mergers and acquisitions),” McKenzie (pic) told DNA via email.
“There are too many competitors and competition has become irrational as everyone chases traffic and market share. Private equity money has become tougher to come by over the last year, and valuations have fallen.
“Essentially those with the deepest pockets will win,” he added.
McKenzie said he sees bigger, well-funded players such as Lazada as being able to continue being aggressive and carry losses for a long period. “Smaller players cannot,” he said.
Concurring with McKenzie was Fadzarudin Anuar, founder and chief executive officer of Malaysian fashion e-commerce startup FashionValet.
“Marketplaces are definitely a big boys’ game, and you will need a massive war-chest to last through the frenzy of the next few years,” said Fadzarudin.
To him, as a small player, “staying niche is the only way to be profitable.”
While he doesn’t think FashionValet will be too affected by the Ensogo news, he acknowledged that in terms of competitors, his startup will be fighting over key suppliers with these marketplaces.
“We don’t want to get into price wars and we will maintain our margins even if it means sacrificing potential business. Right now, staying niche is the only way to be profitable,” Fadzarudin (pic) reiterated.
Surprisingly, Ensogo has not given up entirely on the region either.
Asked about its cash position and if it will still be looking at South-East Asia, its spokesperson said, “We can’t disclose our cash position at this stage, except to say its significant. The macro factors in South-East Asia continue to make the region a compelling opportunity.”
Massive layoffs at Ensogo (again) as it retools (again)
In search of profit, Ensogo adopts B2C marketplace model
Ensogo lays off staff across the region
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