Simon Torring is the Co-founder of Cube Asia, a market insights company for online retail in Southeast Asia. Cube Asia helps brands, retail companies, and investors drive profitable growth by leveraging more recent, granular, and reliable data and insights about their online sales channels.
In this conversation, we cover eCommerce in Southeast Asia. From SEA ltd’s struggles with Shopee, to the inevitable rise of TikTok shop, if it concerns eCommerce in Southeast Asia, we have it covered.
I hope you enjoy my conversation with Simon Torring. [WATCH HERE]
This podcast was a collaboration between Smartkarma and Compounding Curiosity. The aim was to surface the high-quality expertise and analytical strength of the Smartkarma Independent Investment Network, and leverage that into the popular podcast format we all know and love!
Be sure to check out Smartkarma, where it’s free to sign up.
[00:01:43] – [First question] – Simon’s history with Southeast Asia and starting Cube Asia
[00:03:14] – The challenges of Data collection
[00:05:36] – Finding data but also being able to integrate it
[00:07:50] – Snapshot of where Social Commerce is at right now
[00:10:22] – The rise of TikTok Shop
[00:13:08] – Global Brands and TikTok Shop
[00:16:52] – Where might TikTok Shop be going wrong?
[00:23:38] – How has Shopee been able to grow its GMV meaningfully between Q1 and Q2, whereas Lazada and Tokopedia have been sort of struggling to do so?
[00:30:58] – Differences between Shopee, Lazada, and Tokopedia
[00:35:13] – Why Shopee’s position in Indonesia, historically one of its key growth markets has sort of deteriorated since September 2022
[00:37:53] – eCommerce’s remaining growth in Southeast Asia
[00:40:27] – Wrapping up
Connect with Simon:
Listen to this episode on Apple Podcasts, Spotify, Castbox, Google Podcasts, or on your favourite podcast platform.
[00:00:00] Kalani Scarrott: Welcome to Smartkarma Compounding Curiosity. It’s the same compounding curiosity. You and I have always loved, but with the benefit of collaborating with Smartkarma, the independent investment research network that unites insight providers, investors, and investor relations professionals. This collaboration between the Asian first financial research platform Smartkarma and Compounding Curiosity was created to service the high-quality expertise and analytical strength of the Smartkarma independent investment network. And leverage that into the popular podcast format we all know and love. I’ve previously interviewed Raghav here on the podcast, episode 46, and I really enjoyed not only his story, but also his ideas and his vision for what Smartkarma can be. So, to now be partners with him? Pinch me, I think I’m dreamin So, be sure to check out Smartkarma at Smartkarma.com where it’s free to get started on Smartkarma. But, anyway, on to today’s episode.
My guest today is Simon Torring. Simon is the co-founder of Cube Asia. A markets insight company for online retail in Southeast Asia. Cube Asia helps brands, retail companies, and investors drive profitable growth by leveraging more recent, granular, and reliable data and insights about their online sales channels. So in today’s conversation, we cover e-commerce in Southeast Asia. So from sea struggles with Shopee to the inevitable rise of TikTok shops. If it concerns e-commerce in Southeast Asia, we have it covered. So I hope you enjoy my conversation with Simon Torring. Simon, thank you so much for coming on today. I really appreciate you just giving your time and your insights, but just to start off, do you want to give a bit about your background, both in Southeast Asia and how you and your co-founder started Cube Asia?
[00:01:53] Simon Torring: Thanks so much for having me. I’m originally from Denmark but I’ve spent the last 12 years in Southeast Asia. My first port of call here was Kuala Lumpur in Malaysia, where I worked for a venture builder and then I’ve been really fortunate to go around the region and do different things. So I started with a startup in the beauty e-commerce industry. We then sold that to Sephora. So suddenly I ended up being in a big beauty retailer and I stayed there for about seven years and had a wonderful career there across Singapore, Indonesia and Thailand. Then, I moved back to Malaysia, a couple of years ago, during COVID and decided to start cube and cube is a market data and insights company focused completely on e-commerce in Southeast Asia. We are two co-founders met each other in consulting. So for a brief stint before starting cube, I was working as an advisor of McKinsey and that’s where I met my co-founder, Sarab, he’d been there for 10 plus years and was leading e-commerce work in the region. He and I bonded over this, what became a shared frustration just for the lack of good market data and insights in this space and that’s why we decided to start the company, that’s about a year ago now.
