According to the subject, famous players – Zalora, Foodpanda, Tripda, claimed that they would shut down operation in some of countries in SEA one by one.
Zalora, Foodpanda, Tripda are all different kind of startup but with one thing in common, they’re all backed up by Berlin-based incubator – Rocket Internet (ETR:RKET), who aimed to “quickly” build proven business models that focus on basic needs throughout Asia which is about to boom in Internet users (and also median-class), it sounds reasonable, but practically is it work as well as what they think it might be? why they shut down some of their quarter throughout Southeast Asia?
Zalora, an e-commerce platform that provides fashion and footwear products in Southeast Asia, announced selling off its business units in Thailand and Vietnam in 2016.08, which bought by Central Group, a region’s largest retail players in Thailand, for around $10 million each.
Foodpanda shutting down their services in Indonesia in 2016.10 is believed to be hard to compete with local players – Go-Jek’s food delivery service Go-Food. By the way, it’s not the first case for the same reason, Foodpanda is already closed down operations in Vietnam at 2015 and sold it to local rival – Vietnammm for an undisclosed amount.
Tripda, a carpooling startup operating in India, Pakistan, Singapore and Taiwan, will cease operations on 2017.03 after facing high operating costs and failing to raise funding to meet them.
Here’s the reason why :
Weak : (internal factors)
1.Eyes bigger than stomach
Zalora, Foodpanda, Tripda, they all try to get into too much area simultaneously and each countries is expected to hire its own staff. Sounds that It’s a great idea that locals are better know about their countries, but it almost lead to all the original Rocket-assigned workers leave, resulting in a serious lack of company culture and consistent goal.
2.Daddy run out of money
Rocket’s stock price has fallen 54% since 2014, 12 of its startups have officially closed which cause losing $690M in first half of 2016. Not making money would make them rethink the startups they aim.
3.The business seems unprofitable
Let’s check two of it : (Left) Zalora / (Right) Foodpanda. The source : Rocket Internet Annual Report 2015.pdf
We can clearly see that Zalora’s adjusted EBITDA is negative, and the marginal cost is about (45%) in 2015. From 2013 to 2015, their loss is accumulated to US$259 million, while its total disclosed funding from external investors stands at US$212 million according on crunchbase. It’s running out of money already, but they still can’t lower down the expenses, not to mention earning money.
As for foodpanda, adjusted EBITDA is negative on account of investing heavily in marketing and infrastructure. In some of countries in Southeast Asia, infrastructure included logistics and payments are still underdeveloped, so I surmise it’s hard to cut the expenses recently.
CEO of Garena and Shopee (Read more >> Why Shopee taking down SEA in one year), Nick Nash’s, said : “ability to localize and market on the ground helped them scale the business across Southeast Asia – a region that’s huge but also very fragmented, with each country having its own nuances.”
It’s better to focus one market at first for startups with limited resources, step be step, go forward before stand firm at one step!
Threat : (external factors)
1."Profitability" would be more important to VC
Theoretically, in the early stage, investor see the case on “potential”, but at the later stage, they’ll start to focus on the “number” or if the business model can be sustainable and profitable.
Actually, it’s getting harder to raise money from VC these years, according to new report from KPMG about the global venture funding, 2016’s startup fundraising declined by almost 25 percent by deals, and declined 10 percent by total value.
KPMG points out that “The days of companies being able to burn cash are gone for the foreseeable future”. Rather, investors will target those whose business model is strong and with a clear path to profitability.
2.Stronger local players penetrating the market
For e-commerce, even though the global players (such as eBay, Amazon), and regional players (such as Lazada, Zalora) are already taking part of SEA, but the local players in each country are not slouch.
Especially in Thailand (local players accounts for up to 50 percent), in Vietnam (local players accounts for up to 60 percent), in Indonesia (local players accounts for up to 70 percent).
Don’t ignore the local power, it may influence more than you think, so maybe hire locals to get know more and deep about the market!
It’s normal that every week, a different startup will run out of money, and several of startups dead. But there is still something we can learn from the lesson : Don’t sees SEA as single gold brick!
photo @ Gigaom