Vietnam’s homegrown online marketplaces Tiki and Sendo are pursuing their own growth strategies amid stiff competition, particularly from Shopee and Lazada, after their proposed merger plan fell through last year, according to several sources aware of the development.
As DealStreetAsia reported last July, Tiki and Sendo shelved their merger plan, even as the country’s antitrust watchdog said the proposed transaction would not be prohibited by local laws.
The plan to join forces was seen as an attempt by both to take on Sea Ltd’s e-commerce business Shopee – the most popular online shopping site in Vietnam. But, the plan did not materialise as shareholders of Tiki and Sendo could not agree on merger terms.
“It sounds like it makes sense for them to merge but in practice, it doesn’t. The two managements are different, and even the combined entity would still be too small compared to Shopee,” a serial entrepreneur, who had shut down his e-commerce business a few years ago, told DealStreetAsia on the condition of anonymity.
A CEO of a startup that helps merchants process their online stores added that, within his client base, the number of merchants and orders on Shopee is greater than those of other marketplaces combined.
Shopee also topped in terms of web visits (68.6 million monthly visits) and app ranking on iOS and Android, according to iPrice’s Vietnam map of e-commerce in Q4 2020.
By comparison, Tiki had 22.3 million monthly visits and was third on iOS and fourth on Android. Lazada had 20.8 million monthly visits, and ranked second on both app systems, while Sendo scored 11.2 million visits per month, and occupied the fourth and third places on iOS and Android, respectively.
“Lazada is focused on certain segments, and some of its products seem more premium, while Shopee [offers] everything. It’s very challenging for other players who are playing the same game,” commented Jianggan Li, CEO of venture builder Momentum Works.
Indeed, Shopee has the backing of parent New York-listed Sea Group, the world’s best-performing stock with a market capitalisation of $124.6 billion.
The growth of Internet and e-commerce’s market capitalisation in Southeast Asia, which rose from just 1% of the entire regional tech ecosystem in 2013 to 31% in 2020, was largely contributed by Sea Group, according to Singapore-based PE firm Asia Partners.
Shopee “can sustain irrational decisions” like what US giant Amazon did with its Amazon Prime offering, “when they were losing a lot of money on the transactions but they preferred to give it to the consumers than spending on advertising,” said Oliver Raussin, managing partner of Vietnam-focused VC firm FEBE Ventures.
“I like to purchase on Shopee because it offers free shipping more often [than others]. I can also find cheaper products if I give it some more time and effort scanning through the app,” Nguyen Thuy Linh, a 30-year-old working mom in Hanoi, told DealStreetAsia.
Challenging the giant
In Indonesia, the rise of Shopee is believed to be among the factors that prompted Tokopedia and Gojek to enter into merger talks. Consolidation to gain scale has also been seen in the payment space.
In the case of Vietnam’s Tiki and Sendo, however, each is eking out its own path.
“We will focus on our strengths in the delivery system and supply chain,” Tiki’s chief financial officer Ngo Hoang Gia Khanh told DealStreetAsia. He did not comment on the merger intention.
The Ho Chi Minh City-based company has its own delivery team with around 2,000 shippers to provide fast shipping services within the key cities of Vietnam.
Khanh says that the in-house delivery fleet has helped Tiki reduce costs and gain advantage in offering subsidies. He revealed that the company will also ramp up drop-shipping and open its logistics services to merchants outside of the Tiki platform.
Last year, Tiki developed new services including TikiPro, which allows customers to have Tiki’s employees install purchased equipment at home at a time of their choice, and TikiNgon, a raw food delivery service.
“TikiNgon’s sales have gone up 5-7x since our launch in Q3 2020,” Khanh said.
Tiki also operates a unit called TikiTrading, which distributes certain product categories on its own. The company faces difficult math with TikiTrading, according to one of the sources that DealStreetAsia spoke to, as it wants to scale this offering but it would conflict with growing Tiki’s merchant partners.
In response, Khanh said TikiTrading only focused on certain categories such as books, electronic devices or healthcare products, which require authenticity. “The marketplace accounts for two-thirds of our platform’s revenue, while TikiTrading takes the remaining,” he said.
Meanwhile, DealStreetAsia has learnt that Sendo, with the help of its shareholder Kasikornbank, will develop financial services for its merchants and users.
“The offerings could include loans, installments and even credit scoring,” said another source who is familiar with the Thai bank.
Sendo declined an interview request.
The firm had raised $61 million in its 2019 Series C financing from existing investors and new backers including EV Growth and Kasikornbank.
While the cash burn rates of these e-commerce players cannot be ascertained, Tiki’s Khanh said the company “is always open to investors”.
“That said, our latest funding round has given us enough stability in operations,” he added.
Sendo received an extended Series C funding in March 2020 and was looking to raise a Series D round, its CFO JJ Ang told Tech in Asia in July.
Three to five years down the road, e-commerce will not just be about shopping but will also entail entertainment and customer experience, Khanh opined, indicating room for e-commerce growth.
“Look at other markets such as China. A few years ago, people would say Alibaba was going to dominate and JD was declining, and they didn’t see what else was possible to be built. Then you see Pindoudou capturing the market that Alibaba largely neglected, or some SaaS players like Youzan and Baozun,” Li pointed out.
“The question is, how soon will the e-commerce market develop to be big enough to accommodate all these different players?” he said.
FEBE Ventures’ Raussin asserted that there will not be opportunities left for new players in the marketplace side, but the expected exponential growth potential of the entire e-commerce market in Vietnam will leave space for the current businesses to continue their plays.
Vietnam’s e-commerce sector grew by 46% YoY to reach $7 billion in 2020, and is anticipated to grow 34% annually until 2025 to $29 billion, showed the SE Asia e-Conomy report by Google, Temasek and Bain&Co.
Seeking a local presence, Vietnamese companies are still hoping a local IPO will become possible. “We want to see a clearer route for tech listing because it will open up exits, which is critical to attracting investors. The [local stock] market is not yet tech-friendly, and we hope the government will soon have a sandbox for tech IPOs,” said Khanh.