[00:03:14] Kalani Scarrott: Given that lack of data for what you guys are trying to do, how do you get around that? How have you originally started and how has that changed now?
[00:03:22] Simon Torring: We knew we were passionate about the space due to this shared frustration. But when we started the business, we also knew there were two important questions to square out. The first being, are we the only ones that are frustrated about this or is there a market for it? And then the second, this is an important one, can we actually do better? Because there could also be some structural reasons why even these big established data providers were not able to meet the bar that we had. Luckily, we’ve been able to answer both of those questions positively. So we’ve definitely seen a market for it and then on just how to get to better quality. We started the company with a belief that we would be able to get better accuracy and better granularity if we were able to integrate different data sources, so many data providers out there are insights providers. They typically rely on one main data source, that could be web scraping or consumer surveys or access to a big database of consumer online receipts. What we have managed to do is combine those from a starting point, that means our expense to just build our data set has probably been a bit higher than most providers out there, and that was a bet for us. But we have also seen that as we have been able to integrate those data sources, that leads just quantifiably to better accuracy and better granularity as well, so that there is no real secret sauce beyond the fact that we have gotten really good at combining different data sources. We have three main data sources, scraping consumer surveys, you receipts and then we supplement that with a pretty long list of secondary or ancillary data sources. So anything from government reports picked up by our country’s analysts to broad e-commerce statistics that are out there, anything that’s released by companies and their quarterly or annual earnings. So we try to build a machine to integrate it all and test for accuracy and then just serve the most discerning customers out there. Bear with me cause I’m a complete data noob.
[00:05:36] Kalani Scarrott: So feel free to correct me if I’m wrong. But when you’re looking for data sets and also you have to integrate them, what makes a good data set and what does good data do? What are some features of a useful data set?
[00:05:50] Simon Torring: That’s a great question. There is a well known saying, ‘rubbish in, rubbish out. I think one first rule is, we need to be able to ascertain that what we take in is of high quality and complete. We do many different things, but if we take one of the core services that we provide for our subscribers and customers, it’s about sizing different categories online. So that could be the fashion or beauty category, or it could be a small sliver of it, like skin cleansing in Vietnam on these three platforms. Just completeness of data intake is very important because oftentimes you don’t really know where the end of that rope you’re pulling is, you can keep looking. And if you’re attempting to get to completeness, where do you stop? Where do you draw the line? So in a sense, I wouldn’t say beyond just the basic hygiene factors of trusting the data we take in and making sure there are no errors in it. Actually, it’s also much more for us to understand almost all the input data sources as a patchwork that overlaps but has some gaps and understanding that in order to get to a good estimate of the size of a category. Maybe one data source is great for understanding which competitors are so big or which products have started selling well the last month, but we need another data source for understanding just how big is the category or understanding how many consumers are participating in it or what’s their frequency of purchase or whatever. In a sense, no data set is perfect and we try and then find different input data sources to make sure that we get to as complete of a picture as possible.
[00:07:50] Kalani Scarrott: Can you get me up to speed quickly because going deep in the weeds about social commerce in Southeast Asia, would you be able to give us a quick snapshot of where you’ve come from and where are you right now?
[00:08:05] Simon Torring: We believe social commerce is a part of e-commerce. So we started looking at social commerce at the beginning of 2022 and that was because we were seeing an interesting dynamic where you had e-commerce platforms like Shopee, Lazada and Tokopedia on one hand, and then you had social and content platforms like TikTok, Facebook or Instagram on the other and they were living in this interesting symbiosis where Instagram was making a lot of money sending traffic through ads to the e-commerce players, and then the e-commerce players were able to convert that to revenue by selling people stuff. But we also saw that these two groups were, in a sense, starting to encroach a bit on each other’s territory, the e-commerce players were launching some social features like live streaming or entertainment features like small in-app games to try and have consumers go straight into the e-commerce app, not having to buy that ad.
