Qoo10 banking on SEA by building trust

E-commerce player sees Southeast Asia as a key market, along with Japan and China, but notes its success requires trust to be built in the ecosystem, a better delivery network and more local merchants.
Written by Liau Yun Qing, Contributor

SINGAPORE--The online shopping market in the Southeast Asia region has as much potential as Japan and China. However, challenges such as building merchant and consumer trust as well as logistics will need to be solved before the platform can take off.

In an interview with ZDNet, Ku Young Bae, president and CEO of Qoo10, said the company focus is on China, Japan and Southeast Asia. The company expects total sales volume in Southeast Asia to reach US$1.5 billion to US$2 billion per year by 2015. During the same period, it hopes to see sales volume of US$2 billion to US$3 billion for the Japanese market, and US$1 billion to US$2 billion for the Chinese market.

"Southeast Asia is in the very early stage of online shopping," said Ku, adding that the scene is similiar to what was happening in Korea when consumer e-commerce first started. Ku's previous company Gmarket was a top player in the South Korean e-commerce space, which was eventually acquired by eBay.

The main challenge for Qoo10 in the Southeast Asian market is the lack of experienced participants. For example in Singapore, there was a lack of domestic merchants when the company first started its business here so most merchants were from South Korea or China.

Even though the number of domestic merchants in Singapore has grown, there is still a problem of an underdeveloped delivery service. Ku said that more than 80 percent of online shopping purchases in South Korea can be delivered within the day while 98 percent can be delivered within three days.

In contrast, domestic delivery in Singapore takes about five days, he said. Ku added that the main delivery company, SingPost, needs to improve as it still lacks a tracking system for merchants.

However, Ku believes that the logistics system will improve with the growth of online shopping. Delivery companies will see the opportunity and invest to make their service more efficient, he said, adding that this was the case in South Korea.

In Malaysia and Indonesia, Ku said Internet accessibility and limited high-speed Internet were major problems. Even though the mobile Internet platform has good potential, he noted that many Indonesian users use BlackBerry phones which are not conducive for mobile shopping as the screens are small and Qoo10 has no app for the platform.

Ku added that some consumers in Southeast Asia are still reluctant to purchase online as they fear the goods will not be as they expected. On this front, Qoo10 will improve its return policy by the first half of 2013 to make it easier for consumers to return purchases.

Qoo10's Singapore Web site.
Qoo10's Singapore Web site.

China a "tough" market for foreign players
Even though China is expected to become the largest country for e-commerce, Qoo10 had set a modest target for the market. Ku said the target for China takes into consideration the "tough" market as well as the company's relatively late entrance in 2012. The company partnered Chinese fashion retailer M18.com to set up its presence in China.

He noted regulations were not very clear for foreign players in China, in contrast with local players which had clear guidelines.

The CEO added that players in the Chinese market are "huge" with large fundings backed by venture capitalists. For example, leading online shopping platforms Taobao and Tmall.com, which are both owned Alibaba, saw US$153 billion in transactions for the period of January to November, 2012.

While Qoo10 is not looking to "beat" Taobao, Ku said he hopes to build a platform and establish a brand and customer base first.

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