GudangAda gears up for challenges as it guns for profitability

In The Checkout this week, we look at the B2B ecommerce company’s financials and dive into the budding ads businesses of ecommerce marketplaces. [Read from your browser]( The Checkout 🛒 --------------------------------------------------------------- Welcome to The Checkout! Delivered every Thursday, this free newsletter breaks down the biggest stories and trends in ecommerce. You can find past issues [here]( or [sign up here]( to receive future newsletters. Also, If you’re not a subscriber, get access by [registering here](. Written by Putra Muskita Journalist Hello {NAME} Prior to the WeWork debacle, when I was still writing and reporting full time, I remember how profitability was generally an afterthought for many startups and their investors. Gross merchandise value and revenue growth were the main metrics most companies were throwing around. That has since changed, thanks in part to Adam Neumann, and for the better, I’d say. But merely shifting focus to profitability roadmaps doesn’t necessarily translate to actually being on the path to profitability. A frequent refrain in the headlines of our [earnings stories]( is that X company’s revenue has grown, but losses widened. That includes Indonesian B2B ecommerce company GudangAda, whose financials my colleague, Jofie, breaks down for today’s Big Story. The good news, of course, is that GudangAda’s revenue did jump a whopping 9x in the financial year ending December 31, 2021. Losses before taxes, however, widened by US$10 million to US$25 million during the same period. As high inflation and rising fuel prices pose further headwinds in the coming year, it is in times like these that companies like GudangAda will need to prove their mettle. Speaking of profitability, in this week’s Hot Take, I discuss whether ecommerce platforms should follow in the footsteps of Amazon and Shopify to plunge deeper into the lucrative advertising business. – Putra  --------------------------------------------------------------- THE BIG STORIES 1️⃣ [Indonesia’s GudangAda posts 9x revenue jump in FYE 2021, but losses widen]( The B2B marketplace is making efforts to achieve profitability in the near future but high inflation rates and rising fuel prices may hinder its growth. 2️⃣ [The key players in Southeast Asia’s quick-commerce space (updated)]( Many quick-commerce players in the region have fallen. Which ones are the survivors?  ---------------------------------------------------------------  THE HOT TAKE  Is it time for ecommerce marketplaces to go all in on ads? Here’s what happened: - Shopify is prioritizing Audiences, a marketing tool that lets retailers pool customer data and upload it directly to Meta’s advertising platform, Financial Times [reported](. - The tool works around Apple’s updated rules limiting tracking iPhone users and allows marketers to target customers with profiles who are more likely to purchase particular products. - While Shopify Audiences has not garnered significant revenue, that may change in the future. Here’s our take: Social media platforms launching shopping features has been a trend in ecommerce for some time. But perhaps we need to pay more attention to the converse, particularly in the wake of Apple’s revised user tracking rules: ecommerce platforms scaling their advertising businesses. While Shopify’s efforts in the space are nascent, Amazon’s impressive advertising revenue of US$31 billion in 2021 - a 32% growth from the previous year - shows its potential. Amazon’s ads business contributed just 6.6% of total revenue in 2021. Still, it has become a key profitability engine for the ecommerce giant, along with Amazon Web Services - ads on its own is larger than Prime and Prime Video combined. With inventory that [spans]( its ecommerce site, Prime Video, and Twitch, Amazon is the [third-biggest online ad seller]( in the US after Google and Facebook. It’s not hard to see why ecommerce platforms are betting big on their ads businesses. In-platform advertising - where merchants pay for things like [more favorable positioning]( on a landing page - can provide scalable revenue at minimal costs (Facebook’s gross profit margin in 2020 was [81%](. For merchants, advertising within the platforms they sell on can be more effective than doing so on Instagram or Google, since marketplace users have an intention to purchase. Aside from Shopify, ecommerce platforms like MercadoLibre are [accelerating investments]( in ads technology. Closer to home, Tokopedia parent GoTo Group recorded [US$111.6 million in advertising revenue]( in the first nine months of 2022 - representing over 10% of gross revenue. The share of ad revenue also grew almost 2.5x compared to the same period in 2021. Sea Group has also quietly talked up Shopee’s advertising potential since 2019. More recently, Shopee [rolled out]( a Facebook Ads feature that can help brands drive traffic to their stores through ads on Facebook, Instagram, and other third-party apps and websites. See also:[ Sea: The next advertising powerhouse?]( Meanwhile, online classifieds giant Carousell also [launched advertising platform Connect]( last year to [grow its ad revenue](. Grab - while not an ecommerce platform in the traditional sense - is also one regional super app [vying for a slice of the ads business](. In its Q3 2022 earnings call, Grab noted that revenue and GMV from enterprise and new initiatives rose 113% and 18% year on year respectively, driven by “growing contributions” from advertising. See also:[ Grab delivers the goods in its Q3 results, talks up ads business]( That said, Grab noted that it was “just scratching the surface” in terms of ads penetration. Ecommerce’s growing ads businesses may come at the detriment of customer experience and merchants, who might spend [10% to 20% of their sales]( to gain visibility on a platform like Amazon. Doing so is also not without its challenges: Grab’s ads business is [reportedly struggling with]( limited inventory, “clunky” tech, and an inability to sign major advertisers, according to The Ken. Similar growing pains may apply to many of the region’s advertising hopefuls. -- Putra  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ [TikTok Shop’s GMV in SEA topped US$4.4 billion in 2021]( TikTok’s parent company ByteDance also recorded US$208 billion in ecommerce spending for its home market last year, The Information reported. 2️⃣ [Indian roll-up firm UpScalio cuts 15% of workforce]( The firm said the layoffs were part of annual employee appraisal process at the Thrasio-style startup, which has raised a total of US$62.5 million since it was established in March 2021. 3️⃣ [East Ventures, GSR back $2m round of SG wellness firm]( Evo Commerce sells direct-to-consumer health and wellness products, with anti-hangover solution BounceBack as its flagship offering. 4️⃣ [JD.com’s Richard Liu threatens to fire execs amid slow growth]( Liu also mentioned a possible senior management reshuffle, an anonymous source told the South China Morning Post. 5️⃣ [Indonesian checkout solution startup bags $1.1m]( Flik aims to include product discovery, price comparison, express checkout with rewards, and post-purchase services on its platform.  --------------------------------------------------------------- FYI [Shein’s playbook to supply chain domination]( The fashion retailer is famed for its cheap prices and ability to jump on trends, but its supply chain management may be its biggest competitive edge.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preference center. See you next week! [ADVERTISE]( | [SUBSCRIBE]( | [HIRE]( | [FIND JOBS]( P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2023 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894