In search of profit, Ensogo adopts B2C marketplace model
By Karamjit Singh May 6, 2016
- Sellers charged 15% fee on items posted for sale
- Three factors tied to SEA realizing e-commerce potential
Not able to wait for the South-East Asian e-commerce market to realize its oft touted potential, ASX (Australian Securities Exhange) listed, Ensogo Ltd, headquartered in Singapore, changed its model to a B2C marketplace in January 2016 as it sought the profitability demanded of it as a listed company.
“This model allows us to scale rapidly and be global,” says its chief executive officer Kris Marszalek, pointing specifically to how quickly they were able to add sellers and products. “We went from 1,000 sellers in Q3 2015 to 13,599 in Q1 2016 while products on sale went from 77,268 at end Q4 2015 to 4.27 million at the end of Q1 2016.”
In its previous iteration as an e-commerce company its markets were Thailand, Malaysia, Indonesia and Philippines with each served by its own website and in-country operations.
From starting out as individual flash sales and daily deals site across South-East Asia and Hong Kong since 2011, to becoming a more mainstream e-commerce merchant after a corporate exercise engineered by Catcha Group chairman Patrick Grove in 2013, Ensogo’s B2C marketplace app has hit 500,000 downloads and is its main platform to connect sellers to buyers – globally – thanks to the ability of sellers in China and Korea being able to deliver orders to over 50 countries.
Changing the model also came with a new revenue stream. Instead of waiting for its marketplace to gain traction and then charging sellers, Ensogo started charging its sellers a 15% fee right from the beginning. It started exclusively with Chinese merchants in Jan 2016 and added Korean sellers from April. It started charging its domestic suppliers, meaning in-country sellers, from April.
However, Ensogo will stop dealing with all in-country suppliers within the next few months as the marketplace model focuses on supply from sellers in China and Korea who can deliver cross border.
To Marszalek, this pivot does not indicate that its previous models had failed. “Bearing in mind that the only thing that is constant is change, we have been tweaking and fine tuning our model over the years and now have a model that is working and we are taking it global,” he explains.
“We have learned every step of the way and I take it as a learning experience, not a failure,” he adds, drawing comparison to Thomas Edison’s much quoted phrase of having found various ways to not make a light bulb, rather than describing the experiments as failures.
New model “a game changer”
With its quarterly appendix 4C results to the ASX for Jan to end April showing cash collections at A$22.6 million (RM67.8 million) versus A$23.1 million in the 1st quarter of 2014, Ensogo also highlighted a 106% average monthly growth in the GMV (Gross Merchandise Value) to a cumulative A$8.2 million (RM24.6 million) for Q1. The early results underpin Marszalek’s bullishness about the potential of the new B2C marketplace model. “It’s a game changer.”
Pleased with the “solid outcome for the first three months of 2016 with the new marketplace model and with the group in lean shape, Marszalek says he is looking forward to report their next quarterly progress to the market in July.
Besides achieving scale, the new model has allowed Ensogo to tighten its costs by further centralizing operations. Marszalek revealed in his announcement to the ASX on April 28 that the group had reduced headcount from 600 in Jan 2016 to under 300 by April 2016. Malaysia saw headcount drop to 5 from 20 staff with operations now served mainly out of Singapore.
These cuts in the group followed an earlier round in early 2014 that saw the introduction of a common technology platform and layoffs. But even that cost cutting was not enough as its e-commerce business was still loss making and each country would have a combination of warehousing and relying on outsourced partners for delivery.
Meanwhile, when asked to pinpoint why its traction in the previous model failed to live up to the promise of SEA’s e-commerce potential, Marszalek cites the payment infrastructure, last mile logistics and the spending capacity of the middle class in SEA.
“I still believe that the SEA e-commerce market will realise its potential but that it will take a few more years than what is expected,” he says declining to give his prediction of when the market will mature.
The timing of the maturity is less important to him now as he focuses his immediate attention on ensuring Ensogo can meet shareholder expectations with its marketplace B2C model with its global focus.