On the other hand, we saw some of the social and content apps start to integrate some e-commerce features like catalogs, business messaging or even payment. We saw that consumers in Southeast Asia were really enjoying and interacting with these overlapping experiences, and that’s where we thought, Hey, what’s going on here? There seems to be a merger of these two sets of experiences and consumers are enjoying it. So as we’ve sized it just on the numbers, we believe social commerce, which is really e-commerce with some distinct social traits, it’s about a quarter of the e-commerce market in Southeast Asia and it’s growing faster than overall e-commerce, especially with the recent rise of TikTok shop and in a sense, TikTok shop is the most blue flame, clean manifestation of social commerce that we have seen so far, because it is a content destination. It is a commerce destination. It has a fully integrated e-commerce checkout flow. You don’t need to go anywhere else. You can do everything you need in one place and consumers are loving that. So, that’s where we are at.
[00:10:22] Kalani Scarrott: I remember even reading the social commerce in Southeast Asia report, you listed the five winning tips of brands and number two was that the TikTok shop has begun to show its promise across Southeast Asia. So, what makes them so much stronger compared to competitors? Can we just dive deeper on those things you listed.
[00:10:39] Simon Torring: In a way, it’s not very complex. It’s really well executed. There are a few different types of social commerce. We see four archetypes in Southeast Asia. Conversational commerce, which is everything about text message based interaction between sellers and buyers. Then we have live selling, which is selling through live streams, then we have community group buying, which is a bit more for rural communities, which is like reseller and agent based modes of buying online. And then finally, we have what we call social platform commerce, which is e-commerce experiences where you have a full checkout inside of a social app. You never need to go to a separate place to check out and TikTok does live shopping and social platform commerce better than any other app that we have seen. Something as simple as integrating a proper checkout feature. I have been looking for Facebook and Instagram to do this for years, they never moved on it. Prior to the rise of TikTok Shop, we saw individual live sellers in a country like Thailand on Facebook, in one full hour live streaming session, able to do 150 to 200, 000 orders where all of those e-commerce orders were received through Facebook messenger and Facebook comments. It’s completely crazy to organize and manage it and they were managing to do this with some custom hack together software but it was almost as if Facebook or Instagram or anything in the meta ecosystem, were either passive or almost a little bit against this behavior and then TikTok came around and offered, you can live stream here and we will have a fully integrated catalog. It will be easy to check out. We will even integrate to third party logistics providers so we can manage a good logistics and return experience. So, in a sense, TikTok did the more or less obvious thing of enabling what people here really want it to do all along.
[00:13:08] Kalani Scarrott: I saw you mentioned in some other podcast, I’ve read that you did most live sellers on TikTok shop and micro sellers offering high discounts on mass market products, whereas big brands, especially global ones have been a bit slower in adopting the platform. So, why is there this sluggishness in big brands given they’re already familiar with TikTok though?
[00:13:25] Simon Torring: This was true when we wrote that in December last year and we still see that on TikTok shop, depending a bit on the category and the market, 50 to 70% of the sales come from either resellers, individual, influencers or KOLs who are selling. So, in most cases, I would say these are still micro in scale but what we are seeing is two things. The first is that a lot of these global brands are launching on TikTok Shop as quickly as they can. It’s a very daunting and difficult channel for these companies to run because they are corporate companies. They like working with agencies. They have complex guidelines for everything and then TikTok Shop is like, if you’re in Indonesia, for example, you need to live stream 12 hours per day, you need to produce 3-4 videos per day and you need to have 5000 affiliates that you don’t know who they are. How do you even do that? So the commercial opportunity is big enough that most of these brands are considering it. A few of them have already moved. So that’s one change. The other is that we have now seen the emergence of a new class of insurgent champions on TikTok Shop. These are typically local brands that are not that well known outside of e-commerce who are mastering the commercial model of TikTok shop. So the two biggest categories in TikTok shop are fashion and beauty. The beauty categories where there are the biggest individual sellers or the biggest brand sellers, just because the fashion category is more scattered. In beauty, to take an example, Indonesia, which is the biggest market for TikTok shop at the moment in Southeast Asia, the biggest beauty brands on that channel will cross 30-40 million U. S. dollars in sales this year. So it’s a significant scale already, definitely we can’t call them micro anymore, but they are also at the same time brands that if I put 10 of those logos on a slide in front of you, you probably wouldn’t recognize a single one. So it is evolving fast and I imagine that over time, the percentage of international and local champion brands as a percentage of total sales will increase. That’s what we’ve seen with all the other e-commerce channels here is it starts with the small sellers and then over time they get weeded out and the brands take over instead.
