Where is the marketplace headed in Southeast Asia?

By Tan Yinglan, Founding Managing Partner, Insignia Ventures Partners And Paulo Joquiño, Content Strategist, Insignia Ventures Partners

Tan Yinglan, Founding Managing Partner, Insignia Ventures Partners

Many of the successful technology companies we read about today started out as online marketplaces. They range from the likes of Amazon and Alibaba, which thrived off aggregating buyers and sellers of all kinds of goods onto their platform, to the likes of Airbnb that grew on top specific kinds of transactions and customer behaviors.

Led by these marketplaces, the tech startup boom over the last decade has recently been put to the test against tightening regulations within and between borders, lackluster exits (and exit attempts), and other external events. At the same time, the ocean of marketplace models has been populated by all sorts of configurations, as the technology to set up such marketplaces became more accessible.

Is there space to grow new marketplaces? A matter of perspective

The barriers to entry are lower than ever, and it is also increasingly faster and cheaper to scale globally, but the paths to scale are also narrowing and lengthening. Because of this, it's easy to think that there are too many companies getting into the space than there is opportunity in the market to grow on.

What we've found working with founders in Southeast Asia is that this is a matter of perspective. Looking at the narrow scheme of things, the marketplace is getting crowded with more intense competition. In Southeast Asia, Lazada and Shopee have been acquiring users with steepening discounts and successive promotions, riding on the war chests of Alibaba and Sea respectively. There's also the cash-ridden ride-hailing rivalry of Grab and Gojek, which is expected to heat up even further as Gojek pushes forward in other markets.

At the same time, the ocean of marketplaces will continue to expand. In the long-term, as more consumer activities and business operations find their place online, and as more of the economy becomes digitalized, there will continue to be areas available for disruption by online marketplaces.

Paulo Joquiño, Content Strategist, Insignia Ventures Partners

Marketplaces growing in nonobvious directions

What is exciting being a VC in Southeast Asia is following this long-term perspective and seeing how the marketplace model is breaking out into nonobvious sectors and markets. Here are some directions we've seen marketplaces go in Southeast Asia:

(1) Marketplaces are focusing on specific types of goods, from cars to cosmetics. These marketplaces will find success going beyond the transaction or capturing all activities relevant to that specific good.

For example, Carro, a wholesale car marketplace, offers a variety of services apart from enabling users to buy and sell cars, from financing to maintenance. These adjacent services enable them to retain both supply and demand.

"It's easy to think that there are too many companies getting into the space than there is opportunity in the market to grow on"

The goal behind capturing customer activities related to the goods is to complete the user experience on the marketplace. While not all goods will need financing or maintenance, like cosmetics, there are other ways to create beloved user experiences without opening new lines of business, from the product quality to the brand(s) identity and convenience of deliveries. These brand clarity and distribution capacities are what the D2C brands aim to capitalize on.

(2) Marketplaces are entering more secular sectors, like education, agriculture, and healthcare. We are seeing this take flight especially in Indonesia where the potential upside from capturing a large market remains huge in these untapped sectors. The key for these secular marketplaces is to have a deep understanding of the underlying inefficiencies within these sectors in each market (country/region) that could be radically addressed by the marketplace model.

With farm-to-table agritech startup Sayurbox, the farming background and network of the founders gives them a nuanced perspective when it comes to driving efficiency in distributing fresh produce and ensuring quality at affordable prices for their customers.

(3) Social commerce is taking flight, especially beyond urban areas, where having micro-influencers in the marketplace serves as an effective user acquisition strategy. The key for these marketplaces utilizing social commerce is really ensuring that these micro-influencers themselves find value on the marketplace, whether as a buyer or a seller, and are not just being used as user acquisition tools. This value-add could even extend beyond transactions.

For example, social commerce startup Super in Indonesia facilitates the formation of communities among these micro-influencers, who themselves drive activity and learning amongst each other.

(4) B2B marketplaces are making a resurgence. Not only is the model more appealing than a pure consumer-facing platform from a sustainability and profitability standpoint, but it is easier to acquire data and leverage on it.

For example, Eezee is utilizing its marketplace to aggregate suppliers for enterprise and create the first list of accredited suppliers in the region.

This B2B marketplace goes beyond solving problems for enterprises and big corporations. Tech startups are also finding it highly productive to create marketplaces for SMEs to solve pain points when it comes to accessing particular goods and services, from fresh produce to financing.

For example, STOQO enables better productivity for mom-and-pop restaurants across Indonesia as they facilitate more efficient, on-time fresh produce deliveries for these stores' ingredients.

In Vietnam, VRED works with the small sellers (eg: micro-entrepeneurs from street shops to Facebook sellers) that dominate the country to distribute their financial services marketplace for the unbanked and underbanked. 

The main challenge for the B2B marketplace is driving the initial adoption, regardless of whether the target is a regional enterprise or a local SME. The marketplace experience has to be radically improved from the status quo, so much so that the business will find it difficult to operate without it once they have started accessing goods and services on the platform.

The enduring marketplace

The diversity of Southeast Asia in terms of consumer and business experiences has made it a very appealing sandbox for these nonobvious marketplaces to emerge.

Regardless of the approach, however, at its very core, the online marketplace aims to make supply and demand matching more seamless. The ones that have endured over time were also able to make the growth of their marketplaces self-sustaining — reducing churn in demand to a minimum, retaining supply as a result, and monetizing high margin activities. This will continue to be the case even as the marketplace moves in new directions.

Weekly Brief

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