By The Nation
At the “Last Mile Fulfilment Asia Conference and Exhibition” (LMFAsia) held in Singapore last month, Martin Toft Sorensen, chief executive and co-founder of WearYouWant, said there was considerable discussion on how start-ups should focus beyond just team, product and market to become successful.
“Start-ups should have a clear path and strategy towards achieving profitability by scaling the business without forgetting the lifetime value of the customer versus cost per acquisition,” he said.
“If e-commerce businesses simply follow a desire to climb user-acquisition heights quickly without keeping an eye on the ROI [return on investment], there is a higher risk of a greater fall.
“Penetration from online platforms can go far, wide and deep, but the trajectory needs to be based on running a business that brings money for investors, shareholders and other stakeholders in the near future.”
Echoing this advice was Thai e-commerce guru Pawoot Pongvitayapanu, CEO and founder at efrastructure inc and managing director and founder of Tarad.com, who also attended the business-platform event. LMFAsia brought together professionals from the retail, e-commerce, logistics and parcel industries.
Sorensen advised that in addition to creating a viable business model that balances the cost of acquiring customers with the ability to monetise the lifetime value of a customer, start-ups should be creative in how they attract and keep customers.
While many e-commerce sites are reporting high sales growth, the reality is that they may not be showing any profitability, he said.
“In Thailand, we have yet to see any e-commerce companies proving they can scale and yet become profitable.
“The recent acquisition of Rocket Internet’s fast-growing, yet loss-making, e-commerce site Lazada by Chinese e-commerce giant Alibaba, and Zalora (Thailand and Vietnam) by Central Group, has definitely created waves in the e-commerce industry.”
Sorensen said that while Lazada would pave the way for Alibaba to penetrate Southeast Asia in a market-leader position, it remained to be seen whether Zalora’s acquisition by a traditional offline retailer would kick-start true omni-channel experiences in Thailand.
He added that this was an exciting time for e-commerce companies and start-ups in general, as well as for investors.
“There has been a lot of noise on increased funding in various e-commerce businesses lately, but very few on acquisitions and exits, which are important factors that constitute to a healthy business. I think such acquisitions are just the beginning of market consolidation and a signal to what 2016 will bring, which is possibly more M&As [mergers and acquisitions] in this dynamic [Southeast] Asian market.”