[00:16:13] Kalani Scarrott: Correct me if I’m wrong, but I remember hearing on the other podcast, you might’ve mentioned, they’ve made it when they’re selling Samsung TVs and white goods or something.
[00:16:19] Simon Torring: Yeah, TikTok is doing wonderful in fashion and beauty, starting to do well in FMCG, like mom and baby categories, things like instant formula but nobody’s really buying white goods and electronics. So there’s still some categories where Shopee, Lazada, Tokopedia have the lion’s share of the market.
[00:16:46] Kalani Scarrott: It’s fair enough. Everyone always talks about dominating your nation and then expanding out. So I can’t complain there. Given all the positives around TikTok shop, if we go the flip side, is there anything that can go wrong in executing their strategy?
[00:16:59] Simon Torring: Firstly, give credit where credit is due, they have come out of the blue and are on a path to doing very well in 2023. So just as a data point, we believe that there net sales for the year in the region would probably be around 13 to 16 billion, just for the e-commerce geeks out there, that’s not GMV, there is a fairly high returns and cancellation percentage, so we have to subtract a bit for that. I want to look at real trade volume, like how much money are consumers actually spending? So it will be substantial in size. What can go wrong? A lot of things, to take some of the key risk factors that we can see right now, the first is that TikTok benefits a lot from being both an e-commerce and content platform, but at the same time, that also means that they have to obey regulation, both as an e-commerce player and a content player in all of these different markets and they don’t really seem to love being regulated and I guess nobody does. So you’ve already seen some probes and inquiries and countries like Indonesia and Vietnam where they need to establish themselves properly, locally here and implied in that is also like we need to be able to perform a bit of soft censorship and things like that. So, that’s going to be an interesting one for them to balance because they have to fight two fronts on that regulatory piece. The 2nd is, they haven’t managed to get a foothold for real outside of beauty and fashion. That’s fine. It’s a big market on its own, but if you want to be a real e-commerce destination and continue to grow, you need to serve needs outside of that. It also means that they have a pretty sparse appeal for most male consumers at the moment. They are a bit overweight to women. So we need to see them establishing a third or a fourth category outside of that before we can say they have a firm foundation as an e-commerce player for years. Then the last thing is, they’ve recently made some clumsy moves related to what I think is called project-S internally in TikTok which is about acting as a retailer, rather than a marketplace, what that means is currently, whether it’s Shopee, Lazada, TikTok shop, they all marketplaces, meaning there is a seller, there is a buyer, and then there’s the platform in the middle, typically taking a small cut. If you go into a retail model, it means that you as a platform are now owning the stock, you’re buying it wholesale from partners and you’re selling it to consumers. It’s a very different business model. Shopee and Lazada have generally stayed completely out of this, which means they can think about their business as that of a platform where they need to serve sellers and buyers alike. TikTok, this early, has started talking about acting as a retailer, meaning either creating its own like house brands, or at least buying goods and selling them to consumers and this is challenging for two reasons. The first is that TikTok should focus on getting all the big international brands on their platform. That is what they need to do to complete their assortment and enter these categories that they are not in. You’re not going to buy electronics that are brandless, it needs to have a great Samsung flagship store, for example. So at a moment where that should be their focus, this means they’re almost indicating to the same sellers, we’re going to come and try and replace you. It’s something that Shopee and Lazada, 10 years into their journey have not even started thinking about. I’m sure they’re thinking about it, but they haven’t done anything about it and for TikTok to talk about that this early on, I think is shooting themselves in the foot. But it also means from a regulatory standpoint, it means that they can be perceived as taking business away from these micros sellers. That in a sense, the micro seller story is what could make them build a wonderful productive relationship with governments all over the region. So, I think that’s quite clumsy. Let’s see, it’s early days, but those are some of the risk factors that said there’s more good than bad.
[00:21:58] Kalani Scarrott: I don’t know if you have an answer to this and it’s pretty much off the cuff, but why do you think they’re jumping the gun on this? Why do you reckon they’re going down that route?
