In this piece, we spotlight several startups riding the waves of social and live commerce in Southeast Asia while leveraging the war that is going on between TikTok and Shopee. For my Founder readers, I hope you can bring some good takeaways from this article.

E-commerce battle heats up: TikTok and Shopee amp up investments

Shopee has been focusing on profitability, turning EBITDA-positive since the 4th quarter of 2022. After three quarters of focusing on efficiency, in their latest earnings call in August, Shopee stated that they “believe now is the right time to start re-accelerating our investments in growth“. Shopee is willing to risk their bottom line again and is prepared for this to “result in losses“. This is certainly a clarion call made in response to TikTok’s aggressive expansion in the region.

Over the past 12 months, TikTok has become the third-largest e-commerce player in major markets in the region. In Indonesia, TikTok is keeping Bukalapak and Lazada on their toes. Although TikTok is setting a target to unseat Lazada by the end of 2022, achieving this goal won’t be easy. In response, Lazada plans to utilise a fresh injection of US$845 million to bolster its infrastructure and enhance merchant services, aiming to safeguard its market position.

Not to mention Temu’s latest move to land in the Philippines, the competition is certainly intensifying, signalling increased investments and funding throughout the value chain. Unlike the previous “growth-at-all-costs” approach, these giants are now more likely to focus on investing in essential elements that support long-term structural growth, such as improving product quality, service quality, and content quality. These areas present significant opportunities for startup founders as well.

Opportunities in product quality: Leveraging the manufacturing capabilities in Southeast Asia

In Southeast Asia, the Average Order Value (AOV) on major e-commerce platforms hovers between US$5-10, a stark contrast to China’s US$15-50 and Taiwan’s US$50-70. Increasing wallet share from consumers and elevating the AOV are top priorities for these platforms.

One approach to addressing this issue is to diversify and improve the quality of product offerings. While more than 70 per cent of products sold on Shopee and TikTok come from domestic manufacturers, a TikTok Southeast Asia team member we spoke with mentioned that “the majority of domestic product quality simply doesn’t measure up to that from Chinese cross-border sellers.”

Echoing this sentiment, a Shopee Business Development team member stated, “The biggest advantage for local makers now lies in fulfilment speed and cost, but in terms of product quality and even cost structure, Chinese manufacturers remain highly competitive.” Indeed, we reviewed top individual sellers on both TikTok and Shopee, and it shows that most source their products from China.

This gap creates a unique opening. As Southeast Asian governments strive to protect their local economies and manufacturing sectors, demand for higher-quality local manufacturers will inevitably grow. In this landscape, the timing is ripe for new waves of local manufacturers and product brands to establish themselves as essential players. Furthermore, any tech startup that can facilitate this transition is also well-positioned to seize significant opportunities.

Also Read: Decoding the shift: The new era of B2B marketing

Inflow, an HCM City-based startup, is seizing this moment. Founded in April 2022, Inflow connects global fashion brands to Vietnamese apparel manufacturers. They don’t simply help the brand customers to connect, but in fact, guide the local producers on how to improve product quality, fulfilment rate, and even the design and R&D process.

Khanh Lê, the Founder and CEO, noted, “Global big brands have achieved their success due to the robust apparel manufacturing resources in Vietnam and Southeast Asia. However, there isn’t yet a tech platform that can unlock this potential for brands of all sizes worldwide. That is our mission.” 

Opportunities in service quality: How to help merchants make more money

Many services on e-commerce platforms could be enhanced, not least of which is logistics infrastructure—a sector that key players are heavily investing in. (A recent Tech in Asia article has some in-depth discussion on this.) Another avenue to explore is how these platforms can boost merchant profitability. Both Shopee and TikTok are expanding their affiliate programs, with TikTok’s Project S also moving in this direction.

Drawing from our experiences in Taiwan, where the e-commerce industry is a decade ahead of Southeast Asia, provides valuable insights. For instance, 91APP (AppWorks portfolio), a leading online store platform now publicly traded on the Taiwan Stock Exchange, achieved early success by assisting merchants in not only opening online stores but also leveraging powerful marketing tools across major social media channels and offline solutions.

