Shariah-compliant Indonesian brands tap Evermos to expand countrywide

In The Checkout this week, we look at the social commerce startup’s unique strategy and why China’s 618 summer sale is losing its shine. [Read from your browser]( The Checkout 🛒 --------------------------------------------------------------- Welcome to The Checkout! Delivered every fortnight, 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](. IN FOCUS In today's newsletter, we spotlight: - [An Indonesian Shariah-focused social commerce startup helping halal brands expand countrywide]( - China’s 618 summer sale loses luster as growth slows - Grab’s [surprising U-turn]( from ‘no layoffs’ stance --------------------------------------------------------------- Hello {NAME} There’s always a benefit to being a large brand. Big brands with their capital often find themselves able to expand more quickly and reach a larger population, all while reaping the benefits of scale economies. At least that’s what Evermos, an Indonesian social commerce startup focused on Shariah-compliant products, found. In the archipelago, brands that sell countrywide are typically backed by conglomerates or multinational firms that have substantial financial resources available for investment, Evermos CEO and co-founder Ghufron Mustaqim tells my colleague Jofie in this week's Big Story. Through Evermos, even small businesses can develop a countrywide reach. The platform’s dropshipping model enables small resellers to start selling without incurring any inventory costs - and risks - upfront. Big brands also hold sway in other ways - including the power to choose where to sell and how to price their items. Shiseido, a Japanese skincare and make-up retailer, said last month that it would “turn away” from “extreme” promotions in China going forward, including at the 618 sales extravaganza that concluded this week. While big companies have that privilege, smaller sellers reliant on major ecommerce sites for sales may unfortunately find themselves getting squeezed as the platforms engage in aggressive subsidies to drive sales. In this week’s Hot Take, I dive deeper into the slowing sales growth during China’s 618 summer sale event this year as consumption loses steam in the country. -- Melissa  --------------------------------------------------------------- THE BIG STORY [How Evermos helps Shariah-compliant brands reach lower-tier cities through social commerce]( The firm sees Shariah as an important aspect in penetrating lower-tier cities in the country.  ---------------------------------------------------------------  THE HOT TAKE China’s 618 summer sale loses luster Here’s what happened: - The second-largest shopping event of the year in China, dubbed “618” for JD.com’s founding anniversary, drew mixed results this year. - That’s despite billions of dollars in discounts shelled out by retailers including JD.com, Pinduoduo, Taobao, and Tmall. - A combination of poor sales and unsustainable discounting practices have led Shiseido, a Japan-based beauty company, to [“turn away”]( from “extreme” promotions in China. Here’s our take: After years of pandemic restrictions and the seemingly endless waves of discounts offered on ecommerce platforms, Chinese buyers are tired. Starting in the last week of May 2023 and running all the way through June 18, the 618 event saw the country’s major ecommerce platforms splash out billions of dollars of discounts to entice customers to shop amid a tepid economy. JD.com, which created the event to rival Alibaba’s Singles’ Day, has committed [US$1.6 billion]( in subsidies since March to boost spending and fend off rivals. These include other livestreaming and ecommerce platforms like Taobao, Tmall, and Pinduoduo - all of which offered their own [generous discounts](. The event’s performance, however, has been in decline. Last year, JD.com reported sales growth of 10.3%, the [slowest]( since the event started in 2004. While JD.com didn’t report sales figures for this year’s extravaganza, the company said in a post that sales had reached an [all-time high](. (Alibaba and Pinduoduo typically don’t publish results for 618.) Still, [anecdotally]( consumers in China, unwilling to spend after a pandemic that shook customer confidence and household finances, have expressed fatigue for the weeks-long event. Admittedly, flash sales are just [one of many]( tools used by ecommerce platforms to drive sales. Sales generated from these events - despite their eye-popping figures - also make up just a small part of a platform’s overall sales. Removing the gross merchandise value (GMV) contribution of Singles’ Day - 6% for Alibaba in the financial year of 2021 - also doesn’t make a significant difference to annual GMV, one analyst [pointed out](. See also: [When will mega sales events outlive their usefulness?]( Relying on steep discounts to draw customers can be also unsustainable in the long run, both for platforms and brands. Companies like Shiseido, which owns brands including Nars and Drunk Elephant, are already feeling the heat. In its most recent earnings call, Shiseido CFO Takayuki Yokota [said]( that the company would be turning away from “heavy reliance on extreme promotion” - including that of major sales events like 618 - in favor of sustainable and profitable growth. The beauty firm’s Women’s Day promotion was also “low-performing,” Yokota added. Its ecommerce sales in China in Q1 2023 underperformed compared to the same period in 2022. Yokota attributed this slump to the rising number of Covid-19 cases in the country in January this year, which had created a “difficult market environment.” While JD.com’s sales from this year’s event rose an estimated 6% to 8% - more than the 2% to 5% that [Citigroup analysts had predicted before]( - this growth still falls behind the 10.3% logged in 2022. Where does this leave small and medium-sized sellers? These businesses are feeling the squeeze: Either they offer discounts at a loss, or maintain prices but risk losing out on sales to bigger brands. With rising competition warranting ever-steeper discounts and consumers losing interest - competing on the basis of prices may be a race to the bottom. – Melissa  ---------------------------------------------------------------  NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the ecommerce scene [here](. 1️⃣ [Alibaba CEO and chairman steps down to focus on cloud business]( The shakeup follows a number of restructuring efforts at Alibaba, including a plan to split the firm into six different business units, each pursuing independent IPOs. 2️⃣ [Temu reportedly gauges Southeast Asia entry with seller survey]( Pinduoduo’s sister platform reportedly surveyed sellers on the apps they were using in “Southeast Asia, Japan, and Korea.” 3️⃣ [JD.com plans to launch 3 new $140b-revenue firms]( The plans were announced as part of the ecommerce firm’s “35711” vision that outlined its sustainable growth plan over the next two decades. 4️⃣ [Love Bonito sees 41% revenue growth in 2021]( In 2021, the womenswear retailer’s revenue outside of Singapore, Malaysia, and Indonesia surged by nearly 80%. 5️⃣ [TikTok CEO plans multibillion-dollar SEA investment]( The short-video platform said it will invest US$12.2 million over the next three years in the region to help 120,000 small businesses go online. ---------------------------------------------------------------  FYI  1️⃣ [Making sense of Grab’s surprising U-turn from ‘no layoffs’ stance]( Employees are upset by the job cuts, which CEO Anthony Tan insists are not motivated by hitting earnings targets. 2️⃣ [Can TikTok Shop catch up with Shopee, Tokopedia in Indonesia?]( TikTok Shop is growing rapidly in Southeast Asia, particularly in Indonesia, where it captured 5% of the country's ecommerce market share last year. 3️⃣ [This social commerce firm cut its costs by 3x – here’s how]( After making tough calls, Singapore-based Raena nearly tripled its revenue and improved its gross margins in 2022. 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