In The Checkout this week, we discuss the bright spots in Southeast Asiaâs direct-to-consumer space and the future of ecommerce roll-up firms. [Read from your browser]( The Checkout ð --------------------------------------------------------------- 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 youâre not a subscriber, get access by [registering here](. IN FOCUS In today's newsletter, we spotlight: - The [future]( of Southeast Asiaâs direct-to-consumer space
- Rainforestâs positive earnings result despite troubles facing ecommerce roll-ups
- Why Bukalapakâs president isnât [too concerned]( about its falling stock prices --------------------------------------------------------------- Hello {NAME} Filters allowing consumers to toggle between lipstick colors and âtestâ how different shades would look on them from the comfort of their homes were game changers during the pandemic. Similar services have become commonplace these days, so brands have to innovate to stay ahead. Given the high degree of personalization in makeup - everyone has different skin tones and preferences - itâs not surprising that cosmetics and beauty products are among the most popular items sold on livestreaming platforms. Firms such as Esqa, an Indonesian direct-to-consumer makeup brand, had to quickly adapt to changing times, CEO Cindy Angelina told audiences at a panel session at the Tech in Asia Conference in Jakarta last week. In this weekâs Big Story, my colleague Jofie shares key takeaways from the discussion, including the impact of TikTok Shop Indonesiaâs closure on businesses like Esqa. Ecommerce platforms are working overtime to drive eyeballs to their sites. But thereâs no denying how spending has gone down from the levels it reached during Covid-19. In this weekâs Hot Take, I discuss ecommerce aggregator Rainforestâs upbeat 2022 results and why itâs thriving even as large rivals like Thrasio are seeking restructuring options. -- Melissa
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--------------------------------------------------------------- THE BIG STORY [D2C in Indonesia: life after TikTok Shop ban and why offline retail still matters]( Young brands should focus on becoming champions in their home market before considering regional expansion, said DSG Consumer Partnersâ Sameer Mehta.
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THE HOT TAKE Are the good times over for ecommerce roll-ups? Hereâs what happened: - Earlier this month, Singapore-based Rainforest [reported US$37.5 million in 2022 revenue]( indicating a 9x increase.
- The roll-up firm also secured US$21.5 million in a convertible note round from existing investors, bringing its total funding to over US$100 million.
- Rainforest attributed the revenue boost to six brands it bought last year and the growth of its current brands. Hereâs our take:
Rainforestâs positive results defied what some of its global aggregator rivals are going through: the inevitable descent from a high. After shelling out billions to acquire consumer brands on Amazon to increase scale efficiencies, US-based Thrasio began exploring restructuring options in September to address its financial challenges. The move came after the company had carried out multiple rounds of layoffs. Thrasio isnât the first roll-up firm to hit a wall, and itâs likely not the last. Last month also saw New York-based Benitago Group file for bankruptcy, blaming the fall in consumer spending to shifting consumer preferences. It had acquired some 15 brands across sectors including health, beauty, and office products. What could explain the different outcomes for these roll-ups? Detractors have long called out these businesses for their unsustainable model. After raising debt to acquire companies, roll-up firms value themselves at a multiple of their combined revenue to secure more funds. As weâve learned the hard way, a roll-up can be worth less than the sum of its parts. Thrasio, for one, had snapped up dozens of companies, from those that sell camping gear to those that specialize in kitchen tools. In 2021, the firm said it was buying businesses at a rate of 1.5 per week and had over 200 brands in its portfolio. Indiscriminate purchases might have worked in its favor then, driving up revenue during the Covid-19-led ecommerce boom. But this approach most likely put a strain on Thrasio when spending patterns changed and the cost of capital went up. The drop in ecommerce spending, however, isnât limited to the US. Evenflow and UpScalio, two roll-up firms based in India, were reportedly [put up for sale]( earlier this year. While both didnât have a large portfolio of companies - about 10 each - they werenât able to achieve their intended scale, sources say. To make things worse, efficiencies in HR, marketing, supply chain, and finance functions - a key selling point of aggregators - are often difficult to realize. When I spoke to Rainforest CEO JJ Chai [earlier this year]( he acknowledged the pivots that the firm had to make. While it started out with four main categories, these were eventually reduced to two: home goods and mom and baby products. The company also began looking beyond brands on Amazon. Chai pointed out that having too many categories makes it hard to find enough commonalities across acquired brands and to create synergies between them. In hindsight, his observations seem obvious. Despite Rainforestâs encouraging results, its reported revenue growth includes a mix of six brands acquired in 2022 and the growth of its existing brands. In the longer term, a more accurate measure of success would be revenue from organic growth, irrespective of newly acquired firms. This would indicate if scale efficiencies have truly been achieved.
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NEWS YOU SHOULD KNOW Also check out Tech in Asiaâs coverage of the ecommerce scene [here](. 1ï¸â£Â [Navegar, East Ventures steer $34m round of SG logistics startup]( Inteluck, which offers on-demand logistics services in Singapore, Thailand, Vietnam, and the Philippines, serves over 300 enterprise clients. 2ï¸â£Â [Foodpanda names new interim CEO for Malaysia unit]( Pichaya Thongthuaâs appointment comes after regional CEO Jakob Angele left Foodpanda after over nine years at the company. 3ï¸â£Â [Market will correctly value Seaâs business in long run, says CEO]( In a letter addressing employees on the anniversary of Sea Group's IPO, CEO Forrest Li said he did not regret his decision to take the firm public. 4ï¸â£Â [Faveâs revenue slumps 24% in FY 2023, loss improves 78%]( Revenue for the financial year ending March 31, 2023 was the companyâs lowest in five years. 5ï¸â£Â [Amazon let its driversâ urine be sold as an energy drink]( The waste product, left on the roadside by drivers pressed for time and intended as a stunt, allegedly passed Amazon checks and was listed on the platform for sale.
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 1ï¸â£Â [Bukalapakâs president on its IPOâs âsheer luckâ and why heâs not worried over stock prices]( After taking the ecommerce firm public and refocusing its business, Teddy Oetomo shares what heâs learned three years into his role. 2ï¸â£Â [Shopee, Lazada may struggle to fill void left by TikTok Shop]( TikTok must also decide whether Southeast Asia's political dynamics is worth the commitment.
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