While many startups are striving to help online merchants and influencers earn more money on TikTok, one common challenge emerges: marketing effectiveness. There’s still a strong nature of impulsive purchasing on TikTok, marketing results tend to be more unpredictable and sporadic.

Partipost (AW#23, Pre-Series B in 2022) has expanded its presence to six markets in Southeast Asia. They offer a mobile app that allows influencers to effortlessly sign up for marketing campaigns posted by social commerce merchants. From its inception, Partipost established itself as a regional startup, simultaneously opening in three markets: Indonesia, Singapore, and Taiwan.

Tony Jen, the Co-Founder of Partipost, remarked, “Astute brand owners and merchants recognise the importance of curating and retaining the influencer community for the long haul. Relying solely on a single platform can be precarious. Partipost’s platform is specifically crafted to assist these savvy business owners in cultivating enduring brand ambassadors and audiences. Then they can deploy better strategies on all major social platforms, including TikTok.”

Opportunities in content quality: Top influencers in Southeast Asia are not that top; content quality is way early in this region

Supporting merchants and influencers is paramount, especially considering the nascent state of content quality. For perspective, in Singapore, a mere 10 million followers can rank an account in the top 3, while in Vietnam, Indonesia, and the Philippines, this count would place one within the top 10.

However, on a global scale, even 50 million followers wouldn’t guarantee a spot in the top 20. On the top merchant side, examining the top accounts, many employ a basic and straightforward selling strategy, evoking memories of traditional TV shopping channels.

Furthermore, a significant number of these top merchants are linked to Chinese parent companies. When we examine the TikTok ecosystem in Southeast Asia, there are only a few local vendors, most agencies are still from China.

Central to social commerce is the intertwining of commerce and culture. As such, two focal points are pivotal: enhancing content quality and tailoring content for local relevance. Hepmil Media Group (Series A in 2021), a Singapore-based startup, epitomizes this trend. They doubled their revenues in 2022 and are on a promising trajectory to continue. Widely recognised for its iconic meme Facebook page, @SGAG, Hepmil has positioned itself as a leading social media content figure in Southeast Asia across six markets. They also own the popular Indonesian meme Instagram account @mrci.id.

Karl Mak, the Co-Founder of Hepmi Media Group, noted: “The creator economy in SEA has entered a captivating era in the past three years. TikTok has given birth to millions of new creators in the region with varied content styles, formats and monetisation opportunities. As the sector continues to ripe, we expect to witness SEA creators develop a unique localised flavour to their content while continuously innovating on formats and styles.

“Brands and business owners would also be presented with new and varied ways of reaching local audiences through a larger supply of creators on the platform. Hepmil’s focus for the next few years will be expanding our regional network through the refinement of our creator incubation strategy to give rise to the next generation of creators that will define culture and captive audiences.”

Navigating e-commerce competition: Tips for startup Founders

The escalating investments from TikTok in this region are intensifying competition within the e-commerce sector. As major platforms redouble their efforts to serve merchants, influencers, and customers, ample opportunities emerge for startups. By nature, a startup must offer solutions that are at least 10x better than what current platforms provide, addressing pain points at a much better scale. Speed is also of the essence; startups must move quickly before established platforms catch up.

Also Read: Tried-and-tested marketing strategies for startups across all stages in Singapore

For startup founders, the key is to seize immediate opportunities without losing focus on the long-term vision: Build your business on a sustainable model with solid unit economics at its core. Prioritise achieving product-market fit over premature scaling or excessive fundraising. Empower your customers rather than simply seeing them as revenue sources.

Furthermore, it’s essential to recognise that most platforms remain predominantly centralised. Echoing the words of Fleire Castro from DashoContent (AW#26) – a content creator platform based in the Philippines: “Investing in content on channels that you don’t own or control will result in wasted dollars. The only thing that business owners own is relationships done through several touchpoints (especially digital). Your social account is just another touchpoint. Be holistic in your approach.”

Indeed, maintaining a cohesive master plan is key to longer-term success. Construct an unassailable moat that is as difficult to breach as it gets. Ride on the waves driven by the e-commerce giants’ rivalry, but navigate on your own terms.

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