[00:22:07] Simon Torring: It’s interesting, when we talk about TikTok, we must bear in mind that they have a Chinese sister-app called Douyin, which is a fair few years ahead of TikTok in development and monetization and TikTok shop fits very well in the mold of what Douyin did in e-commerce in China. So I think what is happening a little bit is that in a sense, they have the future already. There was a question mark on whether Southeast Asia would react similar to the Chinese market and whether the same features and the same businesses would work, but it seems that they generally do. So I can imagine that a lot of this is them being eager to pull the future into the present. We have seen that and whatever is working in China, let’s just very quickly apply it here as well. This retailer model is also an easy way to deal with not being able to onboard the right sellers. So if they’re having struggles onboarding like big brands in categories where they’re not as big right now, but that could be a way of attempting to cut past that and distort growth a bit more, but in this particular case, I think it’s the wrong time to pursue that.
[00:23:38] Kalani Scarrott: It’s amazing we’ve gone so far without mentioning or going deep into Shopee. So, we’ll get deep into Sea Ltd. and Shopee but how has it been able to grow its GMV meaningfully between Q1 and Q2, whereas Lazada and Tokopedia have been struggling to do so?
[00:23:55] Simon Torring: We’re at the end of August 2023 now, it’s the most interesting moment in e-commerce in Southeast Asia for me, at least from the last three or four years. For the first time we have a real regional challenger in TikTok. We talked about TikTok, so let’s leave that on the side. But for the first time in a while, there’s a real new regional player, not just in one or two markets, it’s everywhere. The second is that it’s a hard time to be an incumbent e-commerce giant in Southeast Asia and I’m thinking about Shopee, Lazada and Tokopedia because their valuations were either directly their valuations, all the valuations off their parents who are, for Shopee, it’s Sea Ltd. that also has some gaming assets, for Lazada, Alibaba, that is a sprawling empire of e-commerce and other things. For Tokopedia, it’s this new constellation called GoTo where Tokopedia was merged with the mobility company Gojek. But in all those cases, two years ago there were such amazing, high promises for the fortunes of these companies, very high valuations and amazing multiples. Investors were super interested in the story. There was talk about the super app story of South Southeast Asia and all these different things. In the last year and a half it has all crashed and burned. Growth has not lived up to expectations. Monetization revenue has not at all lived up to expectations. The funding markets have obviously slowed a lot as well as interest rates have come up. Especially in the last year or so, all of these e-commerce players have had to perform a little bit of an impossible balancing act where they keep growing top line, but at the same time also turn profitable and then start to display consistent profits. They have all tried to do this in different ways and with varying degrees of intensity. Q1 and Q2 this year is essentially when the effect of those moves has started to be shown. We can see that Shopee, for example, turned profitable in Q1, big moment. The CEO went in a big Bloomberg interview, talked about how hard the cost cutting journey had been, one ply toilet paper, and I don’t know what, then went out and offered a big raise to the whole team and said we are through the war now. Lazada is on its own whole thing. Alibaba is breaking up into six or seven different companies. Lazada will now find itself in this odd bunch of international e-commerce assets. We don’t know if they will IPO or if there will be a private equity offering of whatever it will be go to in Indonesia, it’s whole own thing, but common for them all is they’ve put themselves on the spectrum between top line and bottom line focus. In Q1 and Q2, we’ve seen the effects of that. So if we say Shopee, the most important Q1 profitable, for us, industry observers, it was fine. Now, Q2, what are you going to show? Are you going to show that you can just scrape by and stay profitable, but at the trade off of having lower top line growth? Maybe even seeding market share to TikTok shop in some markets because TikTok shop is spending like Shopee did in 2016-2017, it’s really party times or are you going to show top line growth, but then not deliver profits, which will anger your investors? In my mind, there was never a way to do both. It’s fairly simple business model where you can only control so many levers or you can only adjust so many levers and what we saw was very clearly they had decided to return to a focus on top line growth, which I think makes sense for the business in the face of this growing competition from TikTok shop that had the very predictable effect of sliding them back into losses for that unit and combined with some bad news from the gaming side, Garena side of Sea Ltd, it caused nearly 30% decline in the stock price from day one to day two when they released earnings. So, in a sense, it was okay. Now the market has certainly shown us what it feels about this but they are not out of this bind. Shopee has at least taken the pain now and can now, I suppose, go on and focus on top line growth. It should be priced into the stock already, but for Tokopedia and for Lazada, I’m sure that these companies are meeting every week right now trying to figure out how they’re going to strike the right balance. It’s super tough spot.
