Singapore-based e-commerce platform Luxola, which was launched in 2011, has been acquired by French luxury goods conglomerate LVMH, following an undisclosed investment into Luxola by LVMH’s cosmetics subsidiary Sephora. The financial details of the acquisition are undisclosed.
According to Crunchbase data, Luxola raised $15.6 million across four rounds of venture funding. The last funding it raised was a Series C round in May 2014 involving F&H Fund Management and QueensBridge Venture Partners, who invested $3 million in the venture. Gree Ventures has also previously invested.
Commenting on the transaction, Alexis Horowitz-Burdick, CEO of Luxola, said “Sephora’s investment enables us to take this vision further. With greater market reach and brand depth, we will offer an unparalleled customer experience.”
Currently employing 120 people, Luxola brands itself as an online shop for various beauty products and accessories, with a presence across 11 markets and retailing over 250 brands.
Anne-Véronique Bruel, president of Sephora Asia, stated: ”Investing in Luxola is a unique opportunity to penetrate the online beauty market and accelerate Sephora’s growth in Southeast Asia. We are thrilled to welcome Luxola to the Sephora family.”
Online shopping landscape
While Indonesia presents the largest market for e-commerce in the region, with its growing middle class driving consumption, Singapore and Malaysia are also crucial markets. According to an ASEAN Briefing report on regional e-commerce, Singapore’s online shopping market has grown significantly, from S$1.1 billion ($881 million) in 2010 to a projected S$4.4 billion ($3.5 billion) for 2015.
Approximately 40 per cent of the total sales originating from Singapore-based websites in 2014 were led by the sales of events tickets and insurance; and a community of Singapore-based e-commerce startups sustained through cross-border sales in the entertainment and publishing industries.
With mobile shopping possessing significant growth potential, Luxola is well placed to leverage on the city-state’s treaty network, connectivity, high cross-border trade and the ability to ship consumer goods valued below $320 without any duties.
An e-commerce industry cluster is already emerging in the city-state, with clustering behaviour driving the growth of e-commerce ventures alongside other virtues of the city-states startup ecosystem. Notable retailers like Reebonz (luxury products and services) and Redmart (household items, groceries) are already established in the city-state.
Future markets where Luxola may expand its footprint are Indonesia and the Philippines, growth markets presenting tremendous opportunities. However, they also present challenges to online retailers at this point, mostly due to issues with infrastructure.
For Indonesia, demand from Greater Jakarta drove most of the initial growth in e-commerce. However, with orders from beyond Jakarta growing, there are big opportunities for growth in second and third-tier cities throughout Indonesia, as the infrastructure improves and middle class expands.
However, Indonesia’s online shopping industry is hindered by the current state of internet infrastructure. Indonesia’s inefficient transportation channels also present a challenge. While online shopping is more attractive to urban dwellers and rural residents, goods deliveries can suffer from deficits in maps, lack of clarity in addresses and unreliable courier services.
The Philippines is another prospect for Luxola expansion, as it stands out from other Southeast Asian markets by virtue of the population of internet users, which stands at an estimated 38 million as of 3Q 2014.
This makes it the largest English-language online market in Southeast Asia, with foreign online retailers having to do less work to adapt their websites to the local market. Social media use is also pervasive in the Philippines. This makes it especially lucrative for online sales, as over 70 per cent of the Philippines’ GDP came from consumption in 2014. By contrast, most ASEAN markets operate as export-driven economies.
The Philippines also presents compelling logistics opportunities, with a maturing market sustaining e-commerce activity, indicating a strong logistics base and established supply chain. Firms like FedEx and DHL have brought down prices and streamlined the delivery of consumer goods in the Philippines.
These considerations are likely to play a role in Luxola’s future development. And they are also likely to gain centrality as factors in the strategic planning of investors and entrepreneurs for market entry into the e-commerce markets of both nations.