[00:29:07] Kalani Scarrott: You know the numbers better than me here. Just off the top of my head, but I think e-commerce still has a long way to go in Southeast Asia that doesn’t compare to more developed markets like China and the U.S.
[00:29:16] Simon Torring: For sure, we were spoiled up until about a year ago, the 10 year CAGR had been very high, 30-40-50% or something like that, an amazing growth. That’s never coming back. It’s gonna be more, perhaps the next 10 years will be something between 14-17% or something. So still growing much faster than retail is in these markets. It’s growing much faster than GDP but that rocket growth period is over and it has very big implications for the brands that are selling because they’ve been used to treating e-commerce as a new venture and something where top line mattered and where profitability would be sometime in the future. And what’s happening now is the top line growth party’s over. It’s much more now about just sustainable operations, reaching profitability and it’s a very interesting moment in e-commerce. We are very bullish. If you’re in retail, you look for spaces or channels of growth and e-commerce is absolutely the fastest growing channel. They’re still but it’s just the total absolute numbers of growth are definitely in percentage are down but in total dollar value are way up because the base is so high now. So this is a different stage of growth.
[00:30:58] Kalani Scarrott: We’ll ignore the TikTok shop for now but when we’re talking about Shopee, Lazada and Tokopedia, both from either a user perspective and an investor perspective, how do you view their strength relative to the others? Because I remember in the other podcast, you said that between Shopee and Lazada, if you had a go to market strategy, it would almost be pretty similar for both of them as if you’re selling products on the platform.
[00:31:21] Simon Torring: So, between Shopee and Lazada, it used to be that Lazada was the more quality focused player and that had an implication on its assortment as well. So it has had some flagship and exclusive flagship stores for brands of a slightly higher price level. But what we can see in the last year or so is that in most of the markets, Lazada is now letting in the brands at the bottom that previously belong to Shopee, those two channels are looking more and more similar month or quarter by quarter. Shopee has a wonderful advantage in that it has a substantially bigger reach in all of the markets. It is the leader in all the markets depending country to country, we would normally see Lazada’s consumer base. Almost all of Lazada’s customers also shop on Shopee, but somewhere between one third and a half of the Shopee customers do not shop on Lazada, so there is a bigger reach. The second unique trade of Shopee is that Shopee is perceived as the primary e-commerce destination for more consumers. It means it is an app that is opened more frequently. I think they are still firmly in the lead and it is almost their game to lose. In that sense, I agree completely with their decision to refocus on top line growth, because that will contribute to that ability to differentiate. They have a bigger business and bigger reach.
You mentioned Tokopedia as well. Tokopedia is having a very hard time. One, they’re only exposed to Indonesia and Indonesia’s e-commerce market is growing slower than e-commerce in the other Southeast Asian countries, at least most of them. It also clearly doesn’t offer them a lot of portfolio in terms of where they want to make bets and then they are for better or worse, it’s a harsh way to say it, but they’re trapped in this GoTo stock, listed company which contains an e-commerce asset, Tokopedia and a mobility asset, Gojek, both of which are currently still unprofitable. So at a group level, they need to get to profitability and they are taking a harsh and strict diet to get there and unfortunately, by having to make so many cuts, we can see that Tokopedia’s reach is falling and their sales are falling as well. I think out of the bunch, they are honestly the ones that are having the toughest time and I don’t envy the hand that they have been dealt between Lazada and Shopee. My bet for now would be Shopee but I wish for Lazada to have a bright future because for consumers and for brands, which frankly, I care more about them than I care about the platforms. The platforms will be okay, for consumers and for sellers, it’s going to be much better for everyone if there is a little bit of competition.
[00:34:55] Kalani Scarrott: It’s funny with Gojek too. I loved using Gojek every time in Bali and Jakarta, but investing in no way.
[00:35:01] Simon Torring: It’s similar to the story of Grab, great for consumers but not so great for investors.
[00:35:13] Kalani Scarrott: I was wondering why Shopee’s position in Indonesia, historically, one of its key growth markets, has deteriorated since September last year. Could you talk a bit about that and how you would describe it?
00:35:33] Simon Torring: It’s absolutely true that they’ve had a hard time. Everyone other than TikTok shop have had a hard time in Indonesia e-commerce since last summer just to varying degrees. So what’s happened is growth has slowed a bit and our forecast for e-commerce growth in Indonesia this year is 12-13-14%, which is perhaps 5 points lower than most of the other Southeast Asian markets. So it’s a little bit slower. It’s also where there was the most intense promo and price competition in e-commerce in the past and that contributed to bigger total adoption of e-commerce as well, because a lot of new consumers came online using those promos, incentives and all funded by the platforms and as Shopee and even Lazada and Tokopedia have pulled back on their incentives and TikTok, funny enough, has come into the mix at just the same time. The effect has been that these incumbent players, Shopee, Lazada, and Tokopedia had a very hard time. Interestingly, Tokopedia, definitely had quite poor performance but this is a deliberate choice on their part of pairing back investment. Between Shopee and Lazada, Lazada has benefited a little bit from Shopee. Stepping down a bit, and that’s because a lot of the customers are the same. A lot of the assortment is the same, but Shopee used to be more aggressive and promos. So in a sense, by virtue of Shopee pulling back, it made Lazada comparatively more attractive. So Lazada had a bit of a bright moment there but that’s over now as Shopee is returning to investing in the top line. So I think Shopee’s Q3 and Q4 last year was, and this year Q1 muted. I expect that we will see them returning pretty aggressively to growth now and in a sense trying to win the market. I think that would be a compelling new story.
[00:37:53] Kalani Scarrott: Before we wrap up today, is there anything we haven’t talked about the consequential about the future of Shopee or e-commerce in Southeast Asia?
[00:38:01] Simon Torring: I’ve spent the last 10 years in e-commerce in Southeast Asia and I know there’s a lot of investors who listen to this podcast, I think it’s helpful sometimes to zoom out, step back a little bit and think about the long term prospects of e-commerce in the region. There is a quantitative element to that: what percentage will e-commerce end up being of total retail data points? What’s the CAGR forward? We’ve talked a little bit about those, but I think it’s also very interesting to think about the qualitative aspect of it. What will e-commerce end up looking like? And it’s important there to say, e-commerce is still very nascent from an experience perspective. It’s all pretty much the same feel. Shopee feels the same as Lazada, Lazada feels the same as Tokopedia, a very high share of the market is concentrated on these platforms. We haven’t really seen the emergence of great brands. Brand websites or brand experiences selling directly to consumers, we haven’t seen great growth in a single category focused players, like Sephora’s or Zalora’s, who are focused on one category and doing something special there. We haven’t seen very high touch, almost top of the market luxury, what that will end up looking like. So I think we are at an interesting stage now where TikTok is in a way showing that there is now something else than just the flat e-commerce experience of Shopee, Lazada and Tokopedia. But as an investor, I would be very curious to look for signs of what new modes of e-commerce consumers are going to be picking up because there’s no doubt that it will become more rich and diverse as the market matures, similar to what we can see in the U.S or Europe or even in China. So as an observer of the industry, that’s something I really try and keep my eyes peeled for and if I was an investor, that’s also where I would be attempting to try and see into the future.
[00:40:27] Kalani Scarrott: Simon, thank you so much for today. Where can people find you? Anything else you’d like to add or links you’d like to mention? I really recommend the social commerce report you guys wrote last year.
[00:40:37] Simon Torring: We will be coming out with a couple of new reports in the coming months. The place to find me is LinkedIn, Simon Torring, I’m a LinkedIn addict. We are now a pretty big community there and I try to pass along anything I find either from our own datasets or from the broader e-commerce industry two or three times a week. So, people could find me there anytime.
[00:41:07] Kalani Scarrott: People love to dunk on LinkedIn, but I’ve found some pretty good stuff through it.
[00:41:09] Simon Torring: I love LinkedIn.
[00:41:13] Kalani Scarrott: Simon, thank you so much. I really appreciate it.
[00:41:17] Simon Torring: Thank you so much.Outro: If you enjoyed this podcast episode, be sure to check out all the other amazing content on the Smartkarma and Compounding Curiosity channels, links will be in the description of this podcast episode, where you’ll be able to find the transcript, mention links, show notes, and other related resources. If you want an email notification every time an episode releases, plus my lessons and takeaways from each episode, be sure to sign up to the Substack, so that’s compoundingcuriosity.substack.com and make sure to check out Smartkarma, where it’s free to get started at Smartkarma.com. Either way, links to all content mentioned today will be in the description below. So until next time